360° Coverage : I Don't Crowdfund, I Invest

2 Updates

I Don't Crowdfund, I Invest

May 14 2014, 12:54pm CDT | by

I don’t crowdfund. I invest in consumer products companies. For true investors and those who focus on maximizing returns and managing risk — this is an important distinction that I think many people...

Filed under: news

 
 
 

23 weeks ago

I Don't Crowdfund, I Invest

May 14 2014, 12:54pm CDT | by

I don’t crowdfund. I invest in consumer products companies. For true investors and those who focus on maximizing returns and managing risk — this is an important distinction that I think many people overlook in enthusiasm for crowdfunding. Not all platforms are created equal. From my years as a private equity investor and as the founder and CEO of an accredited investor crowdfunding platform, I think recognizing the difference between investing and crowdfunding is crucial.

At last count, according to crowdsourcing.org, there were around 400 crowdfunding platforms around the world – but you likely cannot list more than five. Just because crowdfunding takes place on these sites does not mean that investing is happening on most of those platforms. Crowdfunding platforms supported more than a million campaigns in 2012 that raised $2.7 billion, an 81% increase from the prior year, according to research and consulting firm Massolution. That’s a lot of money. The trouble is crowdfunding is a broad term covering (1) donations and sponsorship where the contributor expects no financial return, (2) lending and (3) investment in exchange for equity, profit, or revenue sharing. So to say you are a crowdfunding site is not very telling.

Now that we are several years into the crowdfunding wave, we are seeing, first and foremost, the proliferation of platforms. But, more importantly, we are witnessing the growth and success of those platforms that have a clear focus.

Crowdfunding is a vast category, but I believe the sites that win will be those that are focused on what Union Square Ventures partner Andy Weissman calls “point solutions.” These are the platforms that are not all-encompassing marketplaces that crowdfund anything, but rather those that are highly targeted.

Kickstarter is one examples of a focused, successful platform. Kickstarter enables you to back an early-stage project you love: Projects like the Veronica Mars movie or the $299 3-D printer for consumers that hit its Kickstarter goal of $50,000 in 11 minutes and in three days had raised more than $1.5 million. During the first quarter of 2014, Kickstarter averaged $1.2 million in pledges daily, and almost 4,500 projects reached their funding goals. By making it easy for passionate, smart creators to connect with people who are equally passionate about supporting cool projects, Kickstarter has become a dominant community with more than $1 billion pledged since it launched in 2009.

I find it interesting that the first two non-profits embraced by Y Combinator were crowdfunding platforms, and both are very focused: Wadsi, funding medical treatments in developing countries, and Zidisha, a person-to-person micro-loan network for enterprises in developing countries to attract funding from investors.

When it comes to crowdfunded investing — whether you want to lend funds or make private equity investments — point solutions appear to be the clear winners.

Crowdfunded investing could be a $2.2 billion to $5.5 billion market, according to estimates from UC Berkeley’s Fung Institute for Engineering Leadership. That’s assuming that it is just 1 to 2.5% of the current combined value of angel investments, small business lending, and entrepreneurial  and  small  business  venture funding.

null  By focusing on linking consumers who need loans to investors who desire attractive returns, Lending Club has, in just seven years, facilitated more than $3.8 billion in consumer loans. Having proven itself with consumer lending, Lending Club is now adding small business lending. This is how the successful crowdfunding platforms will evolve: by addressing a specific problem or gap in the marketplace, providing a solution that benefits investors and entrepreneurs, and then extending their product line as they gain scale.

Just as in crowdfunded lending, accredited investor crowdfunding is taking off as more investors understand the powerful network effects of an online platform. The most successful accredited investor platforms will have a focus, such as enabling investors to create a diversified portfolio in consumer products companies.

I think Union Square Ventures’ partner Fred Wilson was spot on when he estimated Americans will ultimately invest 1% of their investable assets through crowdfunding, which will make this a $300 billion market. The potential for attractive returns may be available for those investors who do research and utilize the expertise provided by point solution platforms. That said, realize that these investments are risky, illiquid, long-term investments.

 
Update
2

7 weeks ago

Khazanah throws MAS RM6b lifeline

Aug 29 2014 5:01pm CDT | Source: Business Times Singapore

August 30, 2014 1:15 AMKHAZANAH Nasional will inject RM6 billion (SS$2.4 billion) over three years to resuscitate loss-making Malaysia Airlines (MAS) under a recovery plan that includes even an Act of Parliament. Other key moves are migrating its operations, assets and liabilities to a new company (N ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

8 weeks ago

MAS posts loss of RM307m for Q2

Aug 28 2014 5:00pm CDT | Source: Business Times Singapore

August 29, 2014 1:13 AMMALAYSIA Airlines (MAS) registered a loss of RM307 million (S$122 million) for the second quarter to end-June, but warned of worse to come in the second half when the "full financial impact of the double tragedies of MH370 and MH17 ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 

Don't miss ...

 

<a href="/latest_stories/all/all/30" rel="author">Forbes</a>
Forbes is among the most trusted resources for the world's business and investment leaders, providing them the uncompromising commentary, concise analysis, relevant tools and real-time reporting they need to succeed at work, profit from investing and have fun with the rewards of winning.

 

blog comments powered by Disqus

Latest stories

Twitter declares war on passwords
San Francisco, Oct 24 (IANS/EFE) Twitter formally declared war on passwords during a developers' conference in San Francisco, unveiling a new system that allows users to log-in to mobile apps with a phone number.
 
 
Ebola not to upset Africa's overall growth: IMF
Harare, Oct 23 (IANS) The Ebola outbreak in West Africa, which has claimed 4,500 lives, will have minimum impact on continent's overall growth, a top International Monetary Fund (IMF) official said Thursday.
 
 
Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday.
 
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said.
 
 
 

Latest from the Network

Second MERS case reported in Qatar
Doha, Oct 23 (IANS) A 43-year-old man in Qatar has tested positive for Middle East Respiratory Syndrome (MERS) in the second confirmed case of the deadly virus in 10 days, media reported Thursday. The patient had...
Read more on Business Balla
 
Two people die in Pakistan bomb blast
Islamabad, Oct 23 (IANS) At least two people were killed and 12 others injured in an explosion that took place in Pakistan's Balochistan province Thursday, media reported. The bomb was planted on a motorcycle, Dawn...
Read more on Politics Balla
 
Trott extends contract with Warwickshire till 2017
London, Oct 23 (IANS) England batsman Jonathan Trott, whose mental issues led to his abrupt departure from last winter's Ashes tour, has confirmed his successful comeback to competitive cricket by signing a new three-...
Read more on Sport Balla
 
Srikanth, Kashyap big movers in BWF rankings
Kuala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest Badminton World Federation (BWF) rankings released Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Alvin Stardust dead
London, Oct 23 (IANS) English singer Alvin Stardust died after a short illness. He was 72. Stardust's manager confirmed the news about his demise Thursday, reports mirror.co.uk. He was recently diagnosed with...
Read more on Celebrity Balla
 
Indian man reunited with family after 40 years
Dubai, Oct 23 (IANS) An Indian man, who had disappeared from his hometown in Kerala nearly 40 years ago, has been found by his family at a hospital in Dubai in the UAE, a newspaper report said. Now in his 60s, Abdulla...
Read more on Politics Balla
 
Srikanth, Kashyap, Saina rise in world rankings
Kala Lumpur, Oct 23 (IANS) Indian men shuttlers Kidambi Srikanth and Parupalli Kashyap jumped seven places each in the latest released Badminton World Federation (BWF) rankings Thursday while Olympic bronze medallist...
Read more on Sport Balla
 
Flintoff signs for Big Bash side Brisbane Heat
Brisbane, Oct 23 (IANS) Former England captain and all-rounder Andrew Flintoff, who retired from international cricket in 2009, Wednesday confirmed that he will play for Brisbane Heat in the Big Bash League (BBL) this...
Read more on Sport Balla
 
OPEC daily basket price falls again
Vienna, Oct 23 (IANS/WAM) The basket of 12 crude oils of the Organization of Petroleum Exporting Countries (OPEC) closed at $81.94 a barrel Wednesday compared to $82.09 Tuesday, the OPEC Secretariat said. The new OPEC...
Read more on Business Balla
 
Lopez to sign multi-million dollar deal?
Los Angeles, Oct 23 (IANS) Singer-actress Jennifer Lopez is reportedly in the final stages of securing a multi-million dollar deal to perform in Las Vegas. The 45-year-old is being offered $350,000 per show at The...
Read more on Celebrity Balla