Pandemic Crowdfunding is Helping Revive Small Businesses
A pandemic-fuelled crowdfunding boom has small businesses approaching investment-raising platforms which experts say help many companies return to normal operations if small-business owners launch effective campaigns. Crowdfunding by companies raising capital from investors on government-overseen online platforms, has blossomed since 2019, going from about $100 million to exceed the $200 million mark year in 2021.
The Covid lockdown has been a massive boon to this market, as it disrupted traditional financing options, forcing small-business owners to look for alternative funding sources, such as ideas of crowdfunding and capital as a commodity as investors are more comfortable with crowdfunding during the pandemic. Many angel investors and investors were sceptical about investing in private companies online, but suddenly that was the only option for these deals, with total buy-in from the retail investor market.
Reopening and rebooting
Crowdfunding is associated with capital raising for new businesses, but months of lockdowns and capacity restrictions have small businesses exploring crowdfunding options to return to normal operations. Many local parlors, beauty salons, small restaurants, that struggled during the pandemic are now tapping customers saying, “I need $25,000/ $50,000 to reopen, help us get up and running.” These businesses offer great yields- 7% to 9%, which is healthy for a short-term loan, and clients don’t have to invest the entire amount of $25,000 as the average investment is $700. Crowdfunding small-business reboots have long-term effects on businesses seeking operating funds. If investors in small businesses see this approach actually works, they will continue to raise this diversified capital.
Effective Crowdfunding Campaigns
Crowdfunding is a good fit for small-business owners strapped for time or energy. The Covid lockdown has enabled investors to provide short-term operating loans also. Small businesses with recovery-oriented crowdfunding campaigns must keep three things in mind, as per experts:
- Find a Good Fit
A small business could have success on any platform that aligns with its goals and mission. A few crowdfunding platforms specifically cater to businesses or certain industries; others may focus on specific areas or certain size businesses. Review the money their companies raised or are currently being raised now so you could calculate how huge their investor base is.
- Don’t skip the Legal Work
This doesn’t involve people giving money to support someone on Kickstarter and GoFundMe. This is highly regulated activity supervised by the Securities and Exchange Commission and the Financial Industry Regulatory Authority. To file disclosures for investors, templates and boilerplate language goes a long way, but lawyers must review all final documents, before submission.
- Promote your Campaign Effectively
Campaigns that go up without serious marketing efforts backing them, get zero traction! The people putting in efforts are the people that witness traction. E-mail outreach, targeted social media efforts, in-store promotions with QR codes for campaign information, are popular, as per experts. Really creative promos like an ice cream social for an ice cream store, inviting people in and enabling investing in the company right now, really works. They come in, super-psyched to be invited, then put in $500 more, once they’re there and see what they’re investing in. Stories about raising funds in the community, providing a potential economic return in exchange for getting a company back on track, are compelling features for businesses to promote; local media outlets need feel-good stories.
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