you want to start a business, but donít have the start-up money or
the collateral to ask the bank for a loan? And you donít want to ask
friends or family? Do the next best thing ó ask a stranger. Better
yet, ask a lot of them. With crowdfunding, itís easy. There are
numerous specialized websites where you can pitch your idea and then
sit back and wait for total strangers to pledge you money. Funding
projects like this arenít new. To build the Vietnam Veterans
Memorial, 275,000 Americans, along with corporations, foundations,
veterans groups, civic organizations and labor unions, pitched in a
total of $8.4 million to the project. And that was before the
One of the most
popular crowdfunding websites, Kickstarter, launched in 2009 and has
received more than $1.9 billion in pledges from more than 9 million
people. To date, over 89,000 creative projects have been funded
through the site. The important thing to note about sites like
Kickstarter, however, is that the backers are not in it for the money.
They are supporting creative projects to help them come to life. They
do not profit financially. The only rewards they receive are things
like copies of books or invitations to showings or premieres for the
projects they help fund.
But a new wave
of crowdfunding is hitting the Internet. Crowdfunding is now being
used as a financial investment tool, attracting both lenders and
borrowers, and Wisconsin is a pioneer in the field. In November 2013,
Wisconsin became the first state to pass a crowdfunding law that
allows companies to seek investments from state residents online. The
law went into effect last year, and since then, more 20 states have
passed similar laws.
"I am sure
that the laws will change to become more workable. Ultimately, a
national law will emerge to allow companies to source capital online
from nonaccredited investors nationwide. In 10 years, I would expect
the U.S. market to more closely resemble what is going on in the U.K.,
where investment crowdfunding has been legal for three years,"
says David Dupee.
He should know.
Dupee not only helped pass the law, but he is also the founder and CEO
of CraftFund. Launched in 2012 as the stateís first local
crowdfunding site, CraftFund is a platform for local residents to
invest in local food and drink and real estate development companies.
CraftFund has helped three companies ó two craft breweries and one
real estate developer ó raise a total of nearly $100,000 on the
site. For now, CraftFund is only for food and drink investors and
companies. "We are focused on food and beverage for two reasons.
First, because we believe niche is important as far creating
expectations. We donít want people coming to our site seeing
opportunities to invest in everything from the next Facebook to a
local bakery. We are about activating local capital and turning local
customers into owners and advocates of local businesses," he
explains. "Second, we believe food and beverage is well suited
for this kind of capital. It is a tangible investment that is easy to
do due diligence on. Plus, there is a great demand for consumers to
connect with their food and drink producers. Invest local is the next
logical extension of the buy local movement."
investment opportunities are only open to Wisconsin residents. Each
person can invest up to $10,000, and so far, the average investment
has been around $1,500. "The motivation to invest is both
financial and experiential. Most of the companies will be giving up
equity, meaning that investors own a piece of the company," Dupee
says. "However, many investors view this as a way to support
local in a new and meaningful way."
As a pure
investment vehicle, Dupee says each investor needs to understand that
this is not a way to get rich quick. "But like being a Packer
shareholder, there is a certain satisfaction in owning a piece of your
favorite local food and drink producer," he says.