Fundable Mixes Kickstarter-Style and Equity-Based Crowdfunding

New crowdfunding site Fundable, based out of Columbus, OH, is aiming to be among the first to take advantage of the recently passed JOBS Act to provide a platform for U.S. investors to help crowdfund small businesses in exchange for an equity stake. But Fundable isn’t banking on that alone; it’s also using the tried and tested rewards-based model pioneered by Kickstarter.

The pre-order and rewards style backing will help Fundable get up and running right now, since equity-based crowdfunding for non-accredited investors, while technically approved in the form of the JOBS Act passed in March, still needs final SEC review and approval to come into effect. That regulatory body has until early 2013 to help work out the specifics of how crowdfunding will work in the U.S.

But Fundable CEO and co-founder Wil Schroter told BetaKit in an interview that that’s not the only reason he’s combining the two funding models. Because while equity may be the right angle to appeal to some, pre-orders make a lot of sense, especially when you’re focused on businesses offering consumer products, as Fundable primarily is.

“Most businesses have nothing to do with web technology, which means their access to investors is incredibly limited,” Schrote explained, talking about why he chose Fundable’s focus. “If you’re looking to do a web startup, there’s such a phenomenal ecosystem […] but for everyone else, like if you and I wanted to open up a café or an apparel company, there’s really nowhere to go.”

The focus on non-web startups naturally led to the idea of product-focused backer incentives. “One of the things that we liked was the concept of pre-order, which is funny to say now because a year ago that was kind of a novel idea, and then you saw Kickstarter and a lot of other crowdfunding sites gravitate there,” he said.

In fact, the equity-based piece of the puzzle only came to Schroter and his team after the JOBS Act succeeded, and wasn’t initially planned as part of its funding system. The addition will help differentiate the site from others in the space, however.

Fundable launches with five companies on board, and the site’s focus on product-oriented businesses is reflected in who was selected for the initial pool. There are two web-tech businesses on the list, but more are designed to sell physical consumer goods. Tackk allows website creation without even a signup or login; Purge is an online sales platform designed to work entirely with the iPhone; Bikedabs makes clipless pedals on bikes regular shoe-friendly; StampTEG is a mobile charger using any heat source to generate power; and uFlavor allows anyone to create their own custom beverage from a variety of flavors, nutritional supplements and caffeine sources.

Schroter said that Fundable is starting small because it wants to be careful about who gets on the platform, in order to provide a more curated experience than some other sites and make sure that investors feel these companies can not only succeed with a single product, but also not turn out to be one-hit wonders. As with Kickstarter, startups looking for investment can exceed their goals, but they need to meet them in order to collect any funding at all. Fundable takes five percent of all funds raised by companies on its platform if their goal is met (the same as Kickstarter).

Of course, the big question around Fundable will be whether or not it can differentiate itself enough from Kickstarter, Indiegogo and others to attract a strong following. Schroter notes that its focus is different from Kickstarter’s, since that site places a lot of emphasis on funding arts projects, but Kickstarter’s headline grabbing success stories and biggest blockbusters have mostly been in the area of product design, like the Pebble smart watch.

Ultimately, Fundable’s long-term success may depend most on the piece of the puzzle that wasn’t added until much later, its equity-based funding options, but we still have at least a few more months to find out the SEC’s thoughts and see how that will pan out. Still, it’ll be interesting to see how sites with similar but competing models like Fundable, Kickstarter and CircleUp fare and adapt in the post-JOBS Act crowdfunding future.

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