DETROIT — Although it’s not yet legal for crowdfunding firms to sell equity investments in companies, the Detroit crowdfunding firm eRaise.com reports nearly $2 million in pledges in just two weeks to save Hostess Brands from oblivion.
The federal Securities and Exchange Commission is expected to release rules for equity-based crowdfunding early next year, equity fundraising made possible by Title II of the JOBS Act of 2012.
ERaise.com’s DoughforHostess.com Web site launched Thanksgiving week, as Hostess received the go-ahead for liquidation of its assets. In two weeks’ time, thousands of individuals flocked to the site from around the world showing their support approaching $2 million in pledges.
Once the SEC releases its final rules for Title II crowdfunding, eRaise.com CEO Spencer Clark says DoughforHostess will begin legal pursuit of turning those pledges into actual dollars.
“These early results show that not only do the American people want a voice in saving an iconic brand and the 18,500 jobs at stake, it also shows that people believe in the power of crowdfunding by pledging significant contributions in under two weeks,” Clark said.
Crowdfunding is collective fundraising by a large group of people, who can either donate or receive equity stakes in a business. While donation-based crowdfunding has been in use with sites like Kickstarter, and by nonprofits, Title II equity-based crowdfunding is a newcomer that changes the investing landscape.
“The JOBS Act, signed into law April 5, 2012, by President Obama, will effectively democratize capital for a new generation of Americans,” Clark said. “This is the 21st century version of the American Dream — using technology and crowdfunding to give people a chance to start or grow a business.”
Competition for Hostess assets will likely be significant as more than 100 organizations have already thrown their hats into the ring. Does this mean that DoughforHostess.com is ahead of its time to be a viable contender?
“We’re fortunate enough to live in a country that thrives on, and rewards innovation,” Clark said. “Once the SEC grants final approval, the sky is the limit for potential. Will Hostess assets be sold before then? It’s likely, but as the employees of Hostess can tell you, nothing is certain.”
What is apparent is that 18,500 individuals will be without a job. DoughforHostess is going beyond its initial push for pledges by creating a free Job Board for the unemployed Hostess workers. Linked to the DoughforHostess Web site, the Job Board will allow former Hostess employees to post resumes and hopefully be discovered by future employers. The free Job Board is expected to go live in coming days.
“We’re encouraging Hostess employees to utilize the free Job Board, and hopefully, find a good employment opportunity,” said Clark. “DoughforHostess.com and eRaise.com are technology-based solutions, to help people connect and pledge their support through crowdfunding, with an iconic brand and the people who sustained it for so long.”