From Crowdfunding to Jobs? IndieGoGo Seeks to Boost Startup America By Corraling Small Investments

4/26/11Follow @wroush

The Startup America Partnership wants to make sure the little guy doesn’t get forgotten. That’s why San Francisco-based IndieGoGo turned up on a new list of companies contributing to the high-profile national job creation initiative last week. One of the first “crowdfunding” platforms, IndieGoGo helps individuals and organizations raise non-equity funding for their projects online. The company said it would contribute to the cause by cutting its fees in half to help these fledgling businesses get off the ground.

It’s an interesting tactic, given that when companies raise money through crowdfunding, they don’t usually think first about hiring people. Most crowdfunded organizations rarely collect more than $30,000 through this method—which makes it hard to hire people for anything other than occasional part-time work. I was curious about the jobs connection—so I contacted IndieGoGo CEO Slava Rubin and Startup America Partnership CEO Scott Case last week to get their perspective on crowdfunding’s role in creating jobs.

Slava Rubin

“It’s just a matter of time” before the first Facebook-scale company emerges from a crowdfunding platform, Rubin argues. “Three years ago, people used to say ‘No one will ever fund a small, for-profit business this way.’ Now, not only are they raising funding but you’re seeing it across every part of America, in many different industries.”

Building on the buzz over President Obama’s town hall meeting last week at Facebook headquarters in Palo Alto, the Startup America Partnership held a livestreamed panel at Facebook to announce it has obtained commitments from U.S. companies to provide an additional $400 million in services to American entrepreneurs. That’s on top of the roughly $360 million in commitments announced when the White House, the Kauffman Foundation, and the Case Foundation first unveiled the partnership in late January.

Case says the point of assembling these resources—which range from training programs to venture investments—is to increase the number of entrepreneurs who are able to take their businesses from the idea stage to the startup stage to the exponential growth stage, with the ultimate goal of creating more jobs. But when you look at the list of services being offered, most are geared toward established companies. Intuit (NASDAQ: INTU), for example, said it would pitch in $37 million in discounts on its financial software, while Microsoft (NASDAQ: MSFT) offered free access to its cloud computing platform, and Silicon Valley Bank said it would hold an “exclusive event” designed to bring the “America’s most promising entrepreneurs” together with venture capitalists and business mentors.

That’s why IndieGoGo stood out on last week’s list. Anybody can join IndieGoGo to raise cash for an idea. It could be an attempt to commercialize an invention (like the AlphaSphere, a futuristic musical instrument with 48 tactile pads) or realize a dream (like a concert tour for the Bucky Walters String Band from rural Humbold County, CA) or sustain a small business (e.g., Atlantis Books, a bibliophile’s haven on the island of Santorini in economically distressed Greece).

Crowdfunding is a model that dozens of organizations, such as new New York-based Kickstarter, are now pursuing. But IndieGoGo, backed by New York-based Penny Black and a number of individual investors, says it is still the world’s largest open funding platform. And the startup says that for the next three years, it will … Next Page »

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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