Whether he knew it or not, President Obama created a brand new industry when he signed the JOBS act into law on April 5th. Up until now, it’s been illegal for private businesses to offer equity to anyone other than accredited investors in exchange for funding. As a result, crowdfunding sites (like Kickstarter andIndiegogo) and the investment seekers that use them have been restricted to giving gimmicky thank you gifts and pre-selling new products in exchange for donations. Although this method of fundraising has proven successful for many artists, charities, and startups, the payback for the people who are giving away their money has been limited to cheap schwag and a few new toys.
The passing of the JOBS Act is about to change all of that. Once the rules are in place early next year, private businesses and startups will be able to use crowdfunding to give equity to investors who will get an actual monetary return instead of a sticker or T-shirt. This shift is expected to attract a huge influx of capital from regular Joes looking for better ways to invest than what is currently being offered by the stock market or the meager 0.5 percent interest from savings accounts.
Fred Wilson, co-founder of the venture capital firm Union Square Ventures (which has invested in Twitter, Tumblr, Foursquare, and Zynga), predicts that once it gets up and running, the equity crowdfunding market will reach $300 billion and will be largely driven by families and individuals investing a small percentage of their assets via crowdfunding. As a point of comparison, a study from Crowdsourcing.org reports that about $1.5 billion was raised from 452 crowdfunding platforms in 2011.
The opportunity to cash in on this new industry by creating “next generation” equity crowdfunding platforms is substantial. Hungry tech entrepreneurs are scrambling to get out in front of this imminent boon; and the market is poised for saturation. To help you keep track of all the happenings in this space, here is a an overview of ten existing platforms that may be getting into the equity game, as well as the status of the newcomers that have been popping up daily.