Is Crowdfunding A New Technology to Raise Funds in Oil & Gas Sector?
Crowdfunding is no more a tool utilized to raise charity funds online. It has grown a bigger platform extending its reach to various different industries across the globe. After a successful run at Real Estate Crowdfunding that was welcomed by investors with both hands, we believe that oil and gas companies are the next big market that must adopt the Crowdfunding model.
Why Invest in Oil & Gas Industry?
Oil and Gas is one of the biggest sector widely spread across the globe with so many oil wells yet to be drilled. There are also several oil wells in the industry that are supposed to be reworked in order to increase production. Hence, investing in such oil and gas wells can be a smart decision as considering the rising demands for energy fuels, such investments will bring nothing but potential returns on the investments.
Also, given the fact that oil and gas is one of the largest business sectors, the profits earned out of the investments are supposedly very high compared to other markets such as Real Estate. Besides offering excellent returns, investment in oil and gas also offer diversification along with tax benefits for the investors.
How Crowdfunding Is Benefiting Oil & Gas Industry?
The Crowdfunding beacon has already entered the oil and gas industry with a bang with the launch of Crowdfunding platforms like CrudeFunders and EnergyFunders in the United States, which are aimed at presenting opportunities for the investors to invest in oil and gas.
Both these websites have successfully launched several different oil and gas Crowdfunding projects. Started by three Texas-based lawyers, EnergyFunders is aimed at transforming the traditional oil and gas investment into a more transparent Crowdfunding method using new technology promoted by the passage of The Jumpstart Our Business Startups (JOBS Act) in 2012. The basic idea of EnergyFunders is to design a law that would aid small U.S. start-up companies to raise capital from a extensive range of potential investors as well as providing excellent investment opportunities for investors too.
Whereas, CrudeFunders are aimed at offering investors an opportunity to invest in oil and gas projects with a minimum of $1000 as well as provide an effective platform for companies to raise project funds. They started with success after raising funds for the rework of an oil well in Ozona, Texas, for which they raised $950,000 from a collaborative effort of 30 investors.
In short, the fact of the matter here is that Crowdfunding in Oil and Gas is real and already garnering success.
So, how it works!
The whole process of Crowdfunding is done online and hence it is as easy as submitting a form for a social media profile or a Gmail account.
Register : Registration is completely free. All you need is an active email address and you can submit the details asked on the registration form to register. A verification email regarding the registration will be sent to the email address provided by you.
Browse : Once verified, you become a registered member and now you have the complete access to browse through different projects in the oil & gas industry. Basically, the projects listed on the Crowdfunding platform are aiming to raise funds in the range from $100,000 to $1M for development ventures.
You can browse through each project listed on the platform, seek information on them as well as sort them according to specific geographical locations or based on technologies used in drilling.
All the projects listed on the platform are verified after a thorough background check to ensure that the funds invested are flowing through a secured and effective channel.
Start Investment : Once you have selected a worthy project to invest in, you can add funds to the project through online mode. As per the regulations set by the Crowdfunding platform, you can make the payment through wire transfer, mailing a check or payment using Bitcoin. Some of the projects may be geographically limited to the investors from a specific state or country. You may need to verify your geographical location while investing in such projects by verifying your residence that can be done online too.
Sign : Once everything is verified and the payment is made, you will be asked to sign the deal, which is also done electronically, thanks to the advance new technology in the form of Crowdfunding.
Complete : However, the investment process is not over yet. The fund amounts as mentioned above range in higher numbers and to ensure that the funds are safe, there is a minimum threshold set by the platform. Until the threshold is met, all the funds invested are locked in for security. Once the threshold is met, the funds are released to the project sponsor and you will be issued shares that would be the proof of ownership to a well(s) or company. Also, if the target is not reached, then your 100% funds are returned back to you without charging any fees.
That’s it. You have successfully invested in oil & gas industry online using the Crowdfunding platform. However, the platform won’t leave you yet. You will receive update regularly through production reports to get a detailed outline on the performance of the project you invested in and the amount of income you will be generating on a monthly basis.