The university startup sector has been showing a lot of interest in the crowdfunding model as a funding model for university startups. The JOBS Act provides a mechanism for raising capital for startups using a crowdfunding model. The SEC must put regulations in place by the end of 2012 which will spell out details of the process. Companies such as Kickstarter have been providing a platform for crowdfunding for artistic and charity projects since 2009, but contributors do not receive equity.
So, will the crowdfunding model work for university startups? University spinout founders need to realize that they will face the same challenges as other startups seeking to raise capital. As crowdfunding platforms become prolific, many startups will try to use the model. Investors will seek out those startups with the most favorable risk return balance – favoring businesses with strong growth prospects, an experienced management team and low risk technology.
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