Just over a week ago, Kickstarter, the crowdfunding platform, revealed that it had successfully funded more than 50,000 projects since its inception in 2009. As of October 31 that number had jumped to 50,844 with another 4,130 currently in the process of being funded.
Kickstarter has helped entrepreneurs with ideas, songs, gadgets, video games, publishing concepts, and fashion design ideas connect with low-budget capitalists interested in supporting them. And, thanks to provisions in the JOBS Act, signed into law in April 2012, they can do this without many of the crushing regulations of the Securities and Exchange Commission. In fact, after reviewing the act’s provisions, the SEC unanimously approved the crowdfunding concept, explaining that it would ease online fundraising for small companies while providing investors with adequate fraud protection.
At the time the JOBS Act was being debated in Congress, the New York Times predictably opposed allowing the exercise of such blatant freedom, citing all types of difficulties that would arise, and calling it “a terrible package of bills that would undo essential investor protections, reduce market transparency and distort the efficient allocation of capital.” The Times even quoted an “expert” who dubbed the JOBS Act the “Boiler Room Legalization Act.”
Of course, none of those concerns were proven valid. In 2010, Kickstarter had 3,910 successful fundraising projects completed with $27 million raised. In 2011, the platform successfully funded another 11,836 projects with $100 million raised, while in 2012 the company completed 18,109 projects and raised $320 million. To date, the company has raised $852 million from more than five million investors and could reach $1 billion in successful financing by the end of the year.
Not every project is successful, in which case the investors get their money back. And even after a successful funding, the entrepreneurial idea may fizzle. More than 40 percent of the projects Kickstarter approves do reach the entrepreneur’s goal, however; and most of them accomplish their purpose, sometimes with remarkable success.
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