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Betaworks embraces crowdfunding with syndicate seed investment

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Today, the U.S. government quietly lifted the general solicitation ban to make good on a provision of the JOBS Act. Now, it is legal to gain startup money from “crowdfunding” techniques — and Betaworks has announced in a blog post that it will seize the opportunity to make syndicate seed investments available for its Openbeta initiative.

Openbeta initially opened as a transparency platform — enabling users to test out new products, leave feedback, and learn about the companies that Betaworks is building even before launch. Now, Openbeta users will also be able to invest in these companies alongside Betaworks during funding periods. It’s an auspicious new feature for the startups under Betatworks’ wing, as they will be allowed to raise more add-on funding straight from the community they interact with through Openbeta.

Betaworks has confirmed that the new feature will be powered by a well-known crowdfunding process, although it has declined to divulge the partnership at this time. At launch, syndicate seed investments will only be available to Openbeta members that are also accredited AngelList investors, though the company says that it hopes to expand the potential investor pool soon.

Of course, it’s quite possible that Betaworks’ decision will become the new normal for similar companies, incubators and accelerators. There’s a real opportunity for startups to turn social capital into actual investment capital, gaining more money without the pressure of adding more VCs (and giving up a little more ownership) in the process. Now that the general solicitation ban has been lifted, it’s likely that a new funding ecosystem will begin to thrive — allowing fans to become more involved in the startups they love and giving companies more money in the process.

One Response to “Betaworks embraces crowdfunding with syndicate seed investment”

  1. David Drake

    It is a great move by Betaworks launching its Openbeta initiative on the day that the U.S. Government quietly lifted the general solicitation ban, and make good on the proviso of the JOBS Act.

    With the rules not yet laid out, we should insure an investor protection program for crowdfunding to truly work. Let us follow the transparency and fraud mechanisms already in place for charities and reward-based markets as starting point. Then augment this with additional safeguards such as portal registry, background and securities enforcement history check, as well as education of investors on crowdfunding.

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