Can Entrepreneurs use CrowdFunding to Save Hostess?

Crowdfunding is another term for collective fundraising by a large group of people who either donate money or receive equity stakes in a business.

Can entrepreneurs use crowdfunding to save HostessAs Hostess Brands, the makers of Twinkie and other snack foods, headed to bankruptcy court last week to begin liquidation plans, a group of entrepreneurs coalesced to use crowdfunding to keep the 82-year-old iconic company and some of its 18,000 jobs alive.

Crowdfunding is another term for collective fundraising by a large group of people who either donate money or receive equity stakes in a business. Crowdfunding has gained popularity in recent years with the launch of Kickstarter, Indiegogo, and other websites that make donating or supporting companies relatively easy. Similarly, eRaise was founded in 2012 when Steve Schafer, an entrepreneur, partnered with Brillant Chemistry, a creative technology studio.

“Not only does Hostess represent an iconic American brand and countless childhood memories,” said eRaise CEO Spencer Clark, “but it’s also a metaphor for the current state of America, and the struggle many businesses face today balancing payrolls with profits. That is why we are launching Dough for Hostess. It allows anyone to pledge a little dough to help save Hostess. “

By visiting DoughforHostess.com individuals can make a pledge of varying amounts, starting at $25. eRaise hopes to raise $500 million dollars and plans to use this money to explore the best options to help save Hostess.

“Your pledge will provide the opportunity to take part in the single largest CrowdFunding campaign in history,” said Clark. “We’re secretly rooting for Twinkie, but we’ll leave it up to America and the power of the crowd to decide.”

CrowdFunding is still in its early stages of existence. The U.S. Securities and Exchange Commission is currently working on specific rules and guidelines to govern how funds can be raised while ensuring the protection of investors. Equity based CrowdFunding received overwhelming bi-partisan support in the House and Senate earlier this year and is awaiting final SEC approval in 2013. Once approved into law, equity based CrowdFunding will allow entrepreneurs to raise capital by selling shares in private companies to the public.

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  • http://twitter.com/thierryhubert thierryhubert

    Great story. I actually found it through http://tweather.co/crowdfunding the tweather crowdfunding report. They also have one on Twinkies where I discovered crazy tweets about actions. You might want to think about the legal issues of crowd-funding on this story. Most people don’t think about the conflict with Private Placement Memorandum (PPM). You can’t get shares from crowd-funded initiatives. The SEC has strict restrictions. At least it is understanding.