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Crowd Funding Sites May Put Power Of the People Behind Business Ideas

START.ac

CEO: Rod Turner.

Financial data: Did not disclose.

Funding: Self-funded.

No. of local employees: Three.

Investors: Turner.

Headquarters: Pacific Beach.

Year founded: 2011.

Company description: Crowd funding website for businesses and projects.

What makes the company innovative: Combining ‘auditioning’ and advice to entrepreneurs before projects seek funding.

Rod Turner was looking for a new venture to invest in. He passed on a few ideas before choosing one he says is certain to be the proverbial “next big thing”: crowd funding.

A veteran technology executive who was part of several successful startups, including Symantec, the makers of Norton anti-virus software, Turner says crowd funding has a similar potential for adoption that the personal computer had in the early 1980s.

Turner was an executive vice president then at Ashton-Tate Corp., the makers of database software, and saw the enormous potential of the early computers, then called micro-computers.

“A lot of us thought back then that the potential for the PC was huge, and that’s similar to what I see now for crowd funding,” Turner said. “The awareness is very low but it’s gaining rapidly…When large numbers of ordinary people contribute small amounts of money, and when you get enough of them together, great things can be done.”

Help Wanted

Turner says there’s an abundance of great business ideas out there, but many won’t be realized because of the lack of capital.

For those entrepreneurs in biotech and high-tech who can convince venture capitalists or angel investors their idea is brilliant, they may get funded. But most entrepreneurs aren’t so lucky and they can’t find the money that they need, Turner said.

Crowd funding sites, such as Turner’s Start.ac, look to fill this need by providing a platform for entrepreneurs and others seeking money. In the past few years, at least a dozen crowd funding sites have been established including Kickstarter.com, Crowdcube.com and RocketHub.com.

Turner says his site differs from the others because it provides advice, mentoring and more feedback to a business or project. Before projects are approved for soliciting funds they go through an audition process where the ideas are picked apart by fellow members and staffers.

Start.ac, which Turner runs from his Pacific Beach home, makes its money by taking 5 percent of the total funds raised. The website was in development for about a year before going live in May.

It now has some 30 projects ranging from a family seeking $3,600 for its multimedia blog on a long road trip to a business developing a machine that would radically alter the way cancer patients receive radiation therapy.

Jeff Schmelzel, who co-founded BRAT Inc. with his brother Paul, is seeking $13,000 to produce the first 100 units of their new product called the Bluetooth pRoximity Activation sysTem, hence BRAT. The device is a wireless fob to start a motorcycle engine without a key, using the Bluetooth capability of cellphones.

Schmelzel of St. Louis said he looked at several other crowd funding sites before selecting Start.ac. “We were attracted to them because they were more focused on business and technology, and providing professional criticism and mentoring to help you,” he said.

The business had only been seeking funds for three days and raised $153, but Schmelzel said the experience has been positive no matter how much money he gets. Supporters who pledge at least $150 get a device when they’re made; others will be informed of the company’s progress, he said.

The process of first auditioning and then working with staffers and others making pledges “has opened our eyes to some things that we hadn’t thought about,” as well as getting professional, expert advice on how to better market the device, Schmelzel said.

Nabil Adnani, principal of Global Medical Physics Institute in Wexford, Penn, is seeking $1.5 million to build a prototype machine that aims to provide more focused radiation therapy to cancer victims. The new process involves implanting a device inside the patient that allows varying doses of radiation at various intervals.

Not Ready for This?

A medical physicist with more than 15 years in clinical radiation oncology, Adnani said he’s been working on the technology called In-Situ Activation Radiation Therapy for about a decade. He’s also applied for grants of about $1 million to build the prototype.

So far the crowd funding effort attracted only $101 in pledges, he said. “I’m not sure that crowd funding principles can apply to medical devices of this magnitude,” he said.

Turner said projects of greater than $4,000 that don’t hit their funding goal will return the funds to supporters, but those raising less than $4,000 can continue soliciting funds.

While most of the projects now on Start.ac are seeking less than $10,000, Turner says he looks forward to next year when the JOBS Act provisions take effect. The federal law passed in April includes language that opens up investment in startup businesses to a much wider audience. Companies will be able to sell up to $1 million in stock annually to investors instead of the current system that limits startups to selling shares to mainly wealthy individuals and institutional investors.

“For the first time in 80 years ordinary people will be allowed to invest in startup companies that they believe have great potential,” Turner said.

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