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It's the classic entrepreneurial glitch. You have a great idea for a product that could possibly change the world. The problem is you don't have any money to fund it.
That's where crowdfunding could come in. Thanks to President Obama's signing of the Jumpstart Our Business Startups Act (JOBS) earlier this year, startups looking for funding now can more easily turn to the community for help in financing their new businesses with fewer financial disclosures.
Although some regulators aren't thrilled by that prospect because of the potential for fraud, a two-day CrowdFunding Made Simple conference launched Thursday at the University of Utah's Guest House and Conference Center, designed to educate entrepreneurs and investors in the ways businesses can succeed in this new concept in capital creation. The opening session, which drew about 200 people, concludes Friday.
"This is something that should be done in America," said Utah angel investor Alan E. Hall, the event's keynote speaker. "There is a funding gap between companies [with] ideas. . . and their access to cash.
"Crowdfunding, for me, is a significant answer."
The conference includes breakout sessions on crowdfunding models and lessons, the state of the crowdfunding industry, examples of successful local campaigns that have used it and more.
Brandon Holmes, 34, Salt Lake City, an entrepreneur who launched a social-media marketing consulting firm called WELD, was attending to find ideas to fund a new venture the creation of a Facebook app that groups people together for discounts to ticketed events such as concerts.
"I'm hoping to get more information on what avenues might be available," said Holmes, who wants to pursue crowdfunding models because the people who help finance his company could also be potential customers. "I'm not particularly nervous [about using crowdfunding]. I'm just not educated yet, so this is my 'due diligence' part."
The JOBS Act was enacted to help stimulate job creation by easing up or removing restrictions for startups in raising money.
In addition to making it easier to engage in crowdfunding, the act also relaxes restrictions on companies' financial statements and allows small businesses to use ads to attract a broader base of investors.
Since the bill's passage, the Securities and Exchange Commission has been working to further defining the regulations in the JOBS Act, including certain aspects of crowdfunding. That process could take months, according to officials.
There are concerns that by lifting restraints on financial disclosure, the potential for defrauding investors could rise. And some believe it could open up doors for people to invest huge amounts from their retirement accounts without fully understanding the risks involved. The conference also will explore those potential pitfalls.
But Berkeley Geddes, executive chairman of the newly formed Crowdfunding Professional Association, which co-sponsored the conference, said the very nature of crowdfunding might help prevent fraud.
"The crowd has a powerful ability and can say, 'I know this person's past and I can vouch for him, or I know his past and I have some concerns,' " Geddes said. "The crowd has a unique ability to help make sure that the entrepreneurs asking for the money" are legitimate.
Most importantly, he said, the act can help those with ideas to get past the first, sometimes most difficult, hurdle in starting a business.
"America was created by our entrepreneurs of the past 200 years. They were allowed to dream and built this wonderful society," Geddes said.
"In the current environment, entrepreneurs are like fish in a stream where the water the money has dried up. We've got to solve the challenge of entrepreneurs getting the money."
Google+: +Vincent Horiuchi
CrowdFunding Made Simple Conference
Where • University of Utah Guest House and Conference Center, 110 Fort Douglas Blvd., Salt Lake City
When • Friday, 9 a.m. to 5 p.m.
Price • $150 per day