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What Industries Stand to Benefit the Most from Crowdfunding?

By  +Follow November 26, 2013 10:04AM
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One of the biggest changes wrought by the JOBS Act was the expansion of the potential pool of investors to include people of all different incomes and wealth. Previously, one had to make at least $200,000 a year (or have assets in excess of $1 million) to get a crack at acting as a venture capitalist and providing seed money to budding young companies before they went public. Now, that’s all going to change. Smaller investors will be limited in the size of their investments (individuals making $100,000 a year or less will only be able to invest $2,000 or 5 percent of their income, whichever is more), but they will have a chance to use their cash to purchase equity in private companies.

Crowdfunding Creates a New Investment Landscape

Also interesting is the lifting of restrictions against soliciting investors for capital. Companies looking for investors no longer need to carefully court them through controlled interactions with a broker as an intermediary; they can advertise online and try to reel in the people who can help their company grow. This solicitation is only available to those companies that exclusively court accredited investors (and subsequently eschew the first-mentioned change in regulations), but it still changes the way companies can pursue funding.

But how might these things change the face of investing? In both cases, selling the idea that’s driving your company is potentially becoming more important. Having a core business plan that captures the imagination of the general public could help open a company up to a whole new strata of capital, either by helping companies with an imaginative driving idea access previously unavailable investors or by allowing a company to take their business plan to accredited investors more aggressively than was previously legal.

Some Sectors Benefit More Than Others?

But this could mean a shift in what industries and segments see the most seed capital. For instance, your micro-cap oil & gas company may be sitting on a lease with monster shale reserves that just require an initial investment of capital to tap into, but are you going to be able to explain the reason why your property is so valuable to someone who’s not a PhD geologist or industry expert with a decade of experience? If so, your situation probably hasn’t changed much. However, have a promising new idea for solar technology? Odds are the fact that your business operates in a promising new segment that can capture the imagination of a potential investor could mean these new rules are going to change your situation a great deal.

Only time will tell which sectors and industries are going to get the biggest boost, but it’s not hard to imagine the direction things could take early on. Here’s a few industries that may see an extra pop because of their ability to pitch their business ideas more effectively:

Entertainment

Much of the recent buzz about crowdfunding has its sources in the early forms it took on sites like IndieGoGo or KickStarter. Here, people could raise money for their projects and charities from the crowd in exchange for token prizes. In this case, though, there was no equity involved. People were effectively giving away their money. And, in some cases, to people who stood a real chance of profiting from the enterprise. So, Zack Braff, who was a successful TV actor for years, made $350,000 an episode on Scrubs, and has an estimated net worth north of $20 million, managed to convinced his fans to donate over $3 million to his indie film Wish I Was Here (which had a budget of just $2 million) despite the fact that Braff would, not only have zero obligation to share any profits with his backers, be legally obliged not to share any money the film might make. Hmm.

Given that fans appear more than willing to offer up financing without any promise of returns (aside from, you know, a T-shirt or something), there doesn’t appear to be much motivation to shift to an equity based model. However, it stands to reason that if fans were willing to pony up millions for this or the Veronica Mars movie for naught but a T-shirt, offering up a chance at sharing in a project’s potential profits should only make it easier. And the potential here, for an industry with the entire nation’s attention, is enormous.

Tech

It probably isn’t a stretch to say that the sector that should greatly benefit from crowdfunding is the tech sector. Tech has long been the “sexiest” of the sectors, offering up plenty of stories of insane returns on early capital. And with new social networking platforms springing up left and right, investors ready to make several high risk/high reward investments will have their chance to throw up some Hail Marys as they seek out the next Twitter (TWTR) or Facebook (FB) . And get used to that pitch. “It’s the next Twitter!” looks to be a popular one for the foreseeable future.

Biotech

Two words tend to incite excitement whether reasonable or not: miracle cure. Could these new crowdfunding rules mean we’re headed towards a new era where the traditional traveling snake oil salesman is replaced by the micro-cap biotech company? Perhaps. Could we also be headed towards a world where medical innovations have an ample supply of cash to invest in research and development of life-saving new drugs? Indeed. Either way, while the physiology and science behind these efforts may be difficult, the potential of curing disease could be enough to keep the average investor’s interest piqued.

Green Energy

Retail investors are probably more likely to try and make a statement with their money, and early crowdfunding efforts (of the non-equity variety) leaned heavily on progressive charities. Well, now there’s a way for a nation of solar and wind power believers to put their money where their mouths are. Energy companies looking to remake the landscape of American utilities are likely to find plenty of able and willing investors happy to plop down cash to help get projects off the ground. It’s a new way to vote with one’s pocketbook, only with a potential for returns that your local environmental charity could never provide.

Dumb Money?

Or course, the assumption that all the new capital opened up by the JOBS Act will be dumb money is probably a flawed one. Like any market, one should expect consumers to gravitate towards decisions that best serve their interests. What’s more, as start-ups start failing (and lets not forget that the vast majority do), there should be some clear tightening of the purse strings. In the end, oil exploration companies could be looking at just as generous a supply of seed capital as solar companies. However, at least in the near future, the fact that there’s money to be raised by selling one’s company to the public should benefit those companies that are easily sellable the most.

