Crowdfunding Is About to Get More Crowded

When Medigram, a Silicon Valley startup that makes a messaging app for medical professionals, wanted to raise money earlier this year, it enlisted the help of Microventures. The online marketplace, also based in the Valley, quickly lined up “hundreds of thousands” of dollars from about 20 individuals, says Medigram’s co-founder and chief executive officer, Michael Chiu. He credits the website, which connects investors to entrepreneurs, with making the fundraising process “a lot more streamlined” than having endless meetings with venture capitalists.

Microventures says it’s the first U.S. marketplace to use a crowdfunding model to sell equity stakes in private companies to wealthy investors. To do that, it had to register as a broker-dealer. Since closing its first deal in 2011, Microventures has handled more than $8 million in equity sales through 25 completed private placements and has six more in motion, according to CEO Tim Sullivan. Other, far bigger sites such as Kickstarter and Indiegogo, which have raised hundreds of millions of dollars for creative projects and business ventures, don’t offer ownership positions or financial returns, though backers sometimes receive gifts.