The impending passage of the JOBS Act has highlighted many practical implementation challenges. What can crowdfunding be used for? Who benefits? How does it work? Competing - sometimes conflicting - crowdfunding models not only deliver different benefits, but also have different challenges. The stakes are high: as the space becomes more defined, and standards more firmly established, the opportunity for disruption is massive.

Fundraisers: Realizing Ideas vs. Building Businesses

Most traditionally venture-backed entrepreneurs that use crowdfunding are only using it for a portion of their round (say, 20%) as vs. the whole round. Slava Rubin (IndieGoGo) adds color to this by noting that money isn't the primary reason to use a crowdfunding platform: "When you do a crowdfunding campaign, you get to gauge demand, test marketing and iterate cheaply, gain exposure you couldn't otherwise, and obtain data. Campaigns take you from a transaction to a relationship. People will pay margin to build ongoing relationships."

Dawn Lepore (Prosper) noted that entrepreneurs (the everyday, non venture-backed kind) make up a substantial portion of Prosper's users. For them, Prosper is an alternative to banks - the average Prosper user receives funds within six days of filling out an application. 

Independent creators, on the other hand, may funnel their entire fundraising effort through a single campaign. According to Becca Plofker (Idea.me), many creators don't consider themselves entrepreneurs - they just want tools and support to bring their ideas to life. 

Funders: Passionate Patrons vs. Day Traders

On one extreme, the passionate funder of an indie album doesn't expect a fiscal reward for his/her support. They're creating the change they want to see in the world (crowdfunding can be applied to public good), or enjoying being part of a cultural experience.

At the other extreme, you see equity funders, who expect a fiscal return. Equity funders not only use platforms because they deliver access to opportunities, but also because through a crowdfunding platform, the small investor can (usually) obtain the same terms that more sophisticated investors agree to. These small investors can get a taste of the high-risk, high-reward investing that existing angels take part in, or they can invest in a local mom-and-pop.

Skeptic Naval Ravikant (AngelList) puts a sharper point on small investors entering the private market:  "Only 1/N angel-backed companies will make money in the private market...there will be lawsuits." That said, it remains to be seen what expectations the market will have for equity crowdfunding. As private asset marketplaces democratize fundraising beyond Silicon Valley tech companies, the "restaurant investor" model may be closest. Restaurant investors enjoy the perks of being an investor, and may be able to get some financial returns; but they also realize that not all restaurants make it, and easy liquidity (a la public markets) is not a given.

Platform Models: Transaction-Based vs. Market-Based

Both project platforms and equity platforms tend to be more transaction fee-based, but platforms that deliver equity funding must answer different structural questions than passion-based platforms do.

• To what extent are crowdfunding services intermediaries, and to what extent are they marketplace platforms? 
• Will small investors suffer from adverse deal selection? 
• Is it incumbent upon the platform to put together the same leverage that more sophisticated investors have? Should they perform due diligence, cultivate access to management, and so forth? 
• Can you show effective visibility into exit strategies at an early stage?

Lending platforms such as Prosper make money on origination and servicing fees, while banks make money on the market-rate interest spread. Over time, banks have taken notice of peer-to-peer lenders such as Prosper and Lending Tree, but they haven't yet chosen (or perhaps, haven't yet figured out how) to enter this segment.

Though it hasn't happened at any scale yet, we can also expect these platforms to test success-based revenue models.

Regulation: Potential Pitfalls for Everyone

Slava called out that "the SEC has a tough job - they get paid to regulate, not innovate." Companies such as AngelList and Prosper solve problems by iteration, but the SEC needs to get things right on Day One. When the SEC does iterate, the cycles are measured in years, not weeks or months. This timing mismatch is a possible sore spot over the next few years, as innovators iterate ahead of what regulators anticipate.

It may be frustrating to educate regulators on model innovation, but it's part of the process. Or as Lepore puts it, "regulation is here to stay, especially when you're dealing with people's money. So you'd better have a good relationship with regulators."

Why Crowdfunding is Here to Stay

Moderator Martin Schneider (451 Research) posited today that crowdfunding isn't a zero-sum game. I tend to agree, as did the funding panel. Slava asserted that crowdfunding will double the size of the capital market. As Naval nicely put it, "the rise of social media didn't kill socializing...and AngelList augments existing investment networks in New York and San Francisco. Though outside of New York and San Francisco, we're the only game in town."

Personally, I believe in crowdfunding because it enables anyone to express their creative self - not just established nonprofits who can hire development officers to build foundation support, or "discovered" artists who have a lockdown on mainstream media distribution. 

Professionally, I'm thrilled that crowdfunding levels the playing field for entrepreneurs. (As is evidenced by Intel Capital's recent investment in Funders Club.) Not everyone with an idea and passion has connections to the angel investment community. Crowdfunding disrupts traditional market inefficiencies via automated platforms - and if the history of eBay can serve as precedent, the ripple effects may be significant.

Rebel Unit clients are primarily tech - Salesforce, Zuora, Docusign, etc – and they produce story content like this: 

They've been too busy to write up job reqs (they went straight from producing all Dreamforce content to a big Brazilian gig, and are in bleeding need of more bandwidth) but here are some standard-looking descriptions I "borrowed" online. Take them as general gist as vs actual job specifics.

