Equity-based crowdfunding

[Instability]

Here is an interesting article from gamesindustry.biz about equity-based crowdfunding. It is about Howard Marks’ StartEngine which aims to be an alternative funding scheme for games. According to this scheme, if you like a game and believe it will be successful, you buy a small equity in the company. You become a little investor. Here is a quote that explains this in more detail.

With StartEngine, unlike Kickstarter, fans will be backing entire companies, not a specific game project, and while a company selling its shares on StartEngine isn’t a public company, the investors will still get dividend payouts just as with any other stock purchases. “They get dividends and they get a cash payout if the company’s sold, and if the company goes public, they can also trade their shares. The shares they receive are also tradable if they find a buyer, but they have to find a buyer. There’s no established market for the shares at this time. The system with Regulation A+ offers you more liquidity than a standard private deal,” Marks noted.

My question is what you think of it and if you think this might be a good funding alternative for any of your projects. Personally, I think this is definitely an interesting idea, because (as Marks points out) “not everybody has the ability to go viral”, which is pretty much what is required for kickstarter success.

[frosted]

I’m not sure how much value equity really has in something like a game company that isn’t public. Since there wouldn’t really be a live market offering liquidity, the only real intrinsic value of the shares is in a buyout situation - and I don’t think that small game studios get acquired all that often.

In terms of selling equity, I’d sure as hell do it as long as there aren’t any stipulations about revenue.