Yakima County Development Association - Crowdfunding Changes Game for Entrepreneurs and Investors

Jonathan Smith

The President’s Pen is a weekly blog written by Jonathan Smith, New Vision’s President and CEO about local economic development projects and initiatives. It also covers economic trends, workforce issues, business climate policies, and manufacturing news. 

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Crowdfunding Changes Game for Entrepreneurs and Investors

Crowdfunding Changes Game for Entrepreneurs and Investors

May 29, 2015

Our Crowdfunding seminar recently highlighted how this new industry is fundamentally altering the landscape for entrepreneurs and investors.  Online investment portals like Indiegogo and Kickstarter offer individuals and organizations wholly new ways of funding causes, nonprofits and businesses.  These crowdfunding sites also provide people novel (and a bit scary) options for investing in businesses or supporting charities. 

Our workshop instructor Greg Paley highlighted how fast crowdfunding has has taken hold:

  • Internet and social network investing grew 63 percent per year between 2009 and 2013;
  • Over $663 million has been booked on these crowdfunding sites since the start of 2015; and
  • There are over $2.5 billion worth of deals in the pipeline just for real estate deals.

With the advent of crowdfunding it is much easier for people to raise money than ever before.  For entrepreneurs crowdfunding can build in support for their enterprises and be a realistic funding option if more traditional loans or institutional financing are not available.  At the same time, however, crowdfunding is not a slam dunk.  According to Paley, 80 percent of online campaigns fail.  Within this failure rate another 80 percent do not even reach 25 percent of their funding goal.

Paley offered lots of good advice on how to stage a successful campaign.  It was refreshing (and reaffirming) to learn that successfully raising business funds requires good business planning, financial acumen, and detailed marketing savvy.  Online investors want to know who is involved with the enterprise, what the product or service is, and how its potential can be realized in the marketplace.  Investor terms and financing specifics are also fundamentally important. A lot of what Greg outlined in the class are the same important themes we emphasize in our Enterprise Challenge business plan contest. 

Washington state recently passed crowdfunding legislation that eases investor restrictions and sets the stage for online investment growth. The new law allows people (or businesses) to raise up to $1 million in stock sales per year.  If folks go this route they can only raise funds from investors residing in Washington State.  

It was ultimately fascinating to learn about the growth of crowdfunding and how to stage successful campaigns.  Like any other novel technology there is a lot of hype surrounding crowdfunding.  It was valuable to learn more about online investment portals and our office is now much better equipped to advise people how crowdfunding works and how to stage successful campaigns.

Organizing and Running Successful Online Campaigns Greg Paley to Teach Crowdfunding Workshop in Yakima l Crowding and Kicking: Jobs Act Provides New Funding Avenues for Entrepreneurs What is Crowdfunding and Will it Work for You?

 


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