A new use of crowdfunding is to provide seed capital for startup companies. Under the JOBS Act passed by Congress in 2012, a company will be able to crowdfund up to $1 million over a 12-month period. Many expect the use of
crowdfunding for this purpose to sky- rocket once regulations allowing it are fully implemented in 2013. Some critics worry that there will be a steep learning curve and that a period of chaos is likely to ensue, until all par- ticipants (entrepreneurs, investors, crowdfund- ing platforms, and regulators) become familiar with all the potential benefits and risks of equity crowdfunding. In the meantime, however, many companies, such as Crowdfunder, AngelList, and CircleUp are already laying the groundwork for an expected explosion of activity. For example, during a test period from December 2012 through April 2013, 18 start-ups raised $6.7 million in funding commitments from 620 investors via AngelList’s AngelList Invest service. Niche com- panies are also springing up. For instance, Seed- Invest is a company that caters to investors who may have privacy concerns about crowdfunding. Sometimes, when a new startup company attracts big name backers, inexperienced investors join in and cause the start-up’s valuation to balloon beyond a reasonable level. With more privacy, SeedInvest argues, valuations become accurate and investing in startups becomes more orderly. SoMoLend is another niche company, focused on debt lending for small business. CircleUp is focused on consumer products. AlumniFinder is aimed at bringing alumni together to back college entrepreneurs. These are just a few of the many companies specializing in equity crowdfunding right now, but ultimately, as with most new mar- ketspaces, these are likely to be boiled down to just a handful of survivors.