What is Crowdfunding?

Crowdfunding (alternately crowd financing, equity crowdfunding, crowd-sourced fundraising) is the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations. Crowdfunding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, motion picture promotion, free software development, inventions development, scientific research, and civic projects.

Crowdfunding can also refer to the funding of a company by selling small amounts of equity to many investors. This form of crowdfunding has recently received attention from policymakers in the United States with direct mention in the JOBS Act; legislation that allows for a wider pool of small investors with fewer restrictions. While the JOBS Act awaits implementation, hybrid models, such as Mosaic Inc., are using existing securities laws to enable the public in approved states to invest directly in clean energy projects as part of a crowd.

Crowdfunding has its origins in the concept of crowdsourcing, which is the broader concept of an individual reaching a goal by receiving and leveraging small contributions from many parties. Crowdfunding is the application of this concept to the collection of funds through small contributions from many parties in order to finance a particular project or venture.

Crowdfunding models involve a variety of participants. They include the people or organizations that propose the ideas and/or projects to be funded, and the crowd of people who support the proposals. Crowdfunding is then supported by an organization (the “platform”) which brings together the project initiator and the crowd.

Funding your business online using crowdfunding

In 1932, the government tried to protect investors from fraudulent investments by creating the SEC (Securities and Exchange Commission). This legislation and corresponding state laws prohibited businesses from advertising to sell shares of their business unless they filed paperwork with the SEC and reported their income quarterly to the SEC. There were exemptions – basically if you had just a few investors (varies by state – but usually 10 or 20), only sold stock once a year, only sold to people you knew, and didn’t advertise. The laws were strictly enforced. People who didn’t follow the rules were jailed. With the Internet, businesses began BORROWING money from ordinary people online. This was the beginning of crowdfunding. It was illegal to offer ownership shares, but it was perfectly fine to loan and borrow money over the Internet. In 2012, the INVESTOR rules changed. The 2012 JOBS Act opened up investment to allow crowdfunding for equity shares in businesses over the Internet. The JOBS ACT doesn’t take effect until the rules are developed by the SEC – which has been delayed to 2013/2014. The SEC is trying to balance the need to protect investors with too many onerous requirements on small business. However, there are a few things we know now:

• If you want to RECEIVE crowdfunding EQUITY money, you will have to go through specific websites, where you will have to disclose a lot of personal and business financial information.
• You CAN get crowdfunding equity money today from accredited investors. These are people who have $1 million or more and are experienced investors. You will be able to do general solicitation beginning mid-September 2013. This means that you cannot advertise your opportunity to the general public until mid-September 2013. Today, you CANNOT legally get crowdfunding EQUITY money from non-accredited investors.
• There may be a requirement to have audited books and records.
• You will have to completely separate your personal and business finances. Legally, this means you must be a corporation or LLC.
• You will have to continually provide information to your investors.
• State laws will have to catch up with federal laws – so it is important to work with an attorney.
• Equity means you are sharing a percentage of your business forever. It means risk on the investor’s part – that they will never get a dime back. It means business owners have given up partial ownership and hopefully, for you and your investors, you will return significantly MORE money to your investors than you ever received from them. If you don’t want this, then you don’t want EQUITY funding – you want DEBT – where you only pay back the loan plus interest.

Here is information on crowdfunding from the California Small Business Development Centers:

10 Tips for Crowdfunding your Business

Brazzle Berry Celebrates 2 Year anniversary by launching crowdfunding.

Brazzle Berry celebrates 2 year anniversary by launching CrowdFunding campaign on Saturday August 17th 2013.

Half Moon Bay, Ca:  Approaching 2 years as a retail creative concept of the local Seaton Brothers, Brazzle Berry is now preparing to source working capital financing needs by crowdfunding 99 diverse rewards ranging $9-$9,999:
·  “Big Crowds Funding Small Businesses” Lessons learned on Crowdfunding E-Book.
·  Healthy Happens Brazzle Berry Cookbook
·  ($99 -/+) Giants, Sharks, Warriors, 49er, Raiders, S.F Opera, Coastal Rep tickets.
·  Mavericks T-Shirt and Paddle Board Lesson, HMB Taffy, Oceano Hotel Package.
·  Brazillian Blowout Hair Treatment by Aqua Beauty Lounge (AQB).
·  $99- “Big Crowds Funding Small Businesses” incubator conference 21st-23rd of February 2014.
·  Baseball/Sports/Autograph/Beanie Baby collection.

·  Traditionally only non-profits have thrived on sites like Kickstarter.com, IndieGogo.com and Rocket Hub.com, however the extended credit crises impact in dissolving small business loan markets is now converging with social networking to make crowdfunding a lucrative alternative for unconventional start-ups, like Brazzle Berry, requiring early capital injections to grow responsibly.

Seeking $99,000 in total, 99 rewards will be crowdfunded at RocketHub.Com before Brazzle Berry’s campaign ends November 17th 2013. If successful, funds will then be transferred for the specific goods/services delivered according to their predetermined schedules. Any excess funds received will ultimately allow Brazzle Berry to thrive by paying down high interest credit card debt and survive a looming slowdown in sales soon expected to take their seasonal dive.

Brazzle Berry’s destiny could forever fail to fruition without local support of our berry rewarding crowdfunding campaign going live on Saturday August 17th at 7:00 P.M. Free food samples, prizes, karaoke, on

Saturday August 17th from 7:00-9:00 + 50% off all yogurt 7 PM – MIDNIGHT.  Find out more information by visiting CrowdFundBerry.Com.

A Crowdfunding Community built on Education, Participation and Trust!

The wave of CrowdFunding is in site and, as entrepreneurs and investors, we know how to handle a the next big idea.

The Crowdfund Roundup is transparent co-operative of CrowdCos, CrowdVestors, Investors, Affiliates and Sponsors working together to understand crowdfunding investment and companies learning how to turn new ideas into products.We intend to gather the right resources and to form the right partnerships that will make SF Bay CR the place to come for your CrowdCreative endeavors!

Join us, sit a spell and lend a hand. This IS the next best thing!

Sonoma, CA: Sonoma Caterers Aim to Crowdfund Food Truck Biz

 

The owners of a Sonoma-based catering company serving up old-fashioned recipes of the South have turned to 21st Century Silicon Valley technology  that they’re hoping will help them share their passion for gourmet comfort foods while boosting their bottom line.

Arthur Chang and Rachel Hundley, who left high-stress careers in law and finance in New York City to start “Drums & Crumbs” in Wine County earlier this year, are seeking funding for a food truck that they say is integral to their business’ expansion.

They’ve launched a campaign that they hope will help them achieve their goal through Kickstarter, a “crowdfunding” website that’s been used for a wide range of ventures – Spike Lee aims to raise $1.25 million for his next film through crowdfunding to site.

Crowdfunding is no traditional investment. Drums & Crumbs funders will get free eats along with the satisfaction of knowing they’ve helped entrepreneurs pursue their passion – not dividends.

Chang and Hundley are offering a free lunch box to donors who give $10 or more along with other rewards ranging from picnics for four and cooking lessons to a catered wedding for 75.

Credit: Drums & Crumbs

They’re hoping a video in support of the campaign will help them meet an Aug. 21 crowdfunding deadline.

To join their crowdfunding effort visit their Kickstarter page. For Drums & Crumbs catering inquiries call 707-999-8394 or emailcatering@drumsandcrumbs.com.