The startup world's current investment environment is a crazy place. Pre-seed is now seed; the seed is now Stage A, Stage A still has a funding gap, and all of the big funding rounds are moving even further downstream. Everything requires "traction," which is total B.S. because that is part of the risk for an early investor (whew!). Luckily, Indigiegogo's business model and latest move is looking to help that.
To investors' defense, entrepreneurs have access to tools and technologies to make it big and stand toe-to-toe with large corporations like never before. Creative launches, advanced technology, growth-focused marketing strategies and globalization have empowered entrepreneurs to start new businesses with minuscule investment and still succeed.
However, startups still need investment to scale, and that's where crowdfunding comes in. This system solicits funds from the public to start a business. Indiegogo is one of the most popular platforms in the crowdfunding world and has helped finance numerous business ventures. Now, this platform will allow backers to make equity investments in new ventures they believe in and want to invest into.
Until recently, only accredited investors could purchase an equity stake in new business ventures. They had to have an annual income of over $200,000 or net worth equal to or more than $1 million, not including their primary home. The act was introduced in 2012 by Obama but was approved and implemented in 2016 by the SEC. It removed several restrictions on investments and proposed Regulation Crowdfunding.
Now non-accredited American investors can invest in start-ups, while new businesses can raise $1 million in capital. While other crowdfunding platforms have entered the equity sphere, none of them are as influential and popular as Indiegogo.
This platform has over 8 million backers and business owners, and entrepreneurs have raised over $1 billion on it. Indiegogo has partnered with MicroVentures for the equity market and hopes to dominate it in the upcoming years.
According to David Mandelbrot, the CEO of Indiegogo, this was always a plan. Since its inception, the company wanted to offer an investment opportunity. Thanks to the new regulations, they can now offer equity crowdfunding opportunities to the millions of users that visit this platform every year.
The potential for growth is enormous. Since Kickstarter, Indiegogo's biggest competitor, doesn't plan to offer equity investments, it's very likely that IndieGoGo will dominate the market.
The latter's presence in this field could be just what the equity crowdfunding industry needs to take off. People trust Indiegogo and are familiar with the platform. It could draw start-ups and ventures with the most potential. That would allow investors to put their money in investments that could potentially provide a sizeable profit.
Experts hope that Indiegogo will bring non-accredited investors into the fold. While the ruling to allow equity investments in start-ups was passed over six months ago, most of the investment still comes from accredited investors. The market has seen over $14 million in funds and majority of that amount has come from accredited individuals on crowdfunding platforms.
So far, non-accredited users have only made small and sentimental investments to support their local businesses. They aren't aiming for profits, so they invest only a few hundred dollars in the ventures. Experts hope this will change in the future and users will start investing more and become more confident in their decisions. Indiegogo's presence in the market might encourage that.