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Published January 09, 2020
A weekly look at issues facing Wyoming business owners and entrepreneurs from the Wyoming Small Business Development Center (SBDC) Network, a collection of business assistance programs at the University of Wyoming.
By Cindy Unger, business adviser, Wyoming SBDC Network
Although crowdfunding has a long history of supporting books, films, art and music projects, and more, the first online crowdfunding platform companies started appearing around 2001.
In 2012, the Jumpstart Our Business Startups (JOBS) Act loosened U.S. Securities and Exchange Commission rules to permit the sale of stock to the general public by way of crowdfunding sites and popularized this new funding mechanism in the media. Today, crowdfunding can be subdivided into four primary categories: reward-based, peer-to-peer, donation-based and equity.
Reward-based “crowdfunders” typically pledge money to a new project or product with no expectation of anything in return beyond a small token gift. The financier essentially gifts money to the company or individual. This is the most common type of crowdfunding.
Donation-based funding is the second most popular method and is the result of the collective effort of individuals to help a charitable cause. Typically, the funds raised are for social or environmental causes, and there is no reward for donating.
Peer-to-peer lending sites enable borrowers to access loans directly from other individuals. Typically, these sites conglomerate small contributions from a large number of participants to create a loan.
Equity crowdfunding enables nonaccredited individuals to make equity investments in private companies. In other words, a company can actually launch a “mini-IPO” without all of the traditional hurdles.
A quick search on Kickstarter for Wyoming projects yielded a total of 412 projects since 2010. The highest grossing projects were two different products from Give’r. Its frontier mittens raised $986,672, and its four-season gloves raised $224,370. Another company, Foot Flops, raised $179,019.
If you are interested in crowdfunding, get in touch with your local Wyoming SBDC Network adviser for no-cost confidential assistance at www.wyomingsbdc.org.
The Wyoming SBDC Network offers business expertise to help Wyoming residents think about, launch, grow, reinvent or exit their businesses. The Wyoming SBDC Network is hosted by UW with state funds from the Wyoming Business Council and funded, in part, through a cooperative agreement with the U.S. Small Business Administration.
To ask a question, call 1-800-348-5194, email firstname.lastname@example.org, or write 1000 E. University Ave., Dept. 3922, Laramie, WY 82071-3922.