You no longer need a million dollars to participate in a fundraising round for a start-up — the JOBS Act of 2012 changed that.
One start-up — New York-based crowdfunding platform Rabble — is taking advantage of that, and has built a platform enabling investors to buy into private companies for very little money. Unlike other start-ups in this space — like Fundrise or Wunder Capital — Rabble lets investors get in for as little as $100.
And by tapping people who are not accredited investors — generally people with a net worth of at least $1 million — Rabble gives young companies access to potentially many more investors than they could get otherwise, enabling the funding of projects overlooked by traditional capital.
Generally crowdfunding platforms for investors have focused around two areas: real estate, or tech start-ups offering innovative products or services.
Rabble's investment focus is positioned somewhere between those two. The company's investments aim to have the stability of hard assets, while also chasing innovative designs or business models that fall outside traditional investment categories. It's also focused on social or environmental-conscious initiatives that have the potential to be high return.
"[The] shopping patterns of our target demographic — late 20s to early 40s, savvy, professionals — indicate a strong preference toward locally grown food, boutique clothing and apparel, and customized ways to spend their disposal income," said founder and CEO Umber Bawa.
"At the same time, [investors] face a contradiction with their investments that do not align with their social values. We provide a platform to reconcile this divergence by providing our customers with projects that align with their values," he said.
Rabble — which launched in July — screens projects based on both their social purpose as well as their investment viability. According to the company, it has had more than 250 sign-ups since the launch and an average investment size of $1,000.
The company's first project, "Back the Comeback," is an example, which backed developer Century Partners' revitalization of some of Detroit's historic neighborhoods. Funds raised will be used to develop a portfolio of 32 housing units across Detroit's North End, Boston Edison and East English Village areas.
Bawa believes Century Partners represents a new type of developer, which is partially what attracted Rabble to the company.
"They believe in Detroit, they have been tremendously successful with their first private real estate fund, and they believe that opening access to investment can be a building block for wealth creation and addressing some of the most intractable issues in the society," he said.
Equity crowdfunding and this new era of fin-tech may help in solving a major societal problem: the growing digital divide. Bawa is excited that hardworking and driven people who may not have access to Silicon Valley or Wall Street now have the ability to fundraise from the millions of people who have a shared vision for development.
"This is the beginning of a tectonic shift in what types of ventures are funded — the time has arrived," he said.