Production Intern: You will work closely with our producers and editors, assisting them in all aspects of pre-production, production and post-production. Responsibilities include: assisting in the coordination of video shoots (creating call sheets and crew schedules, gathering props), serving as a production assistant and grip on set, and coordinating tapes, logs, and digitizing footage in the post-production process. You will also assist with day-to-day in-house needs. (i.e. maintaining video library, filing, archiving, etc…). You never have to go get coffee as our intern, but you do get to drink all the coffee you want, and gain some useful industry experience.

Creative Intern: Our ideal Creative Services Intern will be a talented videographer and video editor with a knack for visual storytelling. Photography skills and basic design skills will be a major plus. The more versatility the better. Beyond that, we’re looking for creativity, curiosity and the ability to thrive in our flexible, fast-paced environment.

Operations Intern: The Operations Intern will learn various aspects of how a small agency runs, while helping us keep ours running smoothly (includes both business ops and tech ops). This is a great opportunity for the entrepreneurial-minded student to get his/her career started in business administration and operations.

Please do share as you see fit! Folks should contact Shannon Newton (shannon-ta-rebelunit-dot-com) with interest/resume/portfolio or etc as is appropriate to role. 

Though Dave isn't the most tactful person, there's solid logic here:

ACTIVITY: Individual women make small investments of $5,000 - $10,000

INTERMEDIATE OUTCOMES:

• Individual women become more active, visible members of the startup ecosystem without waiting for someone to open a door; as angels, they would likely invest while holding a day job
• Startups and founders become more accustomed to working with women in key roles; rather than hiring one woman for a ten-person team, a founder could work with several female investors

CONDITIONS FOR DISRUPTION: It becomes common for startups to have multiple women involved, whether as founders, employees, advisors, or investors. Meaningful levels of gender balance in the industry can be achieved more quickly by leveraging all ecosystem roles, rather than limiting efforts to female founders and/or hiring women.

This is a great challenge and I'm accepting it. (Yes, I invest professionally, but I have yet to make my first personal investment in a private company. Not counting my own startup, which consumed every penny I had.) I'm actively looking for my first three deals. The biggest hurdle will be my own fear of being rejected for the small $5-10K checks that I can afford.

If you're a woman and you both (a) like tech and (b) want to get better gender balance, then join me and commit to engage. Or, as Dave puts it: "You don’t have to be an ass like me, but stop being a wallflower!"

Who are we looking for? Ideally, our new partner is based in the Bay Area, has a great network, and is known and respected as an Internet investor. You complement our diverse crew (a FEM of 67!) with collective experiences ranging from serial entrepreneur <-> seed investor <-> investment banker. The role? To identify emerging segments; source, negotiate, and structure deals; and work with management teams to build companies. Our team invests in disruptive mobile and/or social companies, consumer services, and key enabling platforms.

Intel Capital works with startups like 500 Friends, Ark, betaworks, Jelli, Kabam!, Urban Airship, Voxer, and YuMe. You can see a broader sampling on my Internet deals board. (We invest globally, too.)

Want to help us find and grow more great companies like these? Drop us a line and introduce yourself. Share helpful links. (Your AngelList or LinkedIn profile, twitter stream, blog posts, etc.) Tell us what next Big Thing excites you, and let's help make it happen.

UPDATE: Given the number of offline requests, I thought it might be helpful to share exactly why I took a role at Intel Capital. 18 months in to the job, and everything is ringing true. Five new investments, plus three assumed via follow-on; four seeds, two Series As, two Series Bs. Awesome entrepreneurs that I'm able to get special advantages for by leveraging the Intel brand.

If you don't know the basics of the Facebook-Instagram acquisition already, here's the writeup from Alexia Tsotsis at TechCrunch:

"I’m as shocked as you are, namely because I was working on this as a funding story all morning. Anyways, right before its billion dollar acquisition from Facebook, Instagram closed a $50 million Series B round from Sequoia, Josh Kushner’s Thrive Capital, Greylock and Benchmark at a $500 million valuation. The round was led by Sequoia, as first reported by AllThingsD’s Liz Gannes.

"Investors, many of whom didn’t know about the Facebook acquisition, literally doubled their money (which was wired to Instagram last Thursday) overnight.

"Instagram last raised funding a little over a year ago, in a modest $7 million round from from angels Adam D’Angelo, Jack Dorsey, Chris Sacca, Baseline Ventures and Benchmark Capital."

As noted, it's smart to use an impending investment valuation to drive a higher acquisition valuation. Strategic/acquisition values are typically much higher than investment values. eg, as of today, Instagram is worth more to Facebook than it is to Sequoia, because Facebook gets strategic value in addition to market value. If the company was able to use the Sequoia deal to drive its Facebook acquisition value higher, then in theory the founding team's smaller share of a larger $ pie is greater than the larger share of a smaller $ pie. A nice play if you can make it.

What about Sequoia and the investor syndicate? Investors with a signed term sheet would be fully aware that acquisition discussions were taking place, as well as what valuation range they were in. I would be surprised if Instagram's investment group did not go into this with eyes wide open. Investors win either way - an instant 2X multiple on investment (and a crazy high IRR), or a highly desirable company that they believe has growth potential.

I'm even more green-eyed than usual today. Call me jealous impressed.

NOTE: To be clear, I am not privy to the boardroom conversations around this deal. I'm simply opining on why it could make sense, based upon experience with my own investments.