A lot has been said about Indiegogo allowing people to invest directly in the projects via equity crowdfunding. Since early 2015 we have seen news about it in several major news outlets. Now, approaching the end of the year and four months after JOBS Act Title IV (Regulation A+) was enabled, nothing happened yet.
There are even some analysts claiming both Indiegogo and Kickstarter might not go equity, but it’s too early to say so. Most probably, the delay is caused by some challenges that must be circumvented before allowing equity crowdfunding through their platforms.
The type of individual who would invest in a company expecting a future profit is remarkably different of that one that would put his money to get a product months later. The latter comprises most of Indiegogo community, but there is a genuine demand for equity crowdfunding in the platform, as it is not rare to see people asking how can they invest in successful campaign pages.
Equity crowdfunding is a different beast
Based on the community question, it seems logical for Indiegogo to allow equity crowdfunding through its platform. However, the way the platform has to operate on this is totally different of rewards based types in the way a campaign can run.
The reason is simple: rewards based crowdfunding is open to everyone. Anyone can go to the platform, enter his credit card and “invest” in the company in return for a future gadget. No questions asked, no need to prove anything.
The same does not happen to equity crowdfunding. While Title IV allowed everyone to participate, there are clear rules for both accredited and non-accredited investors, as well as the amount each company and project can raise per year. That means there is a lot of paperwork that both the crowdfunder and the platform must deal with. They have to scrutiny over the company and each and every investor of any campaign.
Plus, the amount that can be invested by each particular person can vary from a couple hundreds to tens of thousands per project. Frauds on larger sums would certainly hurt both the investor and the platform, so everything has to be planned wisely.
What is the status?
We have raised just some of the difficulties that a consolidated platform like Indiegogo would come across if they were to accept equity crowdfunding through their platform. They are certainly bigger given the scale of the site.
While we don’t have a schedule, people from inside Indiegogo have praised Title IV when it came up. So they are probably working on it. Equity on Indiegogo looks to be a matter of when, not if.