The Korean startup ecosystem is often criticized for not attracting enough angel and venture capital funding to get innovative startups off the ground and perhaps equally important, to drag enough top talent away from the tech giants of Korea (Samsung, Hyundai, LG, etc). Add to this that much of the finance that does exist comes from government subsidized programs, with the standard beurocratic red tape attached.
Step up equity crowdfunding!
It is a fairly new concept even in the US, but proponents of this disruptive form of startup financing are convinced that we are on the cusp of a new age of business and finance. In April 2012 the US president signed the JOBS (Jumpstart our Business Startups) Act, legalizing equity crowdfunding, which is a major step forward in “giving tomorrow’s innovators a meaningful chance to succeed”, according to Return on Change CEO Sang Lee.
Sang believes that by empowering end users to invest in the ideas they think will succeed (and which they see value in for themselves), many more startups with good ideas will become realities. This is estimated to change the investment landscape with some believing that even large financial institutions and VCs will have to readjust their risk assessments and provide better equity investment deals to startup CEOs. Crowdfunding websites like IndieGoGo and Kickstarter have already started the revolution, with substantial amounts of capital raised and some successful ventures invested in. But what is different about Return on Change, according to Sang, is that their model is equity based, enabling investors to access the financial success of their investments, rather than merely ‘rewards’ or ‘perks’.
Traditional forms of startup financing will not disappear and crowd investors should be aware that risks do exist investing in any new enterprise. But equity crowdfunding is likely to be about investing in a personal cause, rather than simply investing for big returns, which makes it attractive to the masses and reduces the importance of the financial return, with only affordable levels of investment encouraged. Whether it is through affordable medicine or fair trade businesses, crowdfunding can become a powerful tool to find equity investors that are looking to make a triple bottom line investment.
Startups across the globe will be closely watching developments in the US, where 2013 looks likely to bring change in the funding model for new businesses, driven by the crowd.
About Return on Change:
Return on Change is an equity crowdfunding platform that aims to provide an online medium by which high-impact start-up entrepreneurs can attract capital through crowdsourcing, while creating a collaborative community around their business. Their objective is to empower talent by disrupting traditional modes of funding, bridging the gap between innovation and business, and providing entrepreneurs with an alternative method of funding their ideas. Startups often fail at the early stage due to financing woes, and Return on Change believes that equity crowdfunding is a workable solution. Their model is designed to benefit fledgling businesses that are unable to abide by cumbersome filing requirements. This model stimulates job creation and gives fruition to innovative ideas that may never have been realized due to capital constraints. Equity crowdfunding is a new force in early stage capital-raising and democratizes investments. Return on Change seeks to be the forerunner of this revolution by instigating innovation and enabling investors to support socially conscious ventures as well as realizing financial returns. Return on Change is currently targeting high-impact startups in the bio/med, social venture, cleantech, and tech industries. To follow Return on Change on Twitter click here.