Does crowdfunding have more sizzle than steak? – Part 2

steakAssessment of the impact of crowdfunding amongst those supplying funds starts with the identification of distinct groupings. Two are useful; individuals supplying their own funds – angels – and organizations using other people’s money – firms. The evidence thus far is that crowdfunding models are not having much impact on firms. However, it is clear that if a founder gets prepaid orders as did Pebble, then those offering order financing are in the front line of change. The same would be true for banks offering lines of credit based on receivables and factors that fund receivables.

Platforms supportive of crowdfunding and capable of doing so for equity crowdfunding have already had an impact on individual angels and angel groups during the past decade. AngelList, Gust, and other existing organizations link funders and founders. In their absence, each party spent many hours seeking the other. The overt function of these platforms is to ease the introduction process, a prerequisite for crowdfunding, equity or not. In reality it is introduction of a standard format and facilitation of the mechanics of due diligence that has had a noticeable impact on angel groups. Gust requires funders to use a standard format so angels and angel groups can quickly determine their level of interest. Ottawa’s Capital Angel Network requires all those wishing to present to use the Gust Format to describe the investment opportunity. It is not used by the Capital Angel Network to source deals, even though it clearly could be in those cases where the funder permits open access to their application form. (The funder can limit access to a specific angel group.)

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