Sixty or so of us gathered at the GroundFloor office in the United Way building in Dallas Wednesday, May 7, for a chance to pick the brains of leading crowdfunding experts. The event, “Play To The Crowd,” was a partnership between United Way’s social accelerator program GroundFloor and The DEC. Attendees were treated to one-on-one interactions with a panel of seven experts, each with a unique area of expertise.
Keynote speaker Devin Thorpe, an author, Forbes columnist and self-proclaimed “Champion For Social Good,” launched the event with a heartfelt petition for the audience to get involved in crowdfunding. Early in his presentation, he asked the crowd to estimate the value of the crowdfunding industry in 2014. Guesses from the audience varied widely, and in the end only one individual came anywhere close (within $20 billion).
When Devin shared his projection, I was shocked. He expects $100 billion to be invested into crowdfunding projects in 2014 alone. This represents a substantial increase over prior years, driven by a surge in public awareness and efforts by Congress and the SEC to provide a stable environment where responsible investing can take place.
The popularization of crowdfunding has, to date, been limited by SEC regulations and financial legislation in ways that were designed to protect the average investor. Congress recently passed the JOBS Act, which, when fully enacted, will give anyone with investment dollars access to equity crowdfunding platforms. That legislation is being implemented in stages, with accredited investors gaining access to equity crowdfunding opportunities first. It is estimated that the JOBS Act will be fully implemented in 2015.
Crowdfunding sites such as Kickstarter are already massively popular, but thus far these platforms have been prohibited from offering equity-based crowdfunding to non-accredited investors. The platforms currently provide rewards-based crowdfunding to the average individual, whose pledge guarantees the “investor” a tangible reward of some kind. Kickstarter and IndieGogo (among others) function on this model, which closely resembles a typical donation drive or charity fundraiser.
In fact, Devin gave several examples of crowdfunding models used by nonprofits and charities long before the Internet took over. Habitat For Humanity and various cancer awareness efforts have been funded in part by pledges from individuals for years. As with many things, the Internet enabled this model to take root in the digital space, where it has evolved into a new, highly viral form of itself.
It turns out people are as willing to pledge support to entrepreneurial ventures as to charities, demonstrated by the $480 million invested into Kickstarter projects alone in 2013. While rewards-based crowdfunding is a viable and effective way to raise money for specific ends, it offers no way to invest for profit, which is why equity-based crowdfunding has taken the spotlight in the crowdfunding industry.
Equity crowdfunding is already available to accredited investors and demonstrates the potential for this market with crowdfunded projects such as the Prodigy Network’s BD Bacata, a 66-story, 1.2 million-square-foot skyscraper in Bogota. The $170 million project was funded entirely through crowdfunding and is just one example of similar projects by the Prodigy Network and other equity crowdfunding firms.
After sharing all these stories about successful crowdfunding ventures, what Devin seemed most excited by was the idea that social innovation can be achieved through business savvy. The space between nonprofits and socially conscious for-profit companies is shrinking. An economically sound, self-sufficient business model may prove more attractive (and effective) to investors with a passion for social change than donating to nonprofits. “There has never been an easier time in history to access the capital to fund your dreams,” Devin said.
And he would know. Devin devotes a good portion of his personal time to training organizations how to execute successful crowdfunding campaigns, such as funding Community Giving Days in Utah, an organ restoration project for a First United Methodist Church in Salt Lake City and other efforts. His insight is evident from his practical advice, “Whether you need $5,000 or $50,000, if you are prepared and have the right network, you can raise the funds you need. If you’re not a convicted criminal or a jerk, you can do this.”
Devin’s keynote address raised a lot of eyebrows and blew a few minds, mine included. The potential for growth is virtually unmatched by other current investment initiatives and, more importantly, the potential for social innovation, entrepreneurial opportunity and community collaboration are unparalleled.
As fascinating and inspiring as I found Devin’s keynote address, it was the opportunity to discuss specifics with each of the seven experts in small group sessions that provided attendees the greatest direct benefit. Their varying areas of expertise and their unique perspectives on crowdfunding provided tactical insight for attendees trying to get their own campaigns off the ground. In the second part of this post, I’ll share some of the conversations I had with other guest speakers and detail their accomplishments in regards to crowdfunding.
For more information on Devin Thorpe and his experiences in crowdfunding and social innovation, read his columns in Forbes and his book, Crowdfunding For Social Good: Financing Your Mark On The World.
The post Playing To The Crowd: The Fast Approaching Horizon of Crowdfunding appeared first on The Dallas Entrepreneur Center.