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

4/26/11Follow @wroush

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lower the fees it collects on funds raised by qualifying Startup America Partnership members by 50 percent, up to a maximum of $30 million worth of contributed services.

It was important that the Startup America program include components aimed at the earliest of early-stage entrepreneurs, Rubin says. Most of the companies contributing to the partnership “have made massive commitments, whether it’s Microsoft offering BizSpark or Intel offering hundreds of millions in investment capital,” he says. “One of the things they didn’t have, as we were discussing it with them, was any funding platform for companies that aren’t already $10 million companies. Before you can actually grow to 50 employees and $10 million a year, you have to start out with two or three founders and an idea.”

It’s not clear yet how the program will work. Scott Case, who previously co-founded Priceline, says the organization is still putting together a procedure for vetting people who apply for the various services to make sure they’re legitimate entrepreneurs building real companies.

But Case (no relation to Startup America Partnership chairman Steve Case) says that he’s been interested in IndieGoGo’s crowdfunding model ever since meeting Rubin at the South by Southwest Interactive Festival in Austin, TX, in March. “We recognize that entrepreneurs are all at different stages, and what intrigued me about the crowdsourced funding model was that it really touched on the first two stages—you have an idea and you need to flesh it out, or you’ve started a company and you need to develop a product,” says Case. “What particularly intrigued me was the notion of being able to raise tens of thousands of dollars relatively quickly to get your project off the ground.”

But does online crowdfunding really help to create jobs? There hasn’t been much time for economists to study the question. But if you browse the fundraising campaigns listed on IndieGoGo, Kickstarter, and similar sites, you’ll see a lot of people trying to raise just a few thousand dollars to get a project off the ground, whether it’s vintage-inspired lingerie or a new shrimping device. Obviously, that’s not enough money to fund even one person’s annual salary, let alone a growing company.

At the same time, however IndieGoGo points to examples like Mission Cheese, a San Francisco cheese shop opened by entrepreneur Sarah Dvorak with $12,555 raised on the site; Emmy’s Organics, a vegan bakery in Ithaca, NY, that raised $15,326; and Walk In Love, which raised $30,795 to turn a T-shirt kiosk at a Lancaster, PA, mall into a store. “Projects like Walk In Love started out as … Next Page »

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

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