How crowdfunding raised $282 million to buy Pabst Brewing, with an average investment of $40, and how it could substantially change startup funding in the future

Congressman McHenry promotes his crowdfunding bill

©Image: Eric Blattberg / Crowdsourcing.org

The following story is courtesy  futurist Thomas Frey's blog on the World future Society web site, regarding how, in the future, crowdfunding could be the new answer to raising capital for innovation and to grow and sustain American business.

November 2009 was when Michael Migliozzi and Brian Flatow started a website called BuyaBeerCompany.com who’s lofty goal was to buy the ailing century old Pabst Blue Ribbon beer company. In less than two years, working to match the $300 million sale price, the pair attracted over 5 million investors pledging upwards of $280 million, with an average pledge of $40.
The SEC found out about the money raise and put a stop to it in Sept 2011. The problem? They hadn’t registered the offering with the SEC and they targeted unaccredited investors. These are two major no-nos in investment circles.
Because no money changed hands, only pledges, the two escaped charges, but the entire incident fueled the interest of some very prominent people who saw the potential for invigorating the cash-strapped startup and small business world where most new jobs get created. The concept of crowdfunding was born.
On November 3, the U.S. House of Representatives overwhelmingly passed H.R. 2930, a crowdfunding bill that will allow startups to offer and sell securities online. The Senate will likely vote on the bill in early 2012.
After eight decades of arguably the most restrictive rules for raising capital in the world, we are standing on the precipice of a new era for funding: crowdfunding.