American entrepreneurs are still waiting for the Securities Exchange Commission (SEC) to finalize the federal rules governing crowdfunding. These industrious members of the economy represent 99.7% of national employers and employ more than 54.9 million.
Thanks to shows like Shark Tank, the concept of publicly pairing entrepreneurs to investors is now a mainstream concept, piquing the interest of many Americans.
At one time, pitching a new business idea to a group of investors was an alternate option to traditional funding that made raising capital possible for the average entrepreneur. Today, thanks to the democratic nature of the Internet, there are more options and fewer barriers than ever before.
According to the National Venture Capital Association (NVCA), the venture capital (VC) market in America is shrinking, with the number of VC firms significantly decreased in recent years. The NVCA reports that VC investment and under-management are also on the decline.
Earlier this year, a California-based company raised $750,000 through debt and equity crowdfunding when the owner took advantage of a provision that allowed him to campaign on Facebook, LinkedIn, Twitter and an online crowdfunding platform.
Publicizing his campaign on personal websites is a move that really bolstered his two-year old small business. But, that option isn’t available to everyone. Why not?
Now that the legal barriers have been removed to allow non-accredited investors to participate in equity crowdfunding initiatives in Georgia, we should address the practical roadblocks that are keeping people out of the market. A recent article in the Harvard Business Review addressed some of these areas and ways to prevent financing bottlenecks.
Plenty of small business owners invest months leading up to the launch of an equity crowdfunding campaign. But the work does not end with a successful raise: Maintaining effective ongoing communication with investors, customers and stakeholders long after the campaign has ended can not only prevent legal headaches, but can also become a competitive advantage.
Want to know whether or not a proposed business investment is sound? Look no further than its Value Proposition. A VP is the starting point for potential issuers in developing equity crowdfunding campaigns that has a significant influence on their success or failure. Simply put, if the VP isn’t clear and compelling enough, investors will look elsewhere for better returns for their dollars.
Former President Ronald Reagan called them the “forgotten heroes of America”: small business owners who make up a startling majority of job creators, employers and exporters. But these local, home-grown companies often meet huge financial challenges as they try to get their businesses off the ground. From legal advice to proper underwriting, entrepreneurs are facing many challenges raising the equity they need to make their American dream come true. That’s where crowdfunding may help. Simply put, the promise of crowdfunding can help small business, and small business drives the American economy.
Georgia and Kansas may have led the way in Crowdfunding and Securities Exemptions (CASE) legislation, but many other states are quickly seeing the advantages and passing similar legislation of their own.
After all, crowdfunding promises job creation and economic improvement at the state level. And because any astute politician can see the logic in keeping jobs and business taxes in state.