Results for TWTR
Lagos Capital
24 Apr 14 17:24:29
RT @sobata416: $TWTR RT @InsidersTrades: 44% of Twitter accounts have never sent a tweet, report says http://t.co/65N1mTV78B via @WSJD
$hane Obata
24 Apr 14 17:24:03
$TWTR RT @InsidersTrades: 44% of Twitter accounts have never sent a tweet, report says http://t.co/65N1mTV78B via @WSJD
Colin Macleod
24 Apr 14 17:15:11
Bears creeping into the daily charts of $GM $FTR $HAL $TWTR & $ADBE http://t.co/OqsQuQDOfr
Jody Barrett
24 Apr 14 17:14:15
RT"@2morrowknight: How to Build Your Twitter #Brand in 60 Days: Tips From @ShowoffByDesign - http://t.co/4pKeqjRJYH #smw14 $TWTR @smedio 💜
Stock Herald
24 Apr 14 17:01:11
$TWTR: Storyful’s Verification Tech Could Stop Fake News From Spreading On ... http://t.co/MgsLqiAgMr
Timothy Sykes
24 Apr 14 17:00:53
STUDY THIS TONIGHT http://t.co/NUTPvWhePi get wiser $FB $TWTR $LNKD $WB
z
24 Apr 14 16:37:16
$FEYE Should Buy Out $IMPV While they Enjoy Super Inflated Market Cap $SPY $IWM $QQQ $AAPL $CSCO $AMZN $MDSO $NFLX $FB $TWTR $QCOM $SYMC
Informer
24 Apr 14 16:34:35
$TWTR: Storyful’s Verification Tech Could Stop Fake News From Spreading On ... http://t.co/Wx87jtfF3U
StockNewsNet
24 Apr 14 16:30:25
$TWTR - Storyful’s Verification Tech Could Stop Fake News From Spreading On ... -> http://t.co/nM8M3hGpGc #stock #stocks #stockaction
Colin Macleod
24 Apr 14 16:21:17
Stock Market Analysis Video $AAPL $GOOGL $MSFT $TWTR $PCLN & more http://t.co/CYhMmFJafg
Best Trader
24 Apr 14 16:20:48
@CNBC $TWTR Downside to come. http://t.co/eDRJD5Nkb7
Imanol
24 Apr 14 16:20:47
RT @2morrowknight: How to Build Your Twitter #Brand in 60 Days: Tips From @ShowoffByDesign - http://t.co/preDdMuYO9 #smw14 $TWTR @smedio ht…
Modern Working Woman
24 Apr 14 16:12:15
RT @2morrowknight: How to Build Your Twitter #Brand in 60 Days: Tips From @ShowoffByDesign - http://t.co/preDdMuYO9 #smw14 $TWTR @smedio ht…
Jackie Highfield
24 Apr 14 15:55:04
$TWTR Storyful’s Verification Tech Could Stop Fake News From Spreading On Facebook http://t.co/YN4RE1XR3X
Dividend Buddy
24 Apr 14 15:50:00
Like the new @twitter look and feel on desktop. Wonder what's next for mobile? $TWTR
Annette
24 Apr 14 15:31:10
@Rocco_TheStreet Yes, and then there's $TWTR ;)
Dan
24 Apr 14 15:30:07
$TWTR high open interest range is 46.00 to 47.00 for option expiration 04/25/2014. http://t.co/l7U4l9Vrv5
Crowdfunding Fever
24 Apr 14 15:28:40
RT @NoMoreCaptchas: Mystery attack drops avalanche of malicious messages on @Twitter http://t.co/Aosnzqs9w6 $twtr #heartbleed @dangoodin001
OxBioChronometric
24 Apr 14 15:28:17
RT @NoMoreCaptchas: Mystery attack drops avalanche of malicious messages on @Twitter http://t.co/Aosnzqs9w6 $twtr #heartbleed @dangoodin001
No More Captchas
24 Apr 14 15:27:34
Mystery attack drops avalanche of malicious messages on @Twitter http://t.co/Aosnzqs9w6 $twtr #heartbleed @dangoodin001
Jackie Highfield
24 Apr 14 15:23:05
$TWTR U.S. Jobs, Fed Meeting, BOJ, U.K. GDP: Week Ahead April 26-May 3 http://t.co/IwjsUzPoKY
Susan Darlington
24 Apr 14 15:22:18
@optionmonster volatility options of $TWTR headed into their earnings
BsiflingTrades
24 Apr 14 15:19:21
Here is the link to check out what you get http://t.co/iCskfRlPxz Email me with questions! Brett@biostocks.com Be more than a $TWTR trader!
CJ.SHOWALTER
24 Apr 14 15:08:14
RT @Burns277: Any trader can take risk, a great trader can do it with purpose and use it to their advantage. $FB $AAPL $TWTR #stockaction
= Headline Hydrant =
24 Apr 14 15:07:58
Kyle Long Makes $TWTR Bet on Blackhawks Series http://t.co/E4kJIVKIDQ
Maximus Analysis
24 Apr 14 15:06:45
