It's Okay If You Aren't Familiar With Crowdfunding
Chances are, whether you are a company looking to raise capital or an investor looking to be a part of a start-up company, you haven’t heard of crowdfunding. The reality is most people have not and the reason is simple: the regulation bringing crowdfunding to the everyday person is new.
In 2012, Title III of the Jumpstart Our Business Startups (JOBS) Act provided an exemption from registration for specific crowdfunding offerings. And it wasn’t until May of 2016 that companies were able to raise funds under Regulation Crowdfunding.
Simplifying Crowdfunding
The basis of crowdfunding is the ability for companies to raise capital in exchange for equity in their company. These funds can then be used to continue growing the business.
To simplify the idea of crowdfunding even further, it is helpful to consider a basic example. Let’s imagine there is a young boy named Ben. Ben wants to start a dog-walking business for the summer. Since Ben is a young kid and wants to enjoy his summer, he only wants to walk dogs between 12:00 pm and 1:00 pm.
He quickly realizes he will need a leash to walk the dogs, so he goes into his own pocket to buy the leash. The leash costs $30. At the start, Ben is walking one dog during his business hour. He charges $10 per walk. Suddenly, Ben is referred to four other customers that need their dogs walked as well! Obviously, one leash will not cut it for five dogs. But unfortunately, Ben does not have the $120 to buy an additional four leashes.
His choice is simple, find a way to buy the additional four leashes, or miss out on the potential business from four additional customers. He decides to ask a group of his friends for an investment. He asks six friends for $20 each, and in return, they will each receive 5% of his future earnings. They all agree and give Ben the money. He then uses the money to buy the leashes he needs to walk the additional four dogs.
Ben is now making $50 dollars a day for the five walks over the hour he works and he is putting the cash in a piggy bank. At the end of the summer, Ben worked a total of 50 days. When they broke open the piggy bank, they then had $2,500! Each of Ben’s friends that helped him out and gave him $20 to buy additional leashes each receive $125 and Ben was able to make $1750. Everyone involved is ecstatic.
At its most fundamental level, this is crowdfunding! Both Ben and his friends that contributed to his dog walking business would not have been able to achieve all they did without crowdfunding. Obviously, little Ben and his friends didn’t need to abide by the regulation set forth by the SEC, but the idea is still the same! Crowdfunding is so powerful in that it quickly allows businesses the opportunity to grow and also gives everyday individuals the opportunity to become venture capitalists.
PicMii Crowdfunding – Our Role
Our role in crowdfunding is to provide a simple platform to connect companies and investors. PicMii gives companies an outlet to find investors critical to making their business successful, while providing every day people a portal to be a part of these startups. Crowdfunding, especially equity crowdfunding, can be intimidating at first for companies and investors alike. But we are here to make crowdfunding less intimidating. Crowdfunding is simple at its core, and that includes equity crowdfunding. We are here to exploit the brilliance of crowdfunding to help companies and investors succeed.
