New move towards equity in crowdfunding

Attempts by the crowdfunding platform Indiegogo to enable funders to gain an equity stake in projects to which they contribute have taken a step forward in an announcement by its co-found Danae Ringelmann that it might introduce such a possibility for projects located overseas if they continue to remain illegal in the US, as reported here by the business/tech focused blog GigaOm.

A key feature of crowdfunding ventures at present, on Indiegogo or other major platforms such as Kickstarter, is that donor payments don’t have the status of investments in projects. That is, the donors don’t own any part of the project. This makes the whole process much simpler and more informal in many respects, which is part of the appeal of crowdfunding for many in the indie community, without the legal ramifications that might otherwise result – but it also limits the potential of this means of fund-raising, which has gained increased traction in low-budget indie film in recent years.

The US Securities and Exchange Commission (SEC) has this week delayed its consideration of new rules that would change the law, as part of the Jumpstart Our Business Startups (or JOBS) Act – see here for a report on this by Reuters. The law passed Congress but concerns have apparently been voiced by regulators, including senior figures at the SEC.

Ringelmann is reported by GigaOm as saying Indiegogo ‘may use its global footprint to sidestep the issue in some cases’, already having a more international focus than Kickstarter. But she suggests that the practice will remain a ‘fundamentally social’ rather than a transactional experience.

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