Crowdfund Insider | JD Alois | May 18, 2017

Indiegogo was originally envisioned as a vehicle to sell securities in small companies to the masses. That was back in 2008 and, as we all know, the regulatory environment had not yet caught up to the realities of a world with internet access. Thus Indiegogo pivoted and dove into the perk-based crowdfunding world. Since then, Indiegogo has helped to raise over $1 billion for projects and businesses around the world.

When President Obama signed the JOBS Act into law back in 2012, most people thought regulators would move rapidly and build out the rules that would allow companies to raise capital online.

That did not happen. The wheels of government can move rather slow.

It took four years for each of the crowdfunding exemptions to be completed. The final being Title III of the JOBS Act, the crowdfunding exemption that has received the most popular attention from the media.

See:  Indiegogo Could Soon Dominate Equity Crowdfunding

While Title IV (Reg A+) and Title II (Reg D 506c accredited crowdfunding) of the JOBS Act allow issuers to raise a lot more money online, Title III or Regulation Crowdfunding (Reg CF) was ostensible positioned to benefit the smallest startups or the mom-and-pops in need of growth capital. Ignored by VCs and Angel investors, and being too small for bank loans, these companies clearly lacked access to capital. Thus Reg CF was born.

In May 16, 2016, the new exemption went into effect. Newly minted “funding portals”, a type of broker-dealer light entity that could sell these securities online, listed the first investments under Reg CF. One year later, over $35 million has been raised for more than one hundred small companies.

As it stands today, Wefunder and StartEngine lead the space with most dollars raised. But Indiegogo, a late entry into Reg CF crowdfunding, is quickly catching up.

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Launched in partnership with MicroVentures (First Democracy VC), an already established accredited crowdfunding platform, Indiegogo has diligently pushed into investment crowdfunding. In stark contrast to the free-wheeling, wild-west world of perk-based crowdfunding, Indiegogo has taken a more selective and conservative approach.

Out of twelve crowdfunding rounds listed by Indiegogo, twelve have fully funded. So Indiegogo is batting a thousand. As far as we know, there is only one other active Reg CF portal that can claim the same.

The deals are interesting too. From a restaurant in Washington, DC, Republic Restoratives, raising $300,000 to the Field Guide of Evil (a film) raising half a million dollars.

On Tuesday, I hopped on the phone with Slava Rubin for a quick update as to how he things are progressing for Indiegogo in the equity crowdfunding side of his business. Rubin, co-founder and Chief Business Officer of Indiegogo, passed the mantel of CEO to David Mandelbrot at the beginning of 2016. He is still very much engaged with Indiegogo and is spending his time focusing on innovation and growth.

Rubin said the Reg CF Anniversary was super exciting and they are generating real data and feedback on selling securities online;

“We launched in the middle of November, so only half the amount of time in operation. We are 12 for 12 for businesses that have reached their target. We are at a 100% success rate.”

I asked Rubin if he is seeing any parallels to the perk-based platform.

“There is no question there is a benefit to the history and experience with the perk business. We have worked with thousands of entrepreneurs and millions of backers. That comes with  a lot of people having a good experience and trust. We are building our trust in equity crowdfunding. It has been very helpful.”

Rubin said that it was exciting to see Indiegogo alumni raise funding on their investment side. The perks side is a funnel for potential investment rounds. Rubin also added that having the large existing network of backers has been helpful in getting the businesses funded. “Many times these investors are complete strangers,” said Rubin.

Asked if equity crowdfunding had matched his expectations?

“Yes. Things are going well. It is early, but we expect more growth to come.”

Rubin explained they were receiving a ton of inbound requests because of awareness from their perks side. He said they are making certain that issuers are solid companies. Perks is open but equity – not so much. While he did not know the exact acceptance rate, Rubin said they were far more companies applying than getting posted. Sometimes they will provide feedback to a potential company telling them they need to wait or work to accomplish some more milestones. Sometimes they go to other equity platforms too.

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The National Crowdfunding Association of Canada (NCFA Canada) is a cross-Canada non-profit actively engaged with both social and investment crowdfunding stakeholders across the country. NCFA Canada provides education, research, leadership, support, and networking opportunities to over 1500+ members and works closely with industry, government, academia, community and eco-system partners and affiliates to create a strong and vibrant crowdfunding industry in Canada. Learn more at ncfacanada.org.