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

4/26/11Follow @wroush

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one person and now they have several employees,” says Rubin. “Who’s to say they can’t be the next big fashion company? The whole idea is that you want to grow.”

Rubin points out that roughly 600,000 new businesses are started in the U.S. every year, with average of only $7,000 in seed financing. “Imagine if they all got funded on IndieGoGo and they all hired a few people,” Rubin says. “Obviously a high percentage will fail within one year, but a good number of them will become successes.”

Case makes a similar point. Of the 600,000 companies started every year, “The reality is that probably 80 percent of them will never have more than one employee—the founder,” Case says. “The challenge is that neither you nor I can possibly predict which 20 percent are actually going to make it. So we’re trying to make sure we provide resources like IndieGoGo’s at the base level of the primordial soup of the entrepreneurial ecosystem, if you will. How do we make sure there are lots of nutrients in there, to increase the chances that good companies will bubble out?”

There’s another reason crowdfunding platforms are good for jobs, Case says. It’s that companies that are founded with small amounts of capital—often, services companies or those in software or other corners of information technology—tend to have larger employee bases once they succeed. In capital-intensive industries like biotechnology or clean energy, companies tend to spend a lot of money on technology development and intellectual property, but not so much on human resources, he says. “The companies funded by IndieGoGo are likely to be ones where payroll is the heaviest,” says Case.

Finally, running a fundraising campaign on a crowdfunding platform like IndieGoGo can be good practice for entrepreneurs as they prepare for other business challenges, Case argues. “If you can convince people to fund you on IndieGoGo, that’s a good indication that you have something worth investing in.”

Rubin says he expects the Startup America Partnership to issue guidelines for eligibility for the IndieGoGo fundraising discounts and other programs within the next 30 to 60 days.

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

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