Top 5 Equity Crowdfunding Websites to keep an eye on in 2013
The year 2013 may go down in the books as the year of a financial revolution that changed the world of investing in small business forever.
The federal JOBS (Jumpstart Our Business Startups) Act and crowdfunding are allowing small businesses to sidestep the expensive and time consuming process of working through investment lawyers and investment banks to create an Initial Public Offering (IPO). Small businesses expect to generate more capital that goes direct into the business and small investors will finally have the chance to buy IPO stock at actual IPO prices.
While small business IPOs going direct to the public is not new, it is spreading like a Colorado wildfire thanks to a handful of crowdfunding websites and a few crowfunding projects that caught the attention of mainstream media. This is getting a serious boost from JOBS.
The financial world is looking at equity crowdfunding to be the BIG thing in 2013 thanks to JOBS, which was signed into law in the spring of 2012. Writing for Forbes, Tanya Prive opened an article about crowdfunding and JOBS with the statement “In the spring of 2012, President Obama passed an act that will drastically alter the landscape of crowdfunding platforms.” In other words, the new law makes it much easier for small businesses to raise capital and sell shares of their business via crowdfunding routes.
She further wrote: “Data from Massolution Research indicates that total funds via the reward and donation based crowdfunding are growing at a rate of 524 percent, where platforms raised almost $1.5 billion…”
The number of websites with crowdfunding as part of the domain name or meta tags as, well, exploded. With so many websites out there, some will fail and some will succeed. A likely indicator of success is adherence to standards being set forth by the major crowdfunding sites and who runs the company. People with a background in business and finance are more likely to succeed than someone who is jumping on the crowdfunding train in hopes of making a quick buck. Some key sites to watch are listed below.
Tagged by Worth Magazine as the #1 equity based crowdfunding site around, Early Shares has also garnered publicity from Bloomberg, CNN, Reuters, Fast Company, Fox News and CNBC. More importantly, Early Shares is a member of the Crowdfunding Professional Association and accredited by The Crowdfunding Accreditation for Platform Standards (CAPS).
It is co-founded by three people with a strong background in investing and marketing.
Maurice Lopes previously served as CEO and founder of HotBrick Network Solutions, an international network security appliance manufacturer with offices across the globe.
Stephen Temes is the Founder and Managing Director of both Lincoln Capital LLC, a hedge fund, and Lincoln Partners Group LLC, a venture capital fund. He has 25 years experience in equity and option markets.
Renee Caputi holds a JD from the Buffalo School of Law, an LLM in International Taxation, an MBA from Queens University of Charlotte and a business finance degree from State University of New York College at Fredonia. She too has 25 years experience in the financial matters.
Early Shares is listed by Crowdfunding-Website-Reviews.com as a top company. The site states, “EarlyShares.com has a strong management team in place, along with their accredited status, they will undoubtedly be one of the leaders in the Equity CrowdFunding revolution.” It gets 5 stars on customer services and 4 for website resources and traffic.
IPO Village is accredited by CAPS and is member of the National Crowdfunding Association. The company founder Simon Erblich has been interviewed by Ted Koppel, on The Rudd Report and appeared in an article in Forbes, among others.
Erblich is a founder at First Line Capital LLC, which not coincidentally has partnered with IPO Village. Launched in the mid-90s, First Line has worked with emerging companies around the world to bring them to the public. Among the better known companies are Priceline and E-Trade.
Founder and IPO Village “mayor.” Howard Orloff has extensive management experience at Fortune 500 companies and founded Crowdfunding-Website-Reviews.com, one of the internet’s top sites for getting information on crowdfunding platform websites.
Crowdfunding Website Reviews (CFWR) gives IPO Village five stars in market experience and technology and four for market traffic. CFWR points to the global experience of First Line Capital as a prime reason IPO Village is a company to watch and consider.
The .ac in the domain name means this company’s website is registered in the Ascension Island, a UK held territory about halfway between the horn of Africa and South America. Start launched in spring 2012 with a focus on tech startups. It has since expanded other ventures.
According to Forbes magazine, Start changed the playing field for crowdfunding by letting members, who are potential investors, rank, rate and suggest ways to improve a startup idea. The CrowdAudition has continued to be an integral part of this website. The site also offers mentors who can guide a startup through the process in exchange for a share of equity in the company.
Start is founded by businessman Rod Turner, who has extensive upper level experience in major companies like Ashton Tate, Symantec, and ArtSlan.
CFWR gives the company five stars for innovation and customer service. It earned three stars for traffic.
GROW VENTURE COMMUNITY
With physical offices in three countries, lists itself as the “first global, transparent, community-based platform dedicated to entrepreneurs and investors.” With dedicated offices in New York, London and Hong Kong, that claim probably can stand up to scrutiny.
CrunchBase.com said “Grow VC will be more than current VC or Angel business model on steroids. Grow VC will break the mold and restructure a new better working model for new international start-up ventures.” The same report lists a series of “milestones” the company made which prompted the statement from CrunchBase.
London-based founder Jouko Ahvenainen is partner in several other global-reach financial companies. He is an adviser in NasdaqOMX First North list at Helsinki and Stockholm stock exchanges and regularly speaks around the world on marketing and company start-ups.
The company does list its trade association affiliations on the website.
CFWR gives the company 5 stars for traffic and 5 for reputation. Ease of use gets 4 stars. CFWR adds, “If you fear that your technology may be stolen by a competitor by placing it publicly on a crowdfunding website, look to GrowVC for the capital your small technology company needs.”
Widely considered the original equity crowdfunding platform in the digital age, EquityNet had raised $104 million as of mid-August 2012. The company was seven years old at that time.
Among other things, EquityNet is credited with a patented software system that streamlines a business planning process and provides an indicator of success. Company founder Judd Hollas wrote “A survey found that over 50 percent of the entrepreneurs who complete the EquityNet system succeed in raising capital. That’s 10 times the industry average of 5 percent.”
The company is partnered with a number of business-growth associations like the National Association of Seed and Venture Funds and National Business Incubation Association among others.
Founder Judd Hollas was announced as president and CEO on Jan. 1, 2009. Prior to founding Equity Net, he was a division manager for Underwriting and Progress Monitoring for Beta-Rubicon, Inc., a consulting firm specializing in technology assessment and business due diligence. As of 2009, he had 15 years of experience in investing.
CFWR gives EquityNet five stars for professionalism, ease of use and customers service. It is ranked No. 2 overall on the CFWR website. The business plan software, which gives further evidence of a startup’s chance of long term success is a major reason for the ranking. That software analysis, once completed, can be used anywhere.
As venture capitalists know and crowdfunding website operators certainly know, there is no absolute guarantee of success in business. However, properly applied knowledge and experience can tilt the scales to success. These crowdfunding sites are operated by experts in finance and business investing. They have invested their own money and that of other people for many years and learned how the system works. Their expertise, applied to their new companies is a good indicator that they can make it work.
However, caveat emptor still applies. Just because these crowdfunding sites are a success and should have a bright future does not mean every crowdfunding venture that gets listed on the website will be a success. Investors should pay attempt to what is being offered and study the potential market for is being offered. In the end, these crowdfunding websites are a bridge between a company and possible investors. The crowdfunding sites will not do an investor’s homework for them.
Written by Ben Baker