In 2012, President Obama signed into law the JOBS Act — which stands for “Jumpstart Our Business Startups.” It’s intended to provide new avenues of startup funding to small businesses in the U.S., particularly those bringing new innovations to market.
$6.2 billion in small business funding
The JOBS Act makes it much easier for small businesses and entrepreneurs to raise up to $1 million annually, through a number of small-dollar donations, using Web-based crowdfunding platforms. And, for the first time ever, the Act allows nonaccredited U.S. investors to buy small equity shares in business startups.
This is expected to triple the amount of small business equity funding from an estimated $2.8 billion in 2012 to a forecasted $6.2 billion in 2013. Wondering if you are a nonaccredited individual investor? You are if you have a net household worth of less than $1 million and earned less than $200,000 annually or $300,000 as a couple in the last two years.
Crowd Funding Shows Power of Community Platforms
Kickstarter is the more well known of the more than 450 crowdfunding sites now available. The sites’ growth speaks to how popular crowdfunding sites have become. Since launching in 2009, Kickstarter projects have been under $1 million in funding. Since February 2012, however, 12 Kickstarter projects have raised more than $1 million, and a UK-based project raised $2 million. These numbers should increase dramatically in the next year.
Innovations, Opportunities Abound
Kickstarter graduates will appear at this week’s Consumer Electronics Show (CES), including a vibrating fork that can help you lose weight. Other recently funded ideas include the production of a video by a Singapore rock band, the ability to help a charity devoted to building toilets in the third world, an app that allows cooks to match the right ingredients with the correct herb and a site specializing in long-forum journalism.
While crowd funding has already created a new funding source for innovation and development, its taken the JOBS Act to allow companies to obtain equity in a company through these platforms. As startups are able to infuse new opportunities into companies, crowd funding is one opportunity marketers should be keeping an eye on. Crowd funding platforms like Kickstarter may signal what’s next — and more importantly, marketers now have the opportunity to invest in it.