"70% of the users who signed up to invest via SomoLend were women with intention to invest around $1k." By Baat Enosh (VP Operations & CFO, Women 2.0)
The recent news about the signing of the JOBS ACT bill created as much excitement as confusion through the entrepreneurial and investment community.
The truth is, there is still much work to be done by the SEC and numerous organizations in order to figure out the details behind crowdfunding. The good news is - this is a great time to educate yourself and even get involved in the process as things are shaping up and crowdfunding platforms are springing up. A recent survey indicated upwards of 450 active crowdfunding platforms with estimates for over 530 by December 2012.
Why early education is to your benefit
If you're an entrepreneur -
According to Candace Klein, co-chair of CFIRA and Founder of SoMoLend, "The JOBS Act is a game changer for democratizing access to capital for entrepreneurs. Historically, 23% of entrepreneurs never apply for funding for fear of rejection".
The Crowdfunding Act will hopefully turn things around and open a new channel for different types of businesses. Expanding the options available for fundraising will no doubt create more businesses which is key to job creation and economic growth.
If what's holding you back has been not knowing how to go about fundraising - take a closer look at one of the crowdfunding platforms.
If you are a potential investor -
With a lower bar to becoming an investor in early-stage ventures, angel investing will no longer be accessible only to the few who qualified as "accredited investors" (what we like to call "the 1%"). Opening the gates and educating people on how to invest in businesses will offer a new venue for building capital to the 99%.
On that note, Berkeley Geddes, Chair of the Crowdfunding Professional Association (CFPA) Executive Committee & Governance Board and CEO of DooBizz, commented that "There will definitely be a vetting mechanism done to those who want to invest - by the SEC and other regulatory bodies. Income levels, credit history, etc. will all be verified and taken into account". In particular, Congress mentioned a concern around people making less than $40k/year as potential investors.
The education of the crowds posses one of the bigger challenges of executing on the JOBS Act. Those who will take the lead on educating themselves as the process evolves, and start using the existing platforms will be better poised to make smart investment choices once the Crowdfunding Act changes roll around in 2013.
Ways to educate yourself
Three great place to start with are:
- Crowdfunding Intermediary Regulatory Advocates (CFIRA)
- Crowdfunding Professional Association (CFPA)
The crowdfunding platforms are divided into four sub-categories. It's worth learning about them each individually:
- Equity-based crowdfunding
- Lending-based crowdfunding (e.g., SomoLend)
- Reward-based crowdfunding (e.g., Indiegogo, Kickstarter)
- Donation-based crowdfunding (e.g., Peerbacker)
To understand the scale of these platforms, research done by crowdsourcing.org identified that nearly $1.5B was raised by crowdfunding platforms globally in 2011.
Candace Klein reminds us that "Crowdfunding is not legal until January 2013 at the earliest". But now is a great time to prepare.
Berkeley Geddes talks about being proactive - "Go ahead and get involved in the crowdfunding platforms as they currently exist. See how SoMoLend navigates through these processess so you are poised to move forward with the equity side when it's allowed by law."
Ways to get involved
- Join the conversation - The SEC is listening to the "crowds" as it is forming rules around crowdfunding. Speak up, comment, and let your voice be heard.
- Join the CFPA (free membership available) - Help advocate for crowdfunding, attend conference about crowdfunding education, and volunteer to assist in many of their initiatives.
- Participate in sub-committees formed by the CFPA - these are exciting times as new initiatives are taking place.
Why is this important for women
The news about the JOBS act (opening the gates for crowdfunding platforms to help connect investors and new business) is exciting to both potential businesses seeking funding, and the 99% who until today didn't qualify for "accredited investor" status. But it is also super exciting for women. Historically, women consisted of about 10% of angel investors. Crowdfunding could be a huge turning point for that number.
Candace Klein, of SomoLend mentioned that 70% of the users who signed up to invest via SomoLend were women, with intention to invest around $1k. This could be a view into what we may see as more platforms mature and the SEC gives the green light. Candace Klein reinforces - "I encourage that every american that has a disposable income to invest in stock bonds and other instruments to consider investing in entrepreneurs as a very viable alternative."
Founder of a women's angel group, Julie Chin says, "With crowdfunding, proportionally we will see more women investing, since women are gaining more control over their finances. I don't think that women as a whole are less interested in investing. Rather, they have had less access to become investors. Removing the accredited investor requirement will allow more people (not just women) to invest, regardless of their current wealth or income level. It means there is one less barrier to access if wants to invest."
Berkeley Geddes of CFPA offers a great way for women to get involved: "We need 300 volunteers to serve on various committees, Christine Landon will be heading up one of those communities looking at women entrepreneurs and women crowdfunding investors. We can take as many women across america to come into the CFPA - membership is free - to assist and move some of these initiatives forward...."
Editor's note: Got a question for our guest blogger? Leave a message in the comments below. About the guest blogger: Baat Enosh is Vice President of Operations and CFO for Women 2.0. Baat grew up in Jerusalem, Israel and now lives in the energetic and creative community of Silicon Valley. Baat also serves as VP Operations for Founder Labs, and prior to that she ran the NCWIT Entrepreneurial Alliance. Baat builds on 10 years of work with customer facing roles in software companies. Baat holds a B.S. and M.S. in Computer Science from the University of Colorado at Boulder. Follow her on Twitter at @baatenosh.