Crowdfunding is increasingly popular and effective for certain
types of businesses. The producers of a Veronica Mars movie raised
over $2m in ten hours, and Cloud Imperium Games raised over $10m
for its upcoming Star Citizen game. Crowdfunding works for these
ventures because the producers or game makers have tangible items
or services that people receive for their donation. Movie producers
may be selling DVD copies or t-shirts and the game companies may be
offering advance copies and special downloads. They are not,
however, selling stock or any share of any profits, which would
violate state and federal securities laws.
This distinction is an important one for entrepreneurs who are
looking to raise capital but who can't currently take advantage
of crowdfunding because their products are a long while off or
because they do not have the name recognition to sell t-shirts or
ancillary products. What these entrepreneurs have (and have always
had) is stock.
