Crowdfunding site Indiegogo has partnered with equity crowdfunding startup Microventures to allow anyone to invest in startups.
The comment sections of crowdfunding sites are almost as bad as YouTube. For every crowdfunding campaign that ships on time, you’ll find dozens that don’t. Thousands of people are angry their Bluetooth-enabled Kitten Mittens won’t be delivered before Christmas. Deep in the comments for these ill-conceived projects, you’ll find a common thread. The backers of these projects invested, and they demand a return. This, of course, is idiotic. Backing a project on Indiegogo or Kickstarter isn’t an investment. It is effectively burning money with the hope Kitten Mittens will eventually show up in your mailbox. Until now.
For an actual investment, there are regulations that must be met. The groundwork for this appeared last year when the Securities and Exchange Commission (SEC) introduced rules for equity crowdfunding. These rules include limitations on how much an individual may invest per year (a maximum of $2,000 or 5% of income, whichever is greater, for individuals with an income less than $100,000 per year), how much money these companies can raise ($1M in a 12-month period), and how an individual can invest in these companies.
Right now, the startups shown on Indiegogo and Microventures include an MMORPG, a distillery and cocktail bar in Washington, DC, a ‘social marketplace for music collaboration’, and a Bluetooth-enabled supercapacitor-powered “Gameball™”. All of these projects actually have documentation, and while the legitimacy of each crowdfunding project is highly dependent on the individual investor, there is a lot more data here than your traditional Indiegogo campaign.
This isn’t fire and brimstone and physics-defying electronic baubles raining down on the common investor, as you would expect from a traditional crowdfunding site tapping into the SEC rules on equity crowdfunding. This is, after all, only a partnership between Indiegogo and Microventures, one of the investment ‘funding portals’ that grew out of the equity crowdfunding regulations. In short, putting an investment opportunity up on Indiegogo will require more effort than a project that is just a few renders of a feature-packed smartphone or a video game with stolen assets.
If anything, this is just the continuation of what we’ve had for the past year. Since the SEC released the final regulations for equity crowdfunding, there have been a number of startups wanting to get in on the action. This partnership between Microventures and Indiegogo was perhaps inevitable, and we can only wonder who Kickstarter is about to team up with.