The passage of the Jumpstart Our Business Startups Act (the JOBS Act) into law in April and the recent successes of the online funding site Kickstarter have raised crowdfunding’s profile in the public consciousness. Crowdfunding is a way of raising capital from a large number of small donors. Currently, Kickstarter and a handful of other donation-based crowdfunding portals are operating in the United States.
The number of crowdfunding portals is expected to grow rapidly after the Securities and Exchange Commission implements the JOBS Act in early 2013, which will legalize equity-based crowdfunding investment, allowing companies to sell up to $1 million of securities annually. Crowdfunding presents an exciting opportunity to raise money or to pre-sell a product while building product buzz and an engaged customer base. For example, Pebble Technology raised more than $10.2 million from 68,000 donors to fund the creation of a smartphone-connected wristwatch in just 37 days using Kickstarter.
