Investing in Startups While You're Running
*Updated as of November 1, 2016
Running down the road you stop to change the song and in those same few seconds invest in the app your listening to your music. Is it that easy? Is that going to be a problem? 8 Tracks has partnered with SeedInvest to attract investment from their user base. 8Tracks has raised over $2 million with this route as of November, 1 2016. Expect this experience to start popping up in many more places.
White label technology to invest and raise capital have begun to show up in more digital experiences whether it be through websites or mobile apps. Investing buttons are becoming more common with companies like CrowdEngine, Wealthforge, SeedInvest, and others enabling companies like 8tracks to attract individuals to help fund their ideas. This partnership between the two firms to raise capital started before the remaining majority of the US population can invest through title III of the JOBS Act. As the new law comes into effect I expect this trend to grow significantly.
On top of this button 8 Tracks sent the following email to its users:
"In an unusual turn, I'm not writing today to suggest a few playlists we've hand-picked for you (though I've slipped a few in at the end of this email). Instead, I'm writing about potentially investing in 8tracks.
Under US law, only wealthy individuals and venture capitalists have historically had the ability to invest in startups. This changed last summer: the JOBS Act now allows anyone to invest in private companies. Unlike typical crowdfunding platforms (like Kickstarter), this new process would allow you to actually own stock in 8tracks.
8tracks was founded to showcase the passion and talent of people who care about great music and wish to share it, delivering the perfect playlist for a listener's taste, time and place. As our DJs and listeners have both created and promoted this infinite soundtrack, so too should they have the opportunity to finance it by taking a stake in the company while we're still relatively small.
New funding would allow us to build out a full music library for DJs, make it easier for listeners to find playlists they like, integrate 8tracks on new platforms, and refine our business model to continue to grow 8tracks for years to come.
This isn't an offer to invest, and as of now you still can't buy shares. I'd simply like to understand if you would be interested in participating. If there's broad interest, we may file official paperwork with the Securities and Exchange Commission (SEC) to pursue this new crowdfunding option."
Much of the discussion around these new offerings are the risks associated and how businesses like this one may not succeed. With those high risks come some potential equally high rewards. 8tracks is a private company so does not need to disclose its financial performance publicly yet. Once the investment offering is live, if you are looking to invest, you will be provided some detailed information on the firm and its founders which would inclue performance metrics some of which is financial.
An offering like this comes with some implications of perception on the firm's performance. Why is a company like this not raising capital via traditional routes behind closed doors with venture capitalists? 8tracks Founder and CEO David Porter spoke with TechCrunch's Romain Dillet "As you can imagine, it's a particularly good fit for 8tracks as our community is our chief asset, It's our users who make the programming and our users who promote that programming, so it's only natural that they should also be able to finance that programming and literally own a piece of 8tracks." There has been millions of dollars in wealth created for investors and founders that have leveraged online funding routes. This also creates a diverse base of shareholders who can act as advocates for the firm.