If you’ve been reading this blog for a while, you might remember Chris Schutte, the Hotdog EZ Bun Steamer inventor whose story appeared here in March. Chris is among the many entrepreneurs who are turning to “crowdfunding,” an online fundraising method that allows businesses to obtain financial backing from small investors.
Businesses and other entities use crowdfunding for all kinds of purposes. Chris, for example, wants to raise $15,000 to support a grocery store market test. His fundraising project,“Every Grocery Store in America,” will be among those featured on HLN TV’s “Making it in America” in a story on crowdfunding that’s expected to air today at 4:00 p.m. EST.
While crowdfunding isn’t a new idea, it received a big boost in April when President Obama signed The Jumpstart Our Business Startups (JOBS) Act into law. The JOBS Act, which becomes effective in January, lets companies raise up to $1 million annually in capital directly from individual investors.
Under the new law, the maximum investment amount is $2,000 or five percent of income (whichever is greater) for investors whose annual income or net worth is less than $100,000. The cap is ten percent for those with an annual income or net worth of more than $100,000. If you would like to learn more about the JOBS Act, here’s an infographic that provides a nice, clear overview.
For those contemplating crowdfunding, research is a very good idea, of course. One place to start is The KickBack Machine, where you can look at past projects launched by others to better understand what works — and what doesn’t.
Scott Steinberg is the author of The Crowdfunding Bible, a comprehensive guide to raising money online. You can download the guide for free at www.crowdfundingguides.com
While there are too many crowdfunding platforms to list them all, here’s a quick sampling:
Grow VC (www.growvc.com)
Will the financing side of entrepreneurship be turned on its head by crowdfunding? No doubt it’s opening opportunities — and maybe some challenges as well. We’ll see what happens after the JOBS Act goes into effect next year.