Fund-Raising for the Facebook Generation 

Crowd-funding sites help entrepreneurs kick-start their businesses, but are these new platforms too good to be true?

Page 6 of 6

Because the crowd-funding phenomenon is so new, Lawton said that no one — perhaps not even the government — knows quite what to make of it yet: "There are tens of thousands of people, or hundreds of thousands, getting funding, and no one has any idea what they're doing." He suspects that in cases where the sums are relatively small, a lot of people probably aren't reporting the revenue on their tax returns at all — yet another reason the government might step in and impose its own regulations.

"It's going to be a disaster is what it's going to be," Lawton concluded, "because when the SEC marches in, you know the IRS is going to come in with them."

Ultimately, none of the entrepreneurs interviewed for this story had any real complaints about their experiences with crowd-funding. They all succeeded in raising the money they needed and are, presumably, on their way to bringing their dreams to fruition. Awaken Cafe's Dunlap even launched a second crowd-funding project, using IndieGoGo to sell tickets to a fund-raising event. Some efforts, like Ceaser's attempt to revive the Parkway, have hit bumps in the road — but by and large those have had nothing to do with the crowd-funding element. And only time will tell whether, in the long run, raising the money in this manner ends up paying off.

And, despite his concerns, Lawton doesn't actually believe that crowd-funding is some kind of passing fad — quite the opposite, in fact. Some sites may get shut down, he says, while others tighten their systems and improve their safeguards. Ultimately, crowd-funding will be bigger than ever. Indeed, Lawton envisions a near-future when securities regulations will no longer relegate crowd-funding to pledge sites that only deal with relatively small amounts of money. He imagines a kind of consolidated mega-site that will bring the crowd-funding world and the venture-capital world together — one that offers all of the interconnectivity of existing social networking tools, but with the added benefit of an audience with big-money players who might take a liking to your little project and make a real investment in it, of several million dollars perhaps, so that you can make a real company out of it. "There will be a Facebook in this space," Lawton predicted.

So for aspiring business owners, folk musicians who want to go on tour, and teachers who need computers for the classroom, there's a hope that, even with the uncertainties, this does mark a fundamental change in how an enterprise gets funded, and a significant improvement in the likelihood of someone with a good idea finding the money to bring it to fruition.

IndieGoGo's Ringelmann quantified it this way: "Seven million ventures get started every year in America. And the average amount of money that actually is needed to get started is shockingly low. It's like $44,000. But the median need is actually less than $4,500. ... Ninety percent of funding that goes into new ventures every year does not come from venture capital, does not come from SBA loans. It comes from people maxing out their credit cards, refinancing their mortgage, or going into debt to start their little business. And that is the community that we're serving." 

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