What is the future of crowdfunding? The Crowdfunding Campaign to Change Crowdfunding Law
A lot of savvy independent creatives are using Kickstarter and IndieGoGo to fund their projects via small donations. Instead of asking ten people for thousands of dollars, you ask thousands of people for ten dollars. As seen in the Obama campaign, the internet enables mass communications and mass donations in a way that wasn't possible before the rise of e-mail, social networking, direct deposit, and online credit card forms. I'll be using one of these very sites come July when I launch a crowdfunding campaign for my first feature! But these sites don't offer profit participation in a project, because they can't -- it's illegal in the United States. Now there's a Crowdfunding Campaign to Change Crowdfunding Law, to allow for microinvestments instead of microdonations.
IndieGoGo and Kickstarter's project creators often offer "rewards" for donors -- a t-shirt, a DVD of the film (when and if it's eventually finished) -- and coming up with cool rewards is a big part of running a successful campaign. But there are a lot of potential issues with rewards -- it's up to the creator to deliver on their promise -- and if we're not already seeing it already, eventually people will start feeling "crowdfunding fatigue," where all of their friends are emailing them all the time for money. Hopefully this feeling won't be widespread before July!
However, offering people a chance to invest in a project is a different beast entirely. ((That is, if anyone figures out how to make money on independent film.)) One successful example of microinvestment was The Age of Stupid, which opened simultaneously worldwide and employed a brilliant crowdfunding model -- but it was a British production, and I assume the reason it was able to offer microinvestments was because the laws are different on the other side of the pond. Thus the Crowdfunding Campaign to Change Crowdfunding Law, which states:
Crowdfunding sites like IndieGoGo offer VIP Perks but not shares—because offering profit participation is illegal. Securities law lets you gamble your retirement on investments conveyed through the all-controlling financial system, but you can’t invest $50 in someone you actually know personally, in order to help them start a small business, write a book, make a film, build an iPhone app or develop a new product that you believe has commercial potential. The SEC can change this situation by introducing a regulatory exemption that caps individual investments at $100. I believe that doing this would change everything for crowdfunding, spark innovation, and help vitalize the economy from the bottom up.
The project's already funded -- with 40 days still remaining -- but the minimum donation is only $2 and in exchange you'll be listed as a contributor on the Public Petition for Rulemaking submitted to the SEC. Once the petition is filed with the SEC, the campaign will presumably take off in earnest. This is a complicated legal issue and I spent a good portion of a recent party discussing SEC laws with a financial advisor; I wasn't close to grasping the ins and outs afterwards. As you'd expect the issues are obfuscated by all sorts of legalese, but check out the IndieGoGo campaign and the longer prospectus if you're interested in where crowdfunding might be headed next.