You’re the Boss Blog: RocketHub Ponders Its Future in Crowdfunding

The Agenda

How small-business issues are shaping politics and policy.

We have published a story about why the Securities and Exchange Commission has struggled to write the rules that will carry out equity crowdfunding for small businesses. One company that has been at the forefront of the effort to influence those rules is RocketHub, a donation- and rewards-based crowdfunding site based in New York. Itself a small business, RocketHub debuted in 2010 and now has about 10 employees, including its four founders — but is still viewed as one of the largest American crowdfunding platforms.

The Agenda spoke recently with Alon Hillel-Tuch, 28, one of RocketHub’s founders and its chief financial officer, about the company’s prospects. The interview has been edited and condensed.

At this point, do you know if you’re going to do equity crowdfunding?

That’s a good question — a very good question, actually. I don’t believe anybody should be telling you that their intent is to do this without knowing what the rules are going to look like. If we don’t see the rules panning out in a way that actually makes sense and adds value to both sides of the table, we’re not going to do it.

So let’s say you end up doing crowdfunding — how does that change your business? What can you keep and what will you have to add?

When it comes to the experience on our site, we envision it to be very similar to the rituals that our users are accustomed to now. We would be putting the right team in place to handle that component as well, but as commensurate with growth in that space. A lot of the infrastructure we have now on the back end is very much applicable to equity crowdfunding. Basically, when it comes to our architecture, we’re already set up to handle a predominant share of the Jobs Act as it is written out right now. If the rules come out with a lot of additional stuff, then we would have to develop towards it, but for us that’s not a big concern at all.

How would you differentiate yourself from the competition?

We have actually pushed for standardization. I want every investor to see as much as possible the same deal structures when they look at projects. So when you go to RocketHub for equity crowdfunding, you should understand the deal structure for every project you go to. I would like to see financial statements in a similar format; I would like to see offerings presented in a similar format. So the differentiation really comes in what we do now with education. So if you go to RocketHub.com and click “Success School,” it’s a whole entire educational site that teaches you all the different steps of crowdfunding — there’s a tool kit that gives you different tools and teaches you how.

And one of the things we’ve noticed is that people raise funds and then say, “What do I do next? How do I take these funds to fulfill what the rewards are that I guaranteed as well as hit the goals that I’ve set?” You can launch a project with us and then do the next steps through us as well. If you’ve got a thousand orders to fulfill, and you’re not able to any more do it from your home, we work with groups that can actually help you scale it.

Do you feel like you need to raise more money to execute a crowdfunding platform?

That’s actually very similar to a question the S.E.C. asked us. They asked how much would it cost to build a platform?

And what did you say?

We told them there was no real fixed number on that. The technology is not that complicated on the surface, it’s the execution of it that’s hard. So it’s really about how much money do I need to hire the right people.

Do you think you need to raise additional funds to do this?

We won’t necessarily have to. It will just accelerate the rate at which we’re able to support our users. If I wanted to do equity crowdfunding, and I start just with the major cities initially, if I raised more funds, I might be able to service also certain rural areas I am very excited about.

Can you see yourself raising that money through crowdfunding?

No. Probably we won’t.

Why not?

Because we already have enough other investors already on the table from previous rounds. If we needed to raise another round, they would initiate it. And a platform raising funds for itself might get into some issues from a compliance perspective that I think is a little bit of a gray area.

Article source: http://boss.blogs.nytimes.com/2012/12/26/rockethub-ponders-its-future-in-crowdfunding/?partner=rss&emc=rss