INVESTING
Crowdfunding:
An Introduction
Crowdfunding is a new word that
simply means collecting relatively small
amounts of money from large numbers of
people. The word may be new --- but the
phenomenon is not.
I
n 1885, the pedestal for the Statue
new locations, manufacturing electronic
investing, informed by the U.S. example.
of Liberty was crowdfunded by
devices, and setting up health clinics.
The World Bank recently published a
contributions from the public
Current regulations only allow
report, “Crowdfunding’s Potential for
through a campaign led by newspaper
crowdfunding for donations although
the Developing World,” which argues
magnate William Randolph Hearst.
fundraisers typically promise rewards or
that countries in the developing world
In 1992, Jerry Brown, who is now the
“perks” to their donors: fund a movie and
might use crowdfunding to “leapfrog”
Governor of California, financed his run
you’ll be thanked in the credits, for example,
the complex financial structures of more
for President through contributions of $25
or fund a restaurant and you’re invited
established economic power nations, and
or less collected via a toll-free telephone
to the launch banquet. As crowdfunding
more efficiently foster entrepreneurship
number. And for a long time, schools,
grew and evolved, many advocates felt
and grow their economies. Excerpts from
cultural institutions, aid organizations,
that there was a need for new laws to allow
the World Bank’s report follow this article.
medical foundations, and other nonprofits
people to invest through crowdfunding.
Some people in the U.S. focus on how
have used TV pledge drives, mailings, and
They would then have a financial reward
the new laws will allow people anywhere
other methods for public fundraising.
for helping with the success of small
to invest in startups that could become
In 2009, websites like Kickstarter
businesses that they believed in. The idea
big companies and yield huge profits
(kickstarter.com) began giving people
proved popular --- and a law permitting
--- “the next Facebook,” as they say.
an easy way to collect funds online to
crowdfunded investments passed in 2012
Some crowdfunding advocates see more
support their own projects. Anyone could
as part of the federal JOBS Act. Meanwhile,
potential for these laws to help smaller-
do this. You no longer had to be a large
more local-oriented versions of the law
scale local investing within communities.
organization with the right kind of bank
have passed in some states.
Immigrant communities in the U.S.
accounts and software systems running on
Small businesses in most parts of the
already have excellent records for local
your web server. This new, democratized
U.S., at this time, cannot use crowdfunding
entrepreneurship, thanks to their close-
form of fundraising, called crowdfunding,
to raise investments from the general public
knit social ties and mentorship. Some
has quickly grown in popularity. Today,
because the regulations are still being
believe that it is exactly these types of
hundreds of crowdfunding websites based
worked out. They are, however, expected to
communities that can benefit most from
all over the world handle billions of dollars
go live in the first half of 2014. Meanwhile,
the new investment laws. As the World
in combined transactions each year, to
many other countries are considering or
Bank report suggests, immigrants in
fund diverse ventures such as making
already have new laws to allow crowdfund
diaspora might contribute to crowdfunding
movies, helping restaurants expand to
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WWW.ASEAN-LIFE.COM
efforts in their home countries for multiple