Does it make any sense for companies like Pebble or Ouya to crowdfund for equity?
In hindsight, no.
There is no million-dollar limit in rewards-based crowdfunding. One of the provisions of the JOBS act limits offerings to one million dollars of equity. Ouya raised over $8 million on Kickstarter. Pebble raised over $10 million.
Rewards-based crowdfunding is akin to market research. If you are wondering what the response will be to your product and you want to mitigate some of the risk involved with going straight to the storefront, launch a rewards-based campaign. Every company should be so lucky as to be able to test the sale of their product before they’ve produced it.
Skip the regulations. Why open your books or answer to investors? Having equity sold to private citizens could also limit your future options in regards to raising additional capital.
This brings to light an interesting dichotomy in crowdfunding. If your company is selling a tangible good and has a killer pitch or an actual working prototype, rewards-based crowdfunding probably makes more sense in the effort to raise capital.
What would Pebble or Ouya look like today had they gone the equity route? It is hard to say. Maybe the buzz would still have been strong enough to answer the question of whether or not a market existed for these products. However, $18 million in crowdfunded capital never would have happened.
Will equity crowdfunding just be a collection of failed rewards-based offerings? What types of industries or companies are primed for equity crowdfunding?
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