Crowdfunding while not yet part of the investment vernacular, has gotten a major boost from the recent success of the E-Paper Watch by Pebble Technology and its Kickstarter campaign. What started for Pebble Technology as a funds raising project looking for an initial jolt of capital to the tune of $100,000 over 6 weeks has ballooned to over $6M coming from over 42,000 backers, with nearly a month still left to go before the funding is closed. I wouldn’t be surprised, when it’s all said and done, if this project closes with over $10M and a 100,000+ backers proving the point that when a product is hot, it’s hot, period.
There’s nothing harder for any start-up than to find seed capital. It usually comes from family & friends, brave and slightly foolish angel investors. What distinguishes crowdfunding from buying an equity position into a company and parlaying that position for stock, is how the crowdfunder instead buys into the promise of receiving a tangible reward (be it music, a film, a watch) once funding for a project in question has met its financial objectives. Should it not, then no funding takes place and the crowdfunder gets his money back to keep or invest elsewhere. Most crowdfunders invest $20.00 – $60.00 into Kickstarter projects, but this E-Paper Watch has clearly exceeded everyone’s expectations and created a huge buzz for this watch and a windfall for Pebble Technology. It’ll be interesting to see how Kickstarter doles out such a large amount of cash to a company that’s still very much in its infancy, and with no regulations on how the money should and will be spent.
Naturally if crowdfunding works for the production of a watch, then it will also work for the production of music. And actually it already has, many many times!!! Except now here comes the JOBS Act signed into law by President Obama earlier this month and with it comes the heavily reworked CROWDFUND Act (Bill S. 2190), which should allow for small, even micro investors to hold equity (stock) in the crowdfunded companies they support. The SEC has this under review for the next 9 months before it’s law, so for all of you indie artists who’ve always wanted to have your own label, here’s a perfect opportunity to rally all your musical peers and all your fans to motivate them to own a piece of the label dream with you. And that my friends are chaordic principles in action!