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Sunday, February 17,2013

OU students launch ‘crowd-funding’ company

By David DeWitt
Photo Credits: Photo provided by Rohan Kusre.
Photo Caption: From left, Richard Rodman, Max Heckel and Rohan Kusre attend a startup expo in Memphis, Tenn.

As crowd-funding booms with the advent of companies such as Kickstarter, one local company wants to help make those efforts more successful by providing a multi-faceted consulting platform.

530Funds is the brainchild of Ohio University entrepreneurs Richard Rodman, Rohan Kusre and Max Heckel. The trio recently traveled to Memphis for one of the largest start-up events in the county, The Startup Conference.

"Don't get confused, we're not another Kickstarter," Kusre said. "We provide the essential stepping-stones to launch a successful project and ultimately gain funds."

The crowd-funding industry is expected to double this year to $6 billion worldwide, according to information from 530Funds. Increasingly, people are turning to crowd-funding as a way to raise money, as an alternative to finding small groups of investors.

Crowd-funding is being used to pay for ventures ranging from animal-rescue projects to recording studios to albums to theatrical performances, and almost anything else imaginable.

A quick search of Kickstarter shows funding efforts for local roller-derby team the Appalachian Hell Betties, and a studio album from local musician Mike Elliott.

But Kusre is quick to point out that while crowd-funding is becoming more and more prevalent, it isn't easy.

"It takes just as much, if not more work, as pitching to accredited investors," he said. "That's why 530Funds is here. It's essential that before you launch a project you build a crowd that is willing to back your idea, create a rollout strategy and develop a great video. Tossing up an idea and hoping it will be the next big thing doesn't fly."

Kusre explained that Kickstarter is just one of 530 different crowd-funding platforms and is more general as opposed to many platforms that are niche-specific.

"Where we come in is, we have a searchable database of all the websites so you can find which one you would make the most money on," he said. "And we have a rating system for each of the sites so you can see which ones are legitimate and which ones aren't, because crowd-funding is a really new industry. A lot of people want in on it but not everybody's legitimate. We're trying to bring order to that chaos."

In addition to the database, 530Funds also offers a consultation process whereby customers can learn how to effectively build an audience, as well as aiding in the creation of video content and providing feedback from others who have used crowd-funding before.

"You come to us and we'll take you from Step 1 to Step 10," Kusre said. "We have videographers, web-developers, graphic designers who will help beautify your idea, make it look good."

Most crowd-funding websites include an awards system where Kusre said his company is able to help maximize the benefit and raise more money.

He said that for its fee, 530Funds takes 5 to 10 percent off of the back-end investment.

"If you don't get that much money, then neither do we," he said.

The company was formed in September after the co-founders met at Ohio University's accelerator program this past summer.

In Memphis, Kusre said, attendees came from all around the country and the world.

"There were two ballrooms taken up by the expo part of it," he said. "And then there was another room with keynote speakers. There's still a lot of uncertainty about where this industry is heading."

One issue, he explained, is that currently the industry is set up to be donation-based, so those who put money toward the efforts are simply donors and have no stake in the projects they fund.

There has been something of a move to allow donors to be investors in the company under certain circumstances.

But to be an accredited investor the current requirements are pretty stiff, such as the condition that the party must earn at least $200,000 per year from investments.

"Equity-based crowd-funding isn't legal yet, but the Jobs Act is trying to make it legal," Kusre said. "So there's a lot of uncertainty about if that will happen and if it happens what it will do to the industry, as well as what kind of safeguards there will be."

There is some competition in the crowd-funding consultant business, Kusre acknowledged, but he said that 530Funds is a step ahead in its variety of services offered.

"I think there's room for all of us in the industry in different niches," he said. "It really depends on where the industry goes in the next year or two and how we and our competitors adapt to that."

He said that while crowd-funding takes a lot of work to be successful, reaching customers directly is something every startup should do.

"It not only gives you the opportunity to consult with them, but also allows you to validate your idea in a quantitative format," he said.


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Great article! Conforms with what I suggested in my blog: How to Crowdfund: and my new book: The JOBS Act: Crowdfunding for Small Businesses and Startups