A recent Pittsburgh Business Times article described crowdfunding as a marketing venture in which entrepreneurs can get people excited about and emotionally invested in a cause or product. Crowdfunding uses sites like Kickstarter and Indiegogo.
As explained by Jeremiah G. Garvey, Co-Chair of Buchanan Ingersoll & Rooney’s Corporate Section, crowdfunding currently works like a donation, but similar to any organization that is run on donations, it needs good marketing. He also notes that the federal Jumpstart Our Business Startups Act that was passed in 2012 will change the rules for crowdfunding. The SEC is currently working on the rules for equity crowdfunding, which would allow entrepreneurs to exchange some equity for investment.
Garvey also explains that these rules will likely include limits on how much can be raised in such a manner.
Read the full article – “Crowdfunding a test marketing as much as a test of the idea” (Pittsburgh Business Times – April 15, 2013)