Danae Ringelmann, co-founder of the popular crowdfunding platform Indiegogo, says that the company wants to let people exchange equity for funding — if the conditions are right.
Speaking at Telefonica’s (s TEF) Campus Party Europe event in Berlin, Ringelmann told me that even if the SEC doesn’t implement the rule changes described in the JOBS Act, which aims to make investment crowdfunding legal, the company would consider allowing proper investments for projects outside the U.S..
“Our original vision was around investing and we pivoted towards non-investing given all the SEC regulations and the illegal nature of it,” she said.
The issue of raising funding for new companies through crowd platforms is developing fast right now. The JOBS Act has passed through the Senate, though the outcome of it will only be seen once the SEC reveals its revised regulations early next year.
But Ringelmann says that Indiegogo may use its global footprint to sidestep the issue in some cases — big rival Kickstarter is still mostly limited to the U.S., while Indiegogo makes much play of the fact that it’s operational around the world (it’s currently opening up its first non-English-language site in Germany, and just started accepting euros as well as dollars for the first time).
“The reason the JOBS Act passed was a lot of good work by a lot of people, but what really helped was our customers’ case studies,” Ringelmann claimed.
Those who opposed the Act have generally argued that throwing equity into the crowdfunding mix puts inexperienced investors at risk: essentially, that these people don’t fully understand what they’re
getting for their money.
Ringelmann chalks this up to a misunderstanding of the nature of crowdfunding. The way she sees it, crowdfunding is “fundamentally social” and will stay that way.
“It’s not a transactional experience, and we envision the social nature continuing,” she said. “When people raise money via crowdfunding, it’s rare you see a campaign raising 100 percent of its
funds from strangers. Nobody wakes up in the morning and funds a stranger they don’t know anything about. It’s human behavior for people to put money behind people they know, and we encourage campaign managers to reach out to friends and family, then Facebook and Twitter followers.”
“People trust a friend’s opinion, or see if the crowd has funded something. On the equity side I don’t see that changing a whole lot,” Ringelmann said. “What equity crowdfunding will unlock is the story of a local neighbourhood drycleaning shop being able to open, because it will be able to raise money from local people. I see the local coffee shops definitely benefiting the most.”
The logic makes some sense. If you throw cash at some recording project to get your name in the liner notes, or at some new gadget’s development to get one when it’s done, you know exactly what you’re
hoping to get. Make it a proper investment, with all the uncertainty that brings, and trust becomes even more of a factor.
If Indiegogo did go into the equity business, however, it wouldn’t be the first mover. Early players in this space include Seedrs in the UK and Innovestment, a kind of crowdfunding-auction hybrid, in Germany.
It does, however, suggest the direction that this industry may go.
It’s pretty clear that crowdfunding is something of a revolution: providing not only an alternative to traditional startup fundraising, but also an entirely new kind of boost for causes and artistic projects. But as with all revolutions, the fundamentals of crowdfunding are already starting to evolve.
It’s a concept that’s also starting to be mashed up with other startup-related projects in interesting ways. Case in point: Ringelmann was in Berlin to promote a new local startup competition and academy called Gründer Garage, in which Indiegogo is involved alongside Google.
The revolution isn’t over, not by a long shot.