FundersClub
A new challenger has risen to take on Kickstarter and the host of other crowd sourcing sites that have appeared over the last year or so, but it is one of the very few that offers actual equity in the companies that are using its platform. The FundersClub is an equity offering startup that used its own features to come into existence as it fully funded itself
It is also not as easy to use as the average crowdfunding site, where pretty much all you need is a buck and an Internet connection. Instead you have to be able to show that you are a serious investor with experience and funding.
That means that you have to be an individual that has a $200,000 annual income or greater or $300,000 with a spouse or investors with a net worth of $1 million or greater, not including primary residence. With that type of requirements it also separates itself from most of the existing crowdfunding sites.
It then has a list of investments that are available in individual funds and also offers investors the ability to invest across all active funds can use its FundersClub bundle feature. The primary types of companies that it will have funds for will be early, mid and late stage US hi-tech companies from around the nation.
It has several benefits that it touts for its investors including opening up funds that normally would not be available to even Angle investors due to the size requirements that they often have. It takes all of the individual investments in a single fund and bundles them it into what appears to be one single investment. When a distribution or liquidation of a company that a fund backs occurs th
e money is returned to FundersClub which then distributes the proceeds to the investors.
The site opens up private company stock and dept equity that might be difficult for small investors to access. It also provides a simple one stop investment site that handles screening, payments and documentation handling. There is a minimum investment of $1,000 and a maximum of $5,000 in a fund.
Currently FundersClub will operate at-cost, but over time it seeks to have a much fuller role in the market. It said that it will look to operate liquidity services for private companies, including employee liquidity program management for private companies, and eventually a trading platform for private companies that wish to provide ongoing private market liquidity to their shareholders.
I would not be surprised if after the JOBS Act, the law that basically enabled crowdfunding, finally gets a set of rules approved by the Securities & Exchange Commission others will also jump into the equity offering business.
The JOBS Act does not affect FundersClub because its requirements are ones that have been used for some time with accredited investors, the only real impact it might have is that once the rules are established it might open the program to the non-accredited investors that the act s designed to help.
One example of that is Fundable.org, which makes no mention of offering equity at first look on its web page but if you dig deeper you find that it has plans, at some point to do so, if it is allowed to do so after the SEC sets the rules.
One benefit I see from the formation of FundersClub is that it will be investing in more noteworthy companies. While I find a lot that I find amusing on Kickstarter, much of it seems to be rather frivolous. That could be in part simply because all of this is so new, or it could just be the nature of the crowd that uses that and similar sites.
