Howard Marks (in blue sweater) co-founded StartEngine in 2014.
Crowdfunding App Voice Over Ip Service Social Network Wi-fi Hotspot We just speak one language here– Voice Overs, and undoubtedly English as well. The goal of our website is to be your one-stop pitstop for actionable advice and to keep you approximately date with the current trends in text to speech software. These crowdfunding platforms make asking for that money much easier, and even let you give your donors and supporters a little something in return. Note: All rates and fees were current at the time of writing, but are subject to change. Check each crowdfunding platform for the most up-to-date information. Image by: Olga DeLawrence on Unsplash.
Marks launched a startup accelerator called StartEngine the following year and began making early investments in fledgling startups, as well as guiding founders through the process of building a successful business.
The results were disappointing.
“We made 20 investments for three years,” he said. “Out of our 60 investments, I would say 50 failed to get any capital.”
“I didn’t understand how the system worked,” he said. “No one told me that in order to get venture capital, you need a certain pedigree.”
Female founders and entrepreneurs of color seemed to have a particularly difficult time attracting investment, he said.
Then Marks began reading about the Jumpstart Our Business Startups, or JOBS, Act, signed into law by then-President Barack Obama in 2012.
Key provisions of the bill opened the door for nonaccredited investors to purchase shares in startups, making it easier for businesses to use crowdfunding to get off the ground. Prior to the JOBS Act, businesses could only raise money on crowdfunding platforms like Kickstarter by offering rewards in exchange for contributions.
Crowd Funding Is Over Emv Software Free
Marks said that arrangement put businesses at a disadvantage when going to the general public for funding while donors got little in return if a funded project turned out to be successful.
The founders of virtual reality company Oculus famously rode a successful Kickstarter campaign to venture capital success and an eventual $2.3 billion acquisition deal with Facebook Inc., leaving early funders with free VR headsets and little else.
“I thought this was offensive,” he said. “All those backers who backed the company from day one with enthusiasm and passion got nothing.”
Excited about crowdfunding rule changes included in the JOBS Act, Marks and co-
founder Ron Miller launched StartEngine Crowdfunding Inc., a platform enabling the type of securities offerings legalized by the JOBS Act.
“I thought, let’s take the Kickstarter model, add stock to it and see what happens,” Marks said. The new incarnation of StartEngine launched in 2014 and has facilitated investments from more than 300,000 users, according to the company.
StartEngine makes money by collecting commissions on the sale of securities, as well as providing consulting and advertising services for companies raising money on its platform.
Pitch perfect
Pitch perfect
Companies raising funds through the StartEngine platform include businesses in a wide variety of industries with diverse funding needs.
Knightscope Inc. makes robotic security devices used in shopping malls and parking lots. The company has raised more than $3 million in its current StartEngine
Brentwood-based spirit brand Acre Mezcal Holdings Corp., meanwhile, has taken in a little under $200,000 through a Regulation Crowdfunding offering, which allows companies to raise up to $1.07 million under guidelines from the Securities and Exchange Commission.
Smaller raises
Smaller raises
Neiss says it’s not necessarily a bad thing that most companies receive a relatively modest amount of funding through equity crowdfunding campaigns.
“Success stories don’t have to be $1 million campaigns,” he said. “I speak to entrepreneurs all the time who have, like, a bakery that raises $50,000. It’s just $50,000, but they’re jumping up and down screaming and shouting because the banks weren’t lending to them.”
Marks says interest from both companies and investors in equity crowdfunding has grown rapidly in recent years. More than half of the $250 million companies have raised through the StartEngine platform was recorded in 2020 alone, according to the company.
“Our job is to be able to absorb this kind of growth,” he said. “There are millions of people out there who want to invest. We’ve got to create that marketplace somehow.”
Marks says the next step for the company will be developing a secondary market where investors can trade shares of businesses that have raised money from the crowd.
