In late October 2013, the U.S. Securities and Exchange Commission (SEC) proposed a crowdfunding rule that could boost access to capital for U.S. startup entrepreneurs. The SEC voted unanimously to have the public comment on whether investors would be able to make a profit on investments on crowdfunding campaigns.
Crowdfunding as defined by Mashable is, “the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations…in support of a wide variety of activities, including…startup company funding, movie or free software development…”
With minorities comprising just “8.5% of the people pitching their businesses to angel investors in the first half of 2013,” the SEC’s recently proposed rule could spell good news for entrepreneurs and their investors, particularly as one of the major barriers to starting and maintaining a business is lack of access to capital from traditional lending institutions.
The SEC’s proposed rule is also promising news for online content producers, according to crowdfunding advocate Josef Holm, who highly anticipated the SEC’s ruling announcement and described it as a “game changer.” He said that if approved, the crowdfunding rule would be a great way for digital content creators to raise capital while giving an added incentive for potential investors to earn a profit from their investment.
“It’s never been easier in history to create content and reach so many people to actually start a business around content,” Holm said.
When it comes to producing online content, minority groups, such as blacks, Hispanics and Asians, who access the Internet “are more or as likely than whites to actively participate by creating online content”, according to a 2011 study titled “Race and Online Content.” However, more minorities can use this opportunity to begin profiting from the content they produce.
Many crowdfunding users and contributors are familiar with mainstream platforms such as Kickstarter and Indiegogo to serve as a fundraising platform. However, when it comes to campaigns to fund projects that online video producers create, Holm said that these mainstream platforms are not very suitable because when using platforms such as Youtube, digital video creators often endure ongoing operation costs and opportunities to upgrade their producing equipment. Holm’s company TubeStart fits the needs of online video creators, as he and his business’s co-founder, Claude Shires, learned from experience.
After launching their very own Youtube channel and realizing how expensive it was to produce, edit and make enough revenue, Holm and Shires launched TubeStart in 2013. TubeStart is a crowdfunding startup that bridges the gap between lack of ad revenue and the money it takes to launch a professional Youtube channel by allowing its users reach their specified goals through subscription-based crowdfunding. Using this crowdfunding model, users can host monthly or recurring investment campaigns – opposed to one-time campaigns offered by mainstream crowdfunding businesses – to fund their projects continuously.
On TubeStart there are no barriers. No business plans needed, no significant wealth prerequisites, no gatekeepers to tell you “no,” according to Holm.
Holm said that it is getting easier to publish online content, but at the same time, it is harder to make a livelihood and stand out. However, it is not impossible. Holm expressed that one of the trickiest parts is building an audience, maintaining them, and standing out against other producers creating the same genre of genre.
“If you don’t have an audience, you won’t make money,” Holm said. “It’s just not enough to make a video and upload it on Youtube or write a blog post and upload it.”
Holm suggested that digital content creators should create content as a commodity and look at all monetization channels such as ads, Google’s Ad Sense, and other platforms. He also recommended that building a network of supporters prior to launching a subscription-based campaign could help ensure that campaigns are successful.
“Your audience and your subscribers are your single-most important asset,” he added. “Subscribers watch video three times longer than non-subscribers.”
As the SEC considers public comments, minority and today’s youth entrepreneurs, known as “the most entrepreneurial generation ever” who often face traditional funding challenges, could use this time and opportunity to plan how to earn money from the content they create for themselves and their potential investors and subscribers.