Which equity based crowdfunding startups hold the most promise / have the highest growth potential at this point?
Since no equity crowdfunding platforms under the JOBS Act will be able to even begin operations for another six to nine months, it is impossible for any of them to be “the market leader” at this point…even though every single one of them—as in a drawing room farce—is claiming the title.
And since the three logical big players (KickStarter, Gust and AngelList) have all indicated that they are unlikely to enter the fray, we need to exclude them as well.
That leaves us with five equity ‘crowdfunding’ companies that are actually up and operating: one playing close to the line, one using debt, one limited to Accredited investors, and two using the SPV strategy. They are:
The fast-follower to KickStarter, they have taken the “populist” route rather than the “curation” one. They’ve also somewhat blatantly been claiming to offer crowd equity for some time, despite the SEC regs in the US. But their aggressive market entry scored them $15m in venture financing last month, so you underestimate them at your peril.
This UK-based company, founded by an American securities attorney, has been operating for almost a year, pioneering the SPV approach, which is legal in the UK. They’re very smart, and have been involved with the JOBS Act legislation.
They have been operating their platform for a few months under the exemption for Accredited investors, and have done a nice job in positioning themselves to enable Accredited investors to invest in revenue-generating, consumer brand companies.
A relatively recent entrant, the company is based in New York with its initial operations in Florida. They are following the earlier ProFounder playbook, using existing state-by-state regulations for revenue-backed notes. Smart guys.
In the currently Combinator class, this startup is combining curation, SPVs and [at least for now] Accredited Investor status to allow crowds to invest in ‘micro-funds’ bundling several promising startups (such as yC graduates). In addition to the yC/DST investment, they’ve scored some additional smart money as well.
Finally, among the 200-300 other eager startups on their way to jumping into the arena, there are three or four still in stealth mode that are being run by experienced people I respect, so I’ll be looking out for them as well.
If all this sounds like something between Sons of Anarchy and a three ring circus, you’re right :-). Later this year, but before the floodgates open in January, Gust is planning to introduce a program in conjunction with the ‘official’ angel/venture industry associations, to establish some guidelines which will be useful in determining which platforms will play best with later stage funding options. Stay tuned!
*original post can be found on Quora @ http://www.quora.com/David-S-Rose/answers *
Written by David S. Rose
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