The Good, the Bad and the Crowdfunded

Kickstarter has empowered armchair inventors to make things we really need – and some we could live without.

By Erk Sofge, for WSJ, August 18, 2012

FOUR YEARS AGO, Kickstarter was adorable. The site—which allows designers, independent artists, philanthropists and any netizen with a dream to solicit funding for projects large and small—was a promising novelty act. Ideas and money poured in. Journalists championed it. Was crowdfunding just crazy enough to work?

In hindsight, the success of Kickstarter seems inevitable. The service, which takes a 5% cut of the funding that pours in, has exploded. Along with scores of modestly backed projects—from $100 for a puppet-show adaptation of “King Kong” to one woman’s $15,000 quest to develop a bionic eye for herself—piecemeal investment has yielded multi-million-dollar hits.

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Crowdfunding Becomes more Accessible

By Caroline Lee, fellow at Sustainable Economies Law Center

Good news for the sharing economy: The Securities and Exchange Commission (SEC) just released proposed regulations that would allow businesses to crowdfund by seeking investments or loans through online intermediaries. These proposed regulations, mandated by the 2012 Jumpstart Our Business Startups (JOBS) Act, remove important securities law barriers and take crowdfunding beyond the donation-based model of Kickstarter and Indiegogo. Soon, ordinary people will be able to actually invest in a wide variety of enterprises and receive a return. October 23rd, 2013 commenced a ninety-day public comment period, during which individuals and organizations are invited to offer the SEC feedback on the rules. The rules will hopefully go into effect soon thereafter since the SEC, generally a sharply divided Commission, unanimously approved the proposed regulations.
What exactly does this mean for the sharing economy? Most importantly, it means that an infinitely diverse array of people will now be able to start and finance new enterprises. Starting a capital-intensive business will no longer be a privilege relegated to those with access to bank loans or venture capital. It also means that community members will be able to more easily share in the ownership of local businesses. The legalization of investment crowdfunding is one of the most important steps to date, toward a true sharing economy.