Crowdfunding may be for profit or “for reward”. Funding for profit, that is for equity in a new project or start-up, is still not regulated, but it will be soon as the JOBS ACT has been passed. We are only waiting for the SEC to implement the details which will be early in 2013.
In the meantime Kickstarter offers a platform for backers to fund creative projects in the areas of Art, Comics, Dance, Design, Fashion, Film, Food, Games, Music, Photography, Publishing, Technology, and Theater.
Kickstarter is a company that is participating, for now, in an $8 billion traditional creative funding market, but it will be very easy for the company to expand to the for profit funding sector when it becomes law.
All funds pledged are not tax deductible and the company has raised more than $350 million since its launch in 2009. Kickstarter makes money as it charges a 5% fee to project owners when they meet their funding goals.
As backers don’t get a participation in a business or any potential return from the projects they fund the website encourages creative project owners to offer rewards to their donors. These rewards may be special access to their work or copies of their productions.
Kickstarter is a very well designed business model and it stands to benefit even more when crowdfunding is open to the business world of start-ups.
For investors it is a good opportunity to take a look at the business format, maybe fund some creative projects, and learn and be ready for when this segment of the new financial services is ready for business.
Take a look at Kickstarter here: http://www.kickstarter.com
