Finance 2.0 is here and with it comes the next generation of crowd-finance platforms. While the big players are grabbing the headlines in 2013, there is a lot of innovation happening in the smaller circles where capital is being directed towards specific sectors that are starved for capital. Rather than focusing on financing the high flyers, these entrepreneurs are all about funding the niche.
Late last year, we wrote a well-received article on the evolution of the crowdfunding ecosystem. One of the companies we analyzed was Credibles, a crowdfunding platform (*donation model) based out of California that is using its platform (currently in Limited Beta) to help local food businesses in Cali get off the ground.
*the donation model in this case is a hybrid of the pre-pay model, where backers receive a Credibles credit to purchase food from any of the businesses listed on the site.
This year, in our Redistribution of Dealflow post, we analyzed how Circle Up had created a crowdinvestment platform (*equity model) to help upstart food companies source growth capital.
* not a pure crowdinvestment platform, as only accredited investors can invest; regulations still inhibit everyday investors in the US from investing in this way.
While both platforms use different models, they are both targeted at the same niche: food. It’s a cool example of how different companies are taking unique approaches to work within the patchwork regulatory system to fund the same niche.
Peeled Snacks raised more than $2 million this year on Circle Up.
In today’s environment, an entrepreneur can’t simply wake up and start a platform to help new businesses raise equity capital online from the crowds (everyday investors). Ancient securities regulations in almost every country prohibit raising capital from hundreds of unsophisticated investors. Of course this is all changing (see JOBS Act, etc.), but in the meantime, many entrepreneurs are doing what they do best and finding ways to capitalize niche segments using models that work within the current framework.
What’s happening in other niches?
In fashion for example, Shop ZaoZao launched in Asia as a crowd platform for emerging designers; similar to Credibles, it uses the pre-pay model. Then there is WowCracy, a soon-to-be-launched portal in Italy that promises to help democratize fashion with its crowd-based approach. Regardless of the model they use, it is clear that the movement has started to get capital into the hands of upstart designers.
And no industry needs a shakeup more than fashion:
Naturally this trend is transcending into all types of niches across the board, from sports teams to solar energy. In the not-too-distant future, you could be able to invest in anything from your favorite soccer team to your neighbor’s solar panel project. The key to innovation in all these sectors is unlocking early-stage capital, and while the patchwork models currently in place may be restricting, it’s clear that the movement of capital has already begun.
Funding the niche. It’s an example of how social technologies are being combined with disruptive new business models to counter the currents of crony capitalism.