When it comes to crowdfunding, Kickstarter is probably the most well-known platform—and for good reason! They’ve helped more than 5 million people fund more than 50,000 projects. In recent years though, the marketplace has gotten much more crowded.
In fact, hundreds of new models are now online, and they are increasingly being recognized as having some serious ROI.
The way these funding mechanisms work has also become more sophisticated. Models like Kickstarter or Indiegogo are often referred to as “rewards crowdfunding:” projects receive funding online from a large group of individual contributors. In exchange for what is essentially a donation, individuals receive “rewards” such as a sample product or other gear.
But thanks to the JOBS Act of 2012, we may soon start to see “equity crowdfunding,” which opens up a more traditional investment method to a much wider audience. With this model, businesses acquire funding by selling equity in their company online to the general public—meaning the investor receives a stake in the company instead of a material reward.
Here at Cultivating the Good, we’re interested in the intersection of funding and food, which is why we’re so excited to see some crowdfunding options that focus specifically on food and agriculture projects. Read on to learn about three innovative examples.
Credibles: Rewards Crowdfunding
A project of Slow Money, Credibles enables small, sustainable food businesses to receive prepayments from their customers in exchange for “Credibles,” or edible credits, worth $1 at the business when redeemed. Often businesses will offer an additional dividend for your support—$550 in credits for an investment of $500, for example.
Unlike Kickstarter, there are no set time limits to raising the money, and businesses receive your investment immediately, without having to reach a specific monetary goal.
Also unlike Kickstarter, Credibles hopes to create a sort of “food currency” with their credits. As the site expands, backers will be able to redeem their Credibles at other participating businesses, creating an entirely new investment model for food. And, Credibles can be gifted to friends, family, or employees.
What We’d Like to See:
- While the concept by nature doesn’t involve reaching a specific funding goal, we’d love to see some way to make the projects seem timely—and show that others are participating. Right now there’s no way to know whether a project has been listed for a month or for a year, and there’s no easy way to see what kind of momentum is behind it. Sometimes a little peer pressure is a good thing!
- More projects! The whole concept of Credibles (and their “currency”) relies on many businesses getting involved. We hope there’s some major outreach to come!
CraftFund: Equity Crowdfunding
Milwaukee-based CraftFund is a new crowdfunding platform that will enable breweries and brewery-related food companies to source capital from the general public in exchange for equity online.
That includes breweries, brewpubs, restaurants, food manufacturers, hop farms, and even canning lines.
According to CraftFund, one of the biggest areas of concern with equity crowdfunding is investor protection, especially since they are dealing in larger dollar amounts than sites like Kickstarter. That’s why the group plans to focus heavily on investor education, making sure to highlight the risks specific to the craft beer industry.
CraftFund is waiting for the SEC to finalize Title III of the JOBS Act before launching but so far the numbers look good: more than 600 investors have already signed up, and 55 breweries have profiles on the site.
AgFunder: Equity Crowdfunding
Like CraftFund, AgFunder is also a crowdfunding platform that allows businesses to capture investments in exchange for equity. Unlike CraftFund, AgFunder is limited only to Accredited Investors, and is focused on large-scale projects: think drones, robotics, and crop development.
According to this article in Forbes, “AgFunder sources its own investments and then creates a dedicated investment fund for each company, into which it can then syndicate investors.” Companies can be located anywhere in the world, but AgFunder is looking specifically for new and innovative ideas, and projects with a social mission.
As it scales, AgFunder hopes to work with accelerators, venture funds and angel investors who are able to develop deals locally and then use its technology platform to syndicate their investment.
Admittedly, this funding platform is probably out of reach for many small and artisanal food producers—but as we all know, our food system’s got problems big and small. It’s going to take all kinds (and sizes) of solutions to get us on the right track!
photo credit: Rocío Lara via photopincc