The role of trust and vetting in crowdfunding
By Michael Mealling
One of the many personnel changes within the Obama administration that happened in December was the appointment of Elisse Walter as the new chair chairman of the Securities and Commission. There was significant evidence that the previous chair, Mary Schapiro, has delayed the implementation of the Jobs Act. The Jobs act “is a law intended to encourage funding of United States small businesses by easing various securities regulations. It passed with bipartisan support, and was signed into law by President Barack Obama on April 5, 2012.” But even though several legally required deadlines have passed, the regulations still have not been published.
With the new appointment there is hope that the delays are over. If so then this should make funding New Space startups much easier. In 2012 we saw several examples of successful crowdfunding projects: Uwingu, ArduSat, LiftPort, and SkyCube. With crowdfunding's legal position more clear, especially as it relates to funding in exchange for equity, one would think there should be a small explosion of crowdfunded space projects in 2013.
But what about the failed ones? Projects such as Making Progress on Star Trek Physics, or the SHAAKE Mission. Why do some get funded while others don't? Most crowdfunding specialists will tell you that its about marketing and PR. But I'm not sure that's enough for space related projects.
My hypothesis is that most sources of money willing to fund a space related project aren't experts enough in the field to determine which projects are possible or which teams are capable of completing the projects. The successful cases above had several very prominent space community personalities advocating for them. The ones that failed didn't. One could simply assume that these personalities were simply providing free PR but I think that is to simplistic. Instead they are providing a free vetting service. Their stature and accomplishments provide evidence to others that their technical statements can be trusted.
If we as an industry want to encourage crowdfunding them we need to begin thinking about institutionalizing that vetting process. That does NOT mean someone acting as a gatekeeper for who gets endorsed and who doesn't. But something were those who have technical, management, and business expertise can crowdsource the vetting process more efficiently. That means not just technical tools for managing the process but actively recruiting people to participate.
Anyone willing to step up and help?
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