According to Neiss, the crowdfunding industry is approaching a “tipping point,” largely due to recent crowdfunding rule changes approved by the SEC that could draw new companies to platforms like StartEngine. Under the new rules, companies can raise up to $5 million through Regulation Crowdfunding, nearly four times what’s now allowed.
Making a big difference
Making a big difference
“These startups looking for a Series A round can now actually go to the crowd and raise money from them rather than spending time courting (venture capitalists) to invest in these deals,” Neiss said.
That’s the future Marks says he envisioned when he abandoned his accelerator project and launched the StartEngine platform.
“It’s very frustrating to watch a young person with their dream get completely discouraged because no one will invest in their company,” he said. “Not every company should get investment, but I believe the playing field should be level.”
Sometimes, of course, there are good reasons traditional investors might steer clear of a company. In a November statement regarding the recent Regulation Crowdfunding rule change, dissenting SEC Commissioner Caroline Crenshaw said that allowing unproven companies to raise more money through equity crowdfunding platforms would put investors at greater risk.
“The rule fails to address the fact that in the private markets, the rich and well-connected typically have better access to the most promising companies, while retail investors get the leftovers — too often, unfortunately, the losers,” Crenshaw said.
Marks says these concerns overestimate the acumen of individual investors and underestimate the ability of everyday people to discern which companies have a chance to succeed. “I think the crowd has wisdom,” he said. “They bring to the table 1,000 opinions versus one.”
Marks says crowdfunding also gives greater opportunities to business owners who may not have access to deep-pocketed investors but who have a strong network of family, friends and even customers to support them. “When you remove those barriers, people will come,” he said.
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For the majority of individuals, a direct investment in oil and gas has always been theoretically possible but not practically feasible.
This risky domain used to be a prerogative of professional institutional investors who can make informed decisions.
It was so until recently. The emergence and rapid development of alternative financing have made the O&G industry more accessible to the crowd. And helped small providers reach the capital market.
Now anyone willing to benefit from O&G assets can turn to EnergyFunders, PetroFunders or similar platforms and make an investment.
Oil and gas crowdfunding is a prospective domain that requires a special investigation. So, let’s discover it together.
O&G industry: pre-Covid, crisis and perspectives
To understand how alternative financing can facilitate O&G projects, let’s see what’s happening inside the industry now.
We’ve dug through several market reports published by best-known agencies KPMG, PwC, and Deloitte.
And here’s a brief summary of interesting facts.
Fact #1. 2020 was a challenging year for the O&G industry. Although the domain is used to economic cyclicity, this crisis was unprecedented. Global oil demand has fallen by 8%. In 2021, it’s expected to recover but remain lower than at pre-COVID times.
Fact #2. The pandemic forced the industry to reach “digital maturity”, which is going to solve several important problems, in particular, remote operation, unified reporting, human-machine collaboration, employee engagement. According to Statista, integrating technologies from different areas has always been a challenge for O&G businesses.
Fact #3. Approximately half of the energy CEOs surveyed plan to invest capital in new technology, digitalization, workforce skills, and capabilities – KPMG experts say. It means there are likely to be more projects and demand for investments.
Fact #4. The industry is pivoting to the new energy future intending to build a nationwide, integrated zero-carbon value chain and infrastructure. The new administration of clean energy that implies reconstruction of existing O&G facilities will require external financial support.
Fact #5. O&G investing is becoming more environmental, socially responsible, and impact-focused.
Fact #6. Currently, oil and gas companies need to sell discontinued assets to survive, which may boost the alternative finance market and force investors to use a simple yet powerful strategy – buy low, sell high.
Fact #7. Oil and gas processing seals market is growing despite the overall industry downturn. The frontrunner by volume is The Middle East & Africa, however, Asia Pacific is expected to skyrocket in the nearest future and become a new lucrative sector.
Fact #8. An uncertain return on investment has always been considered as a barrier for O&G fundraisers. Experts believe that the acceleration of tech capabilities and total digitization will help businesses improve resilience and remain attractive to investors.
Fact #9. The production of independent oil providers especially in the US and Canada is growing and OPEC members are likely to limit their production to support the necessary level of prices.
