Crowdinvesting: The next step after crowdfunding

When small business owners needed money to start and grow a business, they used to have three funding options: They could borrow against their own assets, could get a business loan or they could sell a portion of their business to family and friends.

Then the web opened up new possibilities with crowdfunding — a way for entrepreneurs to get their small business idea funded from angel investors. Kickstarter is one of the leaders in this space. With crowdfunding, angels would put money into an idea that they thought was cool or viable and when enough angels sent in money, the idea would be funded. In exchange for their funding, the angel would get the good feeling of having helped someone and they might get some kind of reward (like a mention on a website or a t-shirt or branded mug or something).

I really like the idea of crowdfunding a lot. It’s a way for entrepreneurs to get enough cash to start or grow. As an entrepreneur, I like that. But I’m also an investor and when I invest in businesses, I want to get a return for my money. Crowdfunding is cool but it doesn’t really provide a financial return.

Crowdinvesting is the next step: Once again, entrepreneurs present an idea and angel investors can fund that idea with cash… but now they get the potential of a financial return.

It’s an idea whose time has come! We have the technology and the payment systems and a ton of expertise available to people, plus I know many investors are looking for an alternative to the stock market and might see this as a viable opportunity.

One site that is pioneering crowdinvesting is ImpactCrowd. Here, investors can invest in 20 Euro segments to join a group of other investors and become partial owners in businesses. At this time, ImpactCrowd is pretty limited — they have a couple dozen ideas and only entrepreneurs from the Netherlands can post their idea and not all investors can participate (US-based investors cannot participate at this time but that should be changing shortly). But these things need to start somewhere and I’m glad to see it started.

I love the idea and I’m very excited about participating. In the interest of full disclosure, I’ll admit that there are bugs to work out of the system. But we’re on the verge of an exciting opportunity and I hope to see more crowdinvesting opportunities soon.

What are your thoughts? What opportunities and challenges do you see? Would you invest in a venture through a crowdinvesting site? Why or why not?

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