I've been working on https://buymeadomain.com for over a month now. I've been soft-launching on various forums & subs and gaining a lot of feedback along the way. One such feedback was to turn this into a "Kickstarter for founders who are in napkin-sketch stage".
I searched for Kickstarter for startups but it seems no one has cared to make something like that yet! Why is it so? Are there any complications?
Let me know.
However, I've yet to find a single equity crowdfunding project which was a success for its backers.
Kickstarter originally allowed only artistic projects, and there were good reasons for that. Suppose you are doing an artistic project, and you go to the bank for a loan. The banker now has to guess: will other people want this product?
But if you go to Kickstarter instead, it's not some expert's belief about what people would want which decides if you get funding or not. It's the people who would want it, directly.
For "equity crowdfunding" project, that advantage goes away. Your would-be backers have to ask themselves not if they like it, but if other people will like it. We're back to guessing each other's preferences.
In fact, they should be very careful about their own preferences: If they like the product, it's easy to overestimate how much others will like it. And if they think they have a chance to get rich, they might convince themselves the product is better than it is - getting people caught in a loop between those two biases is how MLMs scam people.
And "equity crowdfunding" projects have rather leaned into that scammy angle, in my experience.
There are public platforms for crowd investing of startups, but they require users to be accredited investors due to regulations.
That’s not the real issue, though. The real issue is that good startup teams don’t have any problem raising normal investment capital right now. The only companies who would even want to raise money from the public would be those who couldn’t get normal investment, which are almost exclusively bottom of the barrel companies that have been passed on by many professional investors. For many reasons, not just regulatory, you don’t really want to have thousands or tens of thousands of tiny investors to manage for your startup.
Companies tried to skirt regulations with the ICO craze a few years ago. It was almost universally a complete disaster for investors. A lot of ICO companies got extremely wealthy and a lot of investors discovered that without the regulations and share ownership they don’t really have much of anything.
Perhaps in the US? In the UK we have Crowdcube which anyone can sign up to and invest in new (and older) startups.
The OP is correct though, crowdfunding (in the UK at least) is complete and utter garbage, where most companies raising are untouchable by traditional investors.
How about the customer paying for future services?
That’s just Kickstarter.
I know plenty of founders of companies that raised huge rounds from top VCs and most of them would have preferred to avoid dealing with VCs if there was an alternative. VCs are a hurdle and their incentives are not really aligned with yours. Getting buy in from your customers and peers is a much more sustainable path long term if your goal isn't to pump and dump your business in 4-8 years.
The VC path is littered with dead companies that could have been sustainable mid sized businesses and successful mid sized businesses that were pumped full of cash and ran off the cliff.
So for example in the USA: https://www.law.cornell.edu/cfr/text/17/230.502
You can't advertise, in fact much of this 'kickstarter for investment' would be virtually blank by law. You would have to pre-screen and qualify each investor on your own. Nobody would be interested in investing this way.
Very long history on why this is important and why virtually all countries with an exchange do this.
Want to pivot your idea? Create "uber plumber' or 'uber electrician' or 'uber handyman' where you can basically request an electrician and electricians can join up and get jobs easily like an uber eats.
IMO, it makes sense to do this through a proxy, like a mutual fund or other kind of investment vehicle. The investment vehicle would need to do a lot of the due diligence. Perhaps someone could do the due diligence before putting startups on their page to solicit investment?
Even then, motivations must be questioned. Sometimes startups only exist to be sold to a larger company; but once the acquisition goes through, there isn't much left.
As others have said though, when there's so much early stage capital around and you could instead raise from a few angels or a early-stage VC (who will have a larger stake and may be more able to help with later rounds) equity crowdfunding isn't that attractive for most founders.
There are good businesses which for some reason can't access that funding which might show up on a platform like this, but don't see it being all that common.
If you google for micro investments or micro angels in the context of startups you might some relevant links.
Assuming that the service deals with the vetting of the startups then I can see myself using it.
My understanding is there are legal issues, many which the JOBS Act resolved. The laws are there to protect the not so well informed investor from losing their money.