Todays market thoughts VIDEO LINK HERE - - $AAPL $PCLN $AMZN $TWTR and others http://t.co/4oZlJyv2a0 http://t.co/XSLe85TIxR
Maximus Analysis
24 Apr 14 15:06:37
Markets still in Chop mode. Pick your names and time frames carefully $AAPL $GOOGL $MSFT $TWTR $PCLN http://t.co/QAhHAWW61y
GavinGreenberg
24 Apr 14 15:01:07
$TWTR: [video] Ronald McDonald Gets a Makeover, Takes to Twitter http://t.co/JbLU04aHty
Dan
24 Apr 14 15:01:06
$TWTR Max Pain = 46.00. Maturity = 04/25/2014. Previous close = 44.82. http://t.co/FXhomb3m9W
BEAST
24 Apr 14 15:00:19
Technically $twtr still looks like an abomination and downtrend still intact. With clear pivot ranges. Earnings will decide its fate
Rich Riker
24 Apr 14 14:46:07
Espec added to $twtr & $fb“@sfiegerman: Microsoft says users spend 5 hours a day using their Xbox consoles. God help us all.”
Nigam Arora
24 Apr 14 14:36:10
SEEDS OF APPLE’S NEW GROWTH IN MOBILE PAYMENTS, 800 MILLION ITUNE ACCOUNTS $AAPL $FB $TWTR: Warning: call_use... http://t.co/ADpo0Hnwck
Stock Herald
24 Apr 14 14:34:38
$TWTR: [video] Ronald McDonald Gets a Makeover, Takes to Twitter http://t.co/20sCjqcL9L
Glenn Petersen
24 Apr 14 14:30:23
Google+ Is Walking Dead http://t.co/g7bC55drv5 $GOOG $GOOGL $FB $TWTR
SNN Team
24 Apr 14 14:23:33
$TWTR - [video] Ronald McDonald Gets a Makeover, Takes to Twitter -> http://t.co/PNIflr6non #stock #stocks #stockaction
Jon Vince
24 Apr 14 14:22:28
$TWTR yes, $FB no, lol-"@OpenSourcenew: How Would You Like To Get Paid To Spend Time On Facebook And Twitter ? -spon http://t.co/IxwZi4VNIQ"
Market Bull
24 Apr 14 14:20:27
@RobertoTironi wouldn't touch it with a 10' pole right now. Technically sick. $TWTR
Rock Alerts
24 Apr 14 14:14:43
$LLEN, $BTCS, $BCCI could gap up tmr find out why HERE http://t.co/GMc02Im8D0 ....you're welcome. $TWTR $FB $VAPE
☞S.Puts
24 Apr 14 14:11:02
RT @HedgeLy: $TWTR “@verge: This is how US lawmakers are reacting to the FCC's controversial net neutrality plan on Twitter http://t.co/83V…
Hedge.Ly
24 Apr 14 14:10:54
$TWTR “@verge: This is how US lawmakers are reacting to the FCC's controversial net neutrality plan on Twitter http://t.co/83VzlxiVLk”
Rock Alerts
24 Apr 14 14:09:52
$LLEN, $BTCS, $BCCI find out why HERE http://t.co/GMc02Im8D0 ...you're welcome. $TWTR $FB $VAPE
CapCube 2.0
24 Apr 14 14:08:17
The only $AMZN bulls I see are the clowns they put on TV .... don't see many on $TWTR anymore ....
RR Trades
24 Apr 14 14:01:04
I have seen an increase in $TWTR ads over the past few months...perhaps this will contribute to their earnings next week
= Headline Hydrant =
24 Apr 14 13:50:44
Ronald McDonald Jumps on the $TWTR Bandwagon – and Gets a New Look - http://t.co/XAUABZESK8 http://t.co/FuGfNRuJGa
luckypete
24 Apr 14 13:48:20
$TWTR '''BATMAN''' head top of 6MO/DAY chart, look at pattern, recognize it when it forms, MOST DEADLY in all CHARTS, prob 9% DOWN FALL.<
Informer
24 Apr 14 13:38:24
last: $44.82 4:00pm EST 4/24/2014 change: -1.13 day high: 46.79 day low: 43.63 open: 46.71 volume: 11005185 $TWTR
More Ant
24 Apr 14 13:37:34
$TWTR dumped hard before rallying into earnings last Q. I suspect that happens again as shorts cover early next week. Long via OTM puts.
Nerd Criollo
24 Apr 14 13:36:44
Hoy #Twitter, Inc. $TWTR cerró a $44.82.
More Ant
24 Apr 14 13:33:30
With VIX still relatively low and "sell in May" around the corner, I'm not looking to do much. Long $ICPT and $TWTR, remainder cash.
TWTR Stock Price
24 Apr 14 13:33:27
$TWTR close: 44.82
				
				
By  +Follow November 26, 2013 10:04AM
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