CrowdFunding – NextGen for Funding
Have you asked yourself why is this economic recovery so shallow and the economy moving so slowly – particularly on the small business end?
Answer: because there is no ready source of capital for scale ups and small businesses to finance their innovation and growth. Banks don’t want to lend to any entity perceived as risky in their own eyes …..they now make money on fees. Govt. sources like the SBA only sit behind banks’ approval processes. They are not actually attempting filling any gaps in the financing needs area for business. And, VC’s only want to fund software, cloud based services, and medical related businesses. Enter CrowdFunding…
If your product requires capital to go to market, then CrowdFunding is poised to fill this gap. There is a ready supply of money and willing investors that want to either contribute to socially responsible or environmental causes and/or make equity investments in these businesses. This comes without all of the ‘qualified investors’ regulations that have to date limited their opportunity to participate. Reg CF actually has been approved effective May 16, likely faces some challenges from securities regulators in initial roll outs, but is gathering momentum. Vast sums have been raised both in the US and globally to fund businesses with strong economic results through CrowdFunding.
CrowdFunding requires a number of different skills to be an effective tool – a virtual team: a product business, legal skills, accounting, strong business plan / story, video resource to draw attention and tell the story, digital media to distribute the story broadly and succinctly, and a portal to access capital and track investments. The product story should be told in phases with different investment audiences selected and tools used. For instance:
If a company deploys a product to provide electricity to produce drinking water to off grid populations in Africa utilizing renewable energy, contributors could be attracted to Kickstarter campaign focused on socially or environmentally sensitive causes – ‘Drinking Water in Africa’; if a product provides electricity from a renewable source to power creature comforts in the cab of a long haul truck – a Kickstarter campaign to advance product sales at discount could be appealing to trucking companies and produce advance sales revenue to fund product manufacture; and with success with these types of campaigns, a CF equity raise from investors could come as the next phase.
It is a proven fact that money follows money and success in earlier phases of a project or fund raise leads to larger amounts in subsequent phases…….and note that a bank does not need to be involved. This is the future of capital for small business funding……are you ready for it? If not, you had better get moving fast or team up with a approach that is already in motion.