Indiegogo is aiming to be a big player in equity crowdfunding—if the regulations ever get finalized.
“I think there is a massive market to be had if equity crowdfunding ever happens,” said Slava Rubin, CEO of Indiegogo. “We are super bullish, but we have to wait and see what the regulations will be.”
Currently, only accredited investors are allowed to invest into young companies. However, the Securities and Exchange Commission is currently working to establish rules that would allow anybody to invest in start-ups via online platforms. The change stems from Title III of the 2012 Jumpstart Our Business Start-Ups (JOBS) Act.
The change will open up another way for young companies to get capital by allowing non-accredited investors—people who make less than $200,000 and are worth less than $1 million—to make investments in these start-ups.
While implementation of the new rules could hugely benefit entrepreneurs looking for funding, critics argue the change could be dangerous for mom-and-pop investors because it opens up a door for fraud, and investors unfamiliar with the failure rate of start-ups could stand to lose a lot of money.
Rubin acknowledged that there are some legitimate concerns, but said the benefits of allowing it outweigh the cons.
“It’s a tricky balancing act, you need to look for investor protections and also make sure you allow for innovation,” he said. “No matter where you end up on the balancing act, you actually have to move forward. I respect the fact that it’s complicated, but the reason that it was included in the act is so not to have it in limbo.”
Rubin said that Indiegogo, which has funded more than 200,000 campaigns, has had tremendous success because the demand for capital is strong for projects and the demand for funding companies will also be strong.
“What’s really interesting is that while everybody is talking about equity crowdfunding, Indiegogo has grown over 1,000 percent since the JOBS Act was signed, because there is massive demand for funding without equity,” he said.
In fact, the demand for crowdfunding, whether it be for projects or for financing start-ups, is becoming so mainstream that it will define the decade, he said.
“It’s a really exciting industry, the 80’s was all about desktop computing, the 90’s was all about online commerce, and the early 2000’s was all about social networking,” Rubin said. “And this decade will go down as the decade of funding by the time it’s over.”
Image credit: CC by Rocío Lara