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SoKap: A Crowdfunding Platform with Quick Financial Benefits

SoKap, a new Canadian startup, has found a brilliant way to take the concept of Kickstarter-style  crowdfunding and add the opportunity for investors to actually…

SoKap, a new Canadian startup, has found a brilliant way to take the concept of Kickstarter-style  crowdfunding and add the opportunity for investors to actually make a profit that goes beyond just receiving a gift or pre-ordering a product. Investors (you and I) now have an outlet for obtaining a town license; that is, buying rights to a startup’s profits in a particular city.

Here is a sketch: I buy the rights to, let’s say, Pebble, in San Jose, then I collect money in the form of commission, set by the project owner, from all profits made from sales in the specific cities I choose. Prices for different cities are determined by startups and SoKap also gives them the option to keep profits from some cities to themselves. The development of a project becomes the collective affair of both supporters and project owners — referral bonuses and affiliate fees are given to investors for driving traffic to a project.

This approach is completely legal in that it is categorized under a  “business opportunity” license, not an investment. Investors do not have to worry about the possibility of making a bad decision in backing a particular startup’s project or product for two main reasons. First, there is no equity involved, so contributors are guaranteed a profit even in the case that the startup does not sell or go public. Secondly, no one is charged for a pre-ordered product or town license, under SoKap’s “all-or-nothing” policy, until a project reaches its funding goal.

SoKap is attractive in that it provides a viable alternative to The JOBS Act’s equity-based crowdfunding, which, in its current state, has not fully been given concrete regulations by the SEC. Though we are definitely in support of the CROWDFUND Act, it can nonetheless get considerably complex and daunting, as a project-owner, to figure out just how much equity to give away and how exactly to deal with crowds, especially when they are not based locally. SoKap is thus a great option for creatives that aren’t quite ready to contend with the politics of equity and investors; their business model is really only targeted at prototype projects that need a flexible and less-involved means of finding their way to market.

The platform has thus far been attracting creatives in the entertainment field seeking funding for movie productions or music recording. Maya Solovey, a multilingual recording artist, has managed to reach her $5,000 fundraising goal in order to meet the costs of producing and recording her latest EP. She has been able to promote her work to a broader audience while making a good profit from listing some of her other entrepreneurial side services. Of all the listings found on Solovey’s SoKap store, my personal favorite  is her private cooking lesson, currently going for $250. This is a particularly unique and mutually profitable way for artists and their audience to connect.

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