Keeping Small Businesses in Business Through Crowdfunding

When I find a business that provides a product or service I love, I want to share it with the world because I want my family and friends to have a great experience and (a bit self-servingly, I’ll admit) because I want the business to continue existing so that I can continue being a customer.

To that end, if a favorite local business was in need of a cash infusion to fight off a takeover or to survive a financial hardship or a health crisis, I’d be willing to support the business. Would others be willing to do that? It seems likely. Crowdfunding via the internet is a medium to which more small business owners are turning in times of trouble.

On its face, the idea of a business – which is essentially designed to make money by selling its product or service – needing money from customers without exchanging those products or services is a bit absurd. Businesses fail for various reasons and getting close to closing down doesn’t necessarily instill confidence in the business owner’s capability.

But that’s a cynical viewpoint. Sometimes stuff just happens.

Crowdfunding small business

Communities can rally around their local small businesses. While crowdfunding is more traditionally used to launch new businesses or creations, small business owners are pursuing crowdfunding to raise money for survival. Some raise enough money; others attempt and fail.

This article from Entrepreneur highlights the stories of several small business owners, including a Brooklyn-based bar that needed money to survive a hurricane and then a protracted family dispute; and this story about a Philadelphia-based book store:

One of these businesses is Philly’s Black and Nobel, one of the last remaining black-owned independent bookstores in the country. Earlier this year, founder Hakim Hopkins was on the verge of shutting down the hulking, 14-year-old shop. Book sales were down, and the bulk of Black and Nobel’s revenue – currently about three-quarters, Hopkins says – came from shipping books to prison inmates, a business that can be run without a pricey brick-and-mortar location. “That’s why we’re still here. They’re still reading in prison. They still have time,” he says.

There was only one problem with Hopkins’ plan to wind down the business: His customers wouldn’t let him. “I’ve been fighting for the past few years to keep the doors open. The younger people were like, ‘No! This place saved my life!’”

So in June, he launched an ambitious $250,000 campaign on GoFundMe to keep Black and Nobel’s doors open and maintain the bookstore’s vital role as an event space, supporter of independent black writers and artists, and community hub. The campaign has gotten plenty of local press, and support from a few high-­profile local artists and athletes. But by the three-month mark, Black and Nobel raised just shy of $10,000, a far cry from what Hopkins was seeking.

At a glance, the Black and Nobel campaign appears doomed. But Hopkins says