By Brie Handgraaf The Wilson Daily Times, N.C.
WWR Article Summary (tl;dr) Last year in the crowdfunding space, approximately $45 billion was raised which is about the same figure as all angel investments combined.
The Wilson Daily Times, N.C.
Since the recession, obtaining a business loan from a bank has gotten harder for entrepreneurs, but there is another option and crowdfunding was the topic du jour last Tuesday at the Wilson Chamber of Commerce.
"Crowdfunding is exploding," said Mark Easley, publisher of CrowdfundNC.com.
"There is huge amounts of money being raised. Last year in the crowdfunding space, about $45 billion was raised and that is about the same investment as all the angel investors."
Angel investors, individuals who are accredited following a check of assets and income, had been the only legal way to loan capital to startups and growing businesses.
"Traditionally, angel investors were the only ones who could invest in these companies," Easley said. "With crowdfunding, everyone can be an investor."
Easley recalled a 2013 conversation with Tom Murry, who was a member of the N.C. General Assembly, about putting together a state law to support investment crowdfunding.
"He told me how he is a pharmacist with a pharmacy in Morrisville and was trying to open a new one down in Raleigh. He said, 'This week I'm going to my 23rd bank to try to get a loan,'" he said. "Think about that. He is a successful businessman already, an assemblyman and the chair of the commerce committee, but he couldn't get a loan. That is how restrictive things have gotten, so he understood the problem and he took the ball and ran with it to create the N.C. PACES Act."
The 2016 North Carolina law providing access to capital for entrepreneurs and small business legislation paved the way for Localstake NC and the online platform -- https://nc.localstake.com/ -- that pairs companies seeking capital with potential investors.
"What you are doing with investment crowdfunding is you're making a security and selling it," Easley said. "What is a security? It is either some stocks, equity in the company or it is a debt instrument you're going to sell to investors with some hope they'll get some return in the future."
The first company in the state to use the site is set to launch a crowdfunding campaign geared toward young parents in the coming weeks, but Easley said similar efforts have been wildly successful in 33 other states with similar legislation or under federal investment regulation. There are a growing list of websites with broad focuses as well as specializations such as funding house-flippers through www.groundfloor.us or agricultural entrepreneurs at www.agfunder.com/.
"AgFunder is full of farmers, people in agricultural businesses and industries, so they understand what it is you're selling," Easley said. "You want to get to the crowd that fits your product and your service because they'll understand you best."
And as a local expert on crowdfunding, Easley encouraged entrepreneurs to do some research before jumping in. "If you have a business, a company, a product, an idea or a target market, I guarantee there are other companies out there trying to address those things and they are already doing crowdfunding," he said. "So your first job if you decide to go this way is to go find those and see what they are doing. Look at their profiles, research how they did and what terms and conditions they gave. You can learn a lot from ones who raised all the money they did and you can learn a lot from the ones who didn't."
Crowdfunding can be risky for contributors, just like any other investment, so Easley said those with the money and those seeking funding should think carefully before jumping on the crowdfunding bandwagon. CrowdfundNC.com has a variety of resources for folks on both sides of the coin.
"I see crowdfunding maturing and ramping up into a very strong piece of the funding infrastructure for small businesses and startups," Easley said. "It is already almost there."