The fundraising website Indiegogo is partnering with MicroVentures, an online venture capital enterprise, to open up opportunities for anyone interested in owning a piece of a company. The two companies have launched an equity crowdfunding platform to allow for individual financial investment in innovative startups. Unlike rewards-based crowdfunding where you receive items like T-shirts, performance tickets, or first dibs on a new product, with equity crowdfunding, you receive company shares, not just perks, in exchange for your equity investment. This way you can support a startup that you believe in and hopefully benefit financially if the company thrives.
Launched in 2008, Indiegogo.com has helped nearly 250,000 of its users to raise over $1 billion to fund their businesses or projects. It is the place for entrepreneurial projects to move quickly from proof of concept to market. The website is owned and operated by Indiegogo Inc., which is not a broker-dealer, funding portal, or investment adviser.
Under its new equity component, all investment transactions take place on MicroVentures.com. Launched in 2011, MicroVentures is positioned as the future of venture capital funding, facilitating investment in tenable entrepreneurial ventures. Over $100 million has been raised via investors and more than 95% of investment opportunities are funded.
How Much Individuals Can Invest
Individuals can invest in an offering pursuant to Regulation Crowdfunding only through an online platform of a broker-dealer or a funding portal, a new type of intermediary that was created by the JOBS Act, which is a law signed by President Obama intended to encourage funding of United States small businesses by easing various securities regulations.
If either your annual income or your net worth is less than $100,000, JOBS Act crowdfunding rules allow you to invest the greater of $2,000 or 5% of your annual income or net worth. If your annual income and net worth are $100,000 or more, you can invest up to 10% of your annual income or net worth, whichever is less, but not to exceed $100,000.
Through Indiegogo’s equity crowdfunding, any individual 18 years and older can invest. And individual investments start at $100. Investors will have investment maximums based on earnings, net worth, and other factors.
How Equity Crowdfunding Works
Each offering company decides how much money they want to raise, what they want to offer, and what the price should be. The offering terms are noted on their page, according to Indiegogo’s website. It’s free for a company founder to create a profile. The only charge occurs when there is an investment processing fee on an investment that gets made.
Before a person can invest via Indiegogo, each company is required to show how they plan to use the money raised and other financial information. After investing, each company is required to routinely share information about how their businesses are doing.