2013 Prediction: Crowdfunding Pays Off

Jobs Act 2013Crowdfunding models like Kickstarter took off in 2012–now we’ll wait and see how transformative those models are.

On April 5, 2012, President Barack Obama sat at a small, wooden desk in the White House Rose Garden and signed the JOBS Act, one of the most transformative pieces of securities legislation written since the Great Depression. Among the 22 pages of dense legalese, one section stood out: the Crowdfund Act. Pending the creation of SEC regulations later this year, new businesses will be able to make their own IPOs, and small investors could act as venture capitalists.

Start-ups and inventors raised an estimated $2.8 billion on crowdfunding platforms such asKickstarter in 2012, a 529 percent increase from 2009. But they could only solicit donations, presales of products, and loans. By allowing equity investment, lawmakers expect to supercharge crowdfunding, which would make nascent businesses less reliant on angel investors and banks while spurring innovation across a wider range of companies.

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