Crowdfunding, like impact investing which I address in later post, covers a wide range of types, models and expectations regarding returns. In my world, there are basically 3 types of crowdfunding that I have explored or participated in:
First, Kickstarter or Indiegogo – Used by early stage companies to raise money for development or building out a product. I participated in two of these campaigns, one for Lumo Lift in 2014 and another for Nebia Shower Head last year. I had seen the entrepreneur pitch Lumolift, she was very impressive and the product sounded cool – and it was for about a week until it stopped working and I was admittedly too lazy to send it back for replacement. Second campaign for Nebia was led by a friend’s daughter so it was really more of a desire to support the campaign than an interest in the product. And that desire backfired since after the Kickstarter campaign hit its target in record time, she was let go. The shower head is still in development so no review yet.
This is just a fun way to get new products, before general release, for ideally lower price point. It is NOT a way to invest in a start-up company and the people who participated in Oculus Kickstarter campaign of course were not going to benefit from subsequent purchase of Oculus by Facebook.
Second, there are other sites, Indiegogo is also in this market along with Crowdrise and Rockethub, that raise money for individuals, groups or nonprofits for mostly charitable/ humanitarian reasons. And an exciting new site, HandUp that leverages crowdfunding technology to address homelessness. I am investor in HandUp so please check it out!
I did check out fairly extensively two investment opportunities in food companies on CircleUp, I pulled back because I didn’t think that as a small investor I would see any real return. I think these are the kind of companies that make for good investments if you can own at least 15% equity stake. But the products are excellent so I would like to mention Ricks Pics pickles and Smari Icelandic organic yogurt, available at Whole Foods of course.
I did invest in properties on the real estate crowdfunding site, Realty Mogul. I heard Jilliene Helman, CEO and co- founder speak at an event in Palo Alto and was impressed by her knowledge and what she had built. So, I have not lost any money to date, in fact one of my investments (or loans really) – a shopping center in Houston, was paid back in full, with interest, in about 7 months. My other two investments, an apartment building in Brooklyn, and an apartment complex in Los Angeles are progressing along, with interest payments paid on schedule. So far, it looks like they will turn out to be solid investments.
Angel List offers a chance to join a syndicate led by a prominent angel or VC investor and invest in what they are investing in. This is a good thing if you believe in the connections theory of angel investing as I do. To be prominent means in most cases, you have successful exits. I am very pleased to know that a few prominent angel investing syndicates also invested in a couple of my investments as it gives them I hope a greater chance of long-term success.