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

 
 
 

18 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

3 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 (NewCo) and slashing the wo ...
Source: Business Times Singapore   Full article at: Business Times Singapore
 

 
Update
1

3 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

EU, Russia and Ukraine to hold meeting on gas in Berlin
Brussels, Sep 23 (IANS/EFE) The European Union will participate in a trilateral ministerial meeting with Russia and Ukraine Friday in Berlin to address the issue of energy security in the context of the ongoing conflict between Moscow and Kiev.
 
 
UN mission team to combat Ebola arrives in Africa
United Nations, Sep 23 (IANS) An advance team of the United Nations Mission for Ebola Emergency Response (UNMEER) has arrived in Ghana's capital Accra to set up the operation's headquarters, a UN spokesman said Monday.
 
 
Spanish Ebola patient in 'serious' condition
Madrid, Sep 23 (IANS) An Ebola affected Spanish missionary who was flown back from Sierra Leone was described as "serious" by the health authorities in Spain.
 
 
Alibaba raises $25 bn in history's biggest IPO
New York, Sep 22 (IANS/EFE) Chinese e-commerce giant Alibaba collected $25 billion in the largest initial public offering ever after underwriters exercised an option to purchase additional shares, the company said Monday.
 
 
 

Latest from the Network

Atlanta Braves Fire GM Frank Wren
The Atlanta Braves have fired general manager Frank Wren.MLB.com's Mark Bowman -- who says Atlanta tapped John Hart as its interim general manager -- wrote about Wren's dismissal on Sept. 22:"Nearing the end of their...
Read more on Sport Balla
 
UN chief welcomes release of Turkish hostages
United Nations, Sep 23 (IANS) UN Secretary-General Ban Ki-moon welcomed the recent release of Turkish hostages held by the Islamic State (IS) Sunni militant group in Iraq. Ban is relieved that the Turkish men, women...
Read more on Politics Balla
 
IS-linked group claims French tourist's abduction in Algeria
Algiers, Sep 23 (IANS) An Algerian armed group linked to the Islamic State (IS) Sunni extremist militants Monday claimed responsibility for the abduction of a French tourist in Algeria, according to a video posted on...
Read more on Politics Balla
 
Kris Jenner files for divorce from Bruce
Kris Jenner has filed for divorce from Bruce Jenner. The showbiz matriarch - who separated from Bruce, 64, 11 months ago - has now officially started proceedings to end their 23 year marriage according to documents...
Read more on Celebrity Balla
 
Naomi Watts wishes she had more kids
Naomi Watts wishes she had more kids. The 'Diana' star - who has Sasha, 7, and Kai, 5 with her actor husband Liev Schreiber - has confessed she regrets not having her children earlier in life. She told More magazine...
Read more on Celebrity Balla
 
Barbara Walters' live appearance axed from The View
Barbara Walters' final live appearance was axed from 'The View'. The US-born broadcast journalist - who created and co-hosted the show from 1997 to 2014 - had her live segment on the season 18 premiere of the ABC series...
Read more on Celebrity Balla
 
Iggy Azalea's 'surreal' duet with Jennifer Lopez
Iggy Azalea's collaboration with Jennifer Lopez was ''surreal''. The 'Fancy' hitmaker - who released the video for the pair's new single 'Booty' last week - confessed she found working with the 45-year-old singer hard...
Read more on Celebrity Balla
 
Israel arrests four Gaza fishermen, says official
Gaza, Sep 23 (IANS) The Israeli naval forces late Monday has arrested four Palestinian fishermen in the central Gaza Strip while they were on their fishing boat, an official said. Israeli naval gunboats surrounded and...
Read more on Politics Balla
 
EU, Russia and Ukraine to hold meeting on gas in Berlin
Brussels, Sep 23 (IANS/EFE) The European Union will participate in a trilateral ministerial meeting with Russia and Ukraine Friday in Berlin to address the issue of energy security in the context of the ongoing...
Read more on Politics Balla
 
Elizabeth Hurley has crush on Aaron Paul's TV avatar
Los Angeles, Sep 23 (IANS) Actress Elizabeth Hurley says she has a crush on actor Aaron Paul's character Jesse Pinkman from TV series "Breaking Bad". The 49-year-old star took to Twitter to share her feelings,...
Read more on Celebrity Balla