Fact #10. There are going to be new players on the market of conventional gas – East Africa and Eastern Mediterranean while China is going to become the largest consumer and importer of gas.
So with all that being said, O&G players are predicted to seek alternative sources of capital to transform digitization strategies and enter new markets. Investors, in their turn, are projected to show bigger appetites for a new lucrative set of assets.
This is the moment when crowdfunding becomes a game-changer. It may help the industry satisfy an already facing capital demand from companies and ramp up investment activity.
A sneak peek into the US oil and gas crowdfunding industry
Oil and gas crowdfunding is a pretty difficult business compared to other sectors – real estate, tech, health, education, travel. Oil and gas investments are high-risk, structurally complex, and typically require additional capital, yet they may bring appealing returns.
Crowdfunding Is Over Emv Software Developer
There’s no holistic overview of the global oil and gas crowdfunding market, but we’ve found some stats of the US sector prepared by PetroFunders.
For the crowdfunding market, there were 74 more offerings in July than a year ago: 137% increase.
PetroFunders experts predict that the SAM (Serviceable Available Market) for alternative equity financing will reach $1,5 billion over the next five years.
Fundraisers believe that equity crowdfunding can solve 31% of all investment needs.
In 2014, 4 enthusiasts founded the first of its kind oil and gas crowdfunding portal- EnergyFunders.
The company operates according to the Reg D framework and works only with proven oil and gas operators and oil and gas finders.
Clients invest in a limited partnership that purchases oil and gas assets throughout the United States.
There are 3 options: you can opt for Income Fund, Yield Fund and Wildcat Fund. The frequency of payments, risk level, targeted returns and payback periods vary.
Each project is thoroughly vetted by the team of industry experts.
Among the benefits of investors are:
- high return potential;
- tax benefits for investors;
- long investment life;
- faster cash flow.
PetroFunders is another provider of oil & gas investment opportunities from the US.
The company explains its mission as “utilization of a disruptive business model to bring the oil and gas investment industry out of its archaic dealings, and into the 21st century”.
PetroFunders provides access to accredited investors who want to invest in exclusive oil and gas deals.
The portal operates under the Reg CF synchronizing financial technology, equity crowdfunding, engineering and investment expertise, and world-class management.
Perks to investors include robust projects, cash flows from wells passed on to investors, multiple tax incentives.
How crowdfunding affects oil and gas ventures
Traditional financial options for O&G companies include:
- equity sources (IPOs, cash calls, shareholder loans and share subscriptions);
- third-party financing options (corporate loans, acquisition financing, reserve based lending (RBL), equity bridge loans (EBLs), project finance, capital markets, hybrid financings and hedging);
- other sources (operational current or future cash flows and the raising of funds through asset disposals).
Unlike the above methods, oil crowdfunding platforms provide smaller operators with a turnkey platform that puts the fundraising process on the autopilot and requires smaller operators to use very few internal resources.
Fundraisers can focus on the development strategy to drive the business growth.
Also, crowdfunding creates a room for more participants in the investment pool and facilitates some investment procedures.
As a result, all investment dollars poured earlier into administrative tasks, now work for project development and scaling up.
What the future holds for oil and gas crowdfunding business
Historically, O&G projects were closed off to individual investors due to the uncertainty accompanying them.
IPOs, bank loans, hybrid financing and capital markets were among traditional financial resources for O&G companies. However, smaller vendors had limited access to this kind of funding.
EnergyFunders and similar crowdfunding providers gave the green light to both small-scale businesses and individual investors willing to unleash the potential of the new investment opportunity.
Despite the temporary downturn, the demand for oil and gas is projected to rise. And crowdfunding is to ensure there will be enough supply to cover a rising demand.
If you’re looking to build an oil and gas crowdfunding platform LenderKit can be a good software choice. Our customisable white-label solution for equity crowdfunding, investment management and private placements can help you automate your business operations and scale into the oil and gas crowdfunding market.