Crowdfunding: Investing in Innovation

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Saving for retirement is hard to do in a green way. Socially and environmentally responsible investing is something I’ve tried for a long time to do, with great difficulty. It’s not just being divested from oil and agribusiness and weapons. I also want to be investing actively in a better future world, and hopefully growing my retirement funds at the same time. Through this blog, I plan to explore various options for green investment, with topics such as real estate, green mutual funds, non-evil companies that pay dividends on stocks, and today’s topic – crowdfunding.

Crowdfunding – or the online raising of capital for art and business projects – has been growing massively in the last 5-10 years and, according to Forbes magazine and a study by Massolution, is on track to overtake venture capital as the largest source of start-up funding this year. But the trend has changed in significant ways from the days when I used Kickstarter to raise a few thousand bucks to save our community garden in Philadelphia. Thanks to the JOBS act of 2015, crowdfunding is now a way for small-scale investors to support innovative companies that are building our sustainable future.

The Old Rewards Model of Crowdfunding

Up until 2015, most crowdfunding was based on a rewards model. Give $5 to a campaign, and you’d get a shout-out or a sticker. Give $50 and your picture will be drawn into the book or album that you are helping an artist produce, for example. When our friend Hillary Frank raised almost $35K online to produce the second season of her then-podcast (now NPR show) The Longest Shortest Time, 5 of her backers donated $250 or more for the chance to have a Mom’s Dessert Night Out with the host and other Moms at a café in New York. Those fans were showing some serious love for her show, and fandom is what this style of crowdfunding is all about.

Plastic Bottle Cutter on Kickstarter

This rewards model has democratized the art, music and publishing industries in many ways, allowing writers and creators to put out items that traditional producers may not have picked up.

Now it is also helping green tech firms get up and running. A currently trending project on Kickstarter is called Orison. It’s a large energy-storing battery for the home that can store electricity when rates are low or when your solar panels are producing it and then let you use it at night or whenever you need it. With 10 days to go, they had raised $300K, six times more than their $50K goal, mostly from customers who have pre-paid for units at a discounted price.

The New Crowdfunding Model: Equity Shares in Start-Ups

But sometimes pre-selling and collecting donations from fans is not the best way to raise the large amounts of cash needed for major sustainability innovations. Enter “equity crowdfunding,” or what people are calling “mini-IPOs” in start-ups. Companies like Crowdfunder are putting Regulation A+ from the JOBS (Jumpstart Our Business Startups) Act into practice, allowing individuals to invest in startups.

Elio, the company whose affordable, energy-efficient three-wheeled car prototype I profiled in my Eco-Cars post, recently raised $17M in an equity crowdfunding campaign. With that money, their 50,000 pre-orders, and the prospect of funding from government tech initiatives and other car companies, Elio is on its way to rolling its first vehicles off its new assembly line this year.

Whenever I start to despair a little about what the world will be like in 2050, when my son is my age, I look at the amazing innovations and inventions out there, and I get back a little hope. If I can keep informed on these ideas and put my money where my mind is, maybe I can build a sustainable little nest egg for my family in the process. Here’s hoping.

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