Crowdfunding critics take note: A recent study by Wharton professor Ethan Mollick proves that crowdfunders are better than you might think at finding quality entrepreneurs–and even seem to act with less bias than venture capitalists.
The typical crowdfunding-project backer is more sophisticated than you might think.
In a recent study, Wharton professor Ethan Mollick analyzed 2,101 Kickstarter projects–all of which were based in the United States, were seeking more than $5,000 in funding, and fell within particular start-up verticals including hardware, software, video games, and product design. He had a simple question: Compared to a skilled venture capitalist, how good is the crowd at assessing the quality of entrepreneurs?
There’s been plenty of research about how venture capitalists seek out investments; but in this study, Mollick’s goal was to understand how and why typical backers make their decisions–and determine whether those decisions were in line with how a VC might make a decision. The results were surprising–and encouraging for proponents of crowdfunding.
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Considering a crowdfunding site to raise money? You might get one of these things instead.
You know crowdfunding, that new type of fundraising in which you can ask a large community of people to donate small sums of money to launch your new project or business idea? Turns out, it’s not only about the money.
“Think of crowdfunding as an ecosystem,” suggested Jeremy Andrews, founder and CEO of Smart Money Entrepreneurs, a crowdfunding site.
At a panel for aspiring entrepreneurs today at Baruch College, Andrews told an audience of 30 students, the crowdfunding ecosystem can help you meet the right people, and test out market interest in your idea.
Andrews was joined on the panel by two other crowdfunding site founders–Alejandro Cremades, CEO of Rock the Post, and Sang Lee, CEO of Return on Change–who, of course, also recommend you crowdfund (and not just for the money).
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The concept of offering a few bucks to help out a project might have started to help your friend’s new album, but new numbers show it’s growing rapidly–and turning into a legitimate form of investment.
Crowdfunding is booming. More than 1 million campaigns across 308 platforms raised $2.7 billion last year, an increase of 81% on 2011. And that volume is set to almost double in 2013, to $5.1 billion, according to a new report.
But, if you thought the future of crowdfunding was all about dinky video game pitches, and cheerful perks on Kickstarter, you’d be missing something. Going forward, crowdfunding is likely to take on many forms, be more geographically-diverse, and, for better and worse, look more like big-time investing.
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A+E Networks and RocketHub Launch ‘Project Startup’ for Entrepreneurs
The entrepreneurial spirit is rapidly spreading to broadcast, as witnessed by popular programs such as NBC’s Celebrity Apprentice, ABC’s Shark Tank and Undercover Boss. Now A&E Network is working to raise the bar on entrepreneurial programming still further with the launch of Project Startup (www.projectstartup.com), a multi-platform initiative to support the businesses of aspiring entrepreneurs.
The new initiative is the result of a partnership with popular crowdfunding platform RocketHub. A&E is selecting entrepreneurs to feature and support with seed money from the community of entrepreneurs with current projects in development on the RocketHub platform.
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Venture Capitalists have been behind startup financing since 1946, when the first two VC firms were created in the United States. These firms were American Research and Development Corporation (ARDC) and J.H. Whitney & Company. Georges Doriot founded ARDC while John Hay Whitney created J.H. Whitney & Company. Both of these men were considered the pioneers of VC investing.
The big push of venture capital firms was thanks to the Small Business Investment Act of 1958, which introduced financing and management focused on entrepreneurial ventures across the U.S.
Once that act was established, the first startup to receive financing was Fairchild Semiconductor, which was funded in 1959 by today’s known firm Venrock. As time evolved, several other firms emerged in 1972, giving a name to Sand Hill Road. This would eventually lead to the incredible growth of 1978, where VC firms invested an approximate $750 million in startups.
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Online marketplaces have already eliminated so much inefficiency in our world. Dating (OK Cupid, Match.com), restaurant reservations (OpenTable), buying most physical goods (eBay) and countless other marketplaces serve both sides of the marketplaces (i.e. buyers and sellers) and provide value- typically making it more efficient to transact (or date!). Other marketplaces are eliminating inefficiency we didn’t even know existed. Uber and other taxi utilization apps are bringing efficiency to the $10 billion taxi market. That market is dwarfed by the size of the market for individual equity investments in private companies, which is $50 billion per year.
The market for individual equity investments into private companies, or “angel market” is huge but has few participants–less than 10% of accredited investors make private investments. Why? Because the cost to participate in this market is just too high. It takes months to network into a deal and then investors are typically required to invest a minimum of $25,000.
Crowdfunding has the potential to dwarf the most disruptive marketplaces we have ever seen. By lowering the cost to participate in the market, crowdfunding will expand participation in the market. Sourcing good deal flow is a full time job for those in the investment community, so how is someone with a day job supposed to source great deals if they cannot spend their waking hours building relationships with intermediaries and companies? In the old world, they couldn’t. Additionally, minimum investment sizes of $25,000 to $50,000 spook all but the wealthiest investors. Enter equity crowdfunding, which we at CircleUp believe will turn the antiquated traditional angel investing model on its head.
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Am Dienstag Abend fand unser zweiter c-crowd Investoren-Event statt. Es hat uns sehr gefreut, dass über 60 Personen den Weg in das wunderschöne Zunfthaus zur Zimmerleuten gefunden haben.
Als Einführung haben wir die Gäste über unsere Strategieanpassung sowie Partnerschaften informiert. c-crowd wird sich in Zukunft ausschliesslich auf das Thema Unternehmensfinanzierung fokussieren. Somit können wir unsere Ressourcen viel fokussierter einsetzen und uns dementsprechend im Markt verstärkt positionieren. Die Website wird in den kommenden Wochen ein dazu passendes Facelift erfahren.
Nach dem formellen Teil war dann die Bühne frei für die vier eingeladenen Startups welche sich den Gästen, bestehend aus Investoren, Unternehmern, Interessenten sowie Vertretern der Presse präsentierten. Mit der WorldHorseSports AG und der Neuhaus Publishing AG haben zwei bekannte c-crowd Projekte den Anfang gemacht. Danach präsentierte Andrea Salce sein Unternehmen Colada um dann dem spannenden Jungunternehmen Parkit die Bühne zu überlassen. Nach den Präsentationen fand während des gemütlichen Apéros ein reges Networking statt bei welchem die Teams von Unternehmen und c-crowd den Gästen die Möglichkeit gaben sich näher kennenzulernen.
Das Echo der Teilnehmer zu diesem Investoren-Event war sehr positiv und wir freuen uns bereits auf die nächste Ausgabe. Da jeder Event eine Lernkurve beinhaltet sind wir überzeugt, unseren Gästen beim nächsten Mal eine noch bessere Organisation und mehr spannende Unternehmen vorstellen zu können. Wir halten Sie über die dritte Ausgabe unseres Investoren-Events auf jeden Fall auf dem Laufenden.
Crowdfunding has the potential to provide new funding options for small businesses and stimulate job growth, and yet the S.E.C. has stalled on crowdfunding Rulings.
Other countries are off and running with equity crowdfunding, such as the United Kingdom, Australia, Sweden, Norway and Finland. Why is the U.S. still stuck in first gear and lagging behind the pack? Aren’t we innovators and leaders in entrepreneurship?
What’s going on with the S.E.C. crowdfunding Rulings, as spelled out in the JOBS Act? Why are they stalled? Will the S.E.C. abort crowdfunding before it gets a fighting chance?
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We are very happy to announce that Simon Kaiser has joined the c-crowd team as Chief Operating Officer on February 1st 2013. Besides being the COO of c-crowd, Simon is also very active in the Swiss and international startup scene. He is president of Startup Weekend Switzerland, Global Facilitator for Startup Weekend and member of the START global advisory board. During and after his studies at University St. Gallen, Simon was working with a Swiss VC and an international management and strategy consulting firm.
An der heutigen ausserordentlichen Generalversammlung wurde der Social Media Experte Manuel P. Nappo einstimmig in den Verwaltungsrat der c-crowd AG gewählt. Er ersetzt in dieser Funktion Martin Saidler. Manuel P. Nappo ist Leiter der Fachstelle Social Media Management an der HWZ Hochschule Wirtschaft in Zürich und wird das Unternehmen in den Bereichen Social Media sowie digitalem Marketing unterstützen.
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