Josh Ong is the US Editor at The Next Web. He previously worked as TNW's China Editor and LA Reporter. Follow him on Twitter or email him a Josh Ong is the US Editor at The Next Web. He previously worked as TNW's China Editor and LA Reporter. Follow him on Twitter or email him at [email protected].
LA-based crowdfunding platform Investedin took a couple years to find its stride, but since focusing on providing white-label solutions for the enterprise, it has processed over $30 million worth of deals on its platform.
Investedin founders Alon Goren and co-founder Yadid Ramot met while working together at Myspace. The two started Investedin as a consumer-focused crowdfunding site while working full-time, but they decided to hone in on servicing specific verticals after quitting their jobs.
In order to gauge interest, the pair threw up a bunch of launch pages for different crowdfunding services. Investedin quickly began receiving inquiries for the page they’d created for a white-label platform, so the startup decided to work with a couple customers before making decisions on which industries to target. As Investedin tweaked its business model and pricing, enterprise customers continued to roll in, so the company committed to the platform play and developed platform-as-a-service technology to power crowdfunding.
Goren said in a recent interview with The Next Web that an increasing number of large enterprises are reaching out these days because crowdfunding has become a trend that companies feel they need to join in on to stay relevant.
“They do it because it’s really, really good marketing for them,” he said, estimating that for every dollar given, campaigns see roughly 10 times the eyeballs.
For corporations, crowdfunding acts as a cross between corporate social responsibility and traditional marketing. Goren noted that Investedin gets contacted on a daily basis by someone with “innovation” in their title.
The crowdfunding space is poised to take off even further as the SEC puts into effect the JOBS Act, which was signed into law last April. While the SEC is taking its time approving stipulations that would allow non-accredited investors to invest in private companies, the agency did authorize companies to begin publicly soliciting investment earlier this month.
Though Goren is generally optimistic about some of the crowdfunding opportunities that the JOBS Act will create, he remains skeptical that the rules for unaccredited investors will usable. Startups, for instance, would be hesitant to take on unaccredited investors because of the higher up-front fees and longer wait times that arise from stricter regulations.
“It’s one step closer to truly evening the playing field. I’m skeptical because I’m one of those guys who thinks the government takes too long with everything,” Goren said.
Goren’s proposed solution would allow crowdfunding sites to govern themselves. He likened the current state of the industry to the early days of ecommerce where PayPal was born out of a need to protect from eBay scammers.
For Investedin’s current rewards-based crowdfunding solution, Goren says fraud isn’t an issue: “We’ve been running a crowdfunding site for years now, and there’s very, very little fraud. It’s on the same level as any kind of Internet company.”
Sites like Kickstarter are experiencing growing pains as a community, though. Earlier this week, a board game creator announced that he was canceling his Kickstarter-backed project, which had raised over $120,000. Kickstarter’s popularity among consumers contributes to the issue, as many backers view the transaction more as a preorder than a risky investment.
However, Goren finds it odd that crowdfunding faces such strong government scrutiny when things like state-sponsored lotteries and gambling exist.
“If the government wanted to regulate crowdfunding, I think the only disclosure that they should say is, “Investing in companies is very risky and you may lose all your money,”” he said. “If there was fraud in it, people are going to stop using it and the site that is able to fix it is going to be the winner.”
Goren also pointed out that the people committing fraud aren’t likely to follow the rules anyway.
Crowdfunding for crowfunding
I’ve long been curious whether crowdfunding companies apply their own principles when raising their own money. Investedin did so in a very meta experiment when it launched at DEMO in 2010. Goren took to the stage to demo the company’s product by creating a crowdfunding campaign to help raise money for the costs associated with presenting at DEMO. When he checked the site after finishing his pitch, Investedin had already raised $1,000. Backers were rewarded with the honorary title of “co-founder” and a t-shirt. When the campaign closed, Investedin had raised over $10,000.
Investedin went on to join accelerator Amplify LA and raise a seed round from several prominent angel investors.
Goren acknowledged that a lot of investors are interested in backing crowdfunding companies right now, though some have gotten skittish because the government has dragged its feet with the JOBS Act.
“We’ve actually been approached by investors about raising a fund just to invest in some of the leads that come to us. We’ve received over 3,000 leads of people launching crowdfunding businesses,” he said.
Crowdsourcing.org estimates that crowdfunding platforms will raise $5.1 billion this year, up from $2.7 billion in 2012. Goren sees plenty of room for crowdfunding to keep growing, especially as companies like Realty Mogul and Solar Mosaic open up massive industries like real estate and energy.
“At the end of the day, [crowdfunding is] creating really exciting opportunities in tons of industries,” Goren said.
Investedin’s enterprise platform doesn’t inspire the same level of excitement as a consumer service like Kickstarter, but it’s in a good position to have its technology serve as the foundation for the future crowdfunding revolution.
Image credit: Digital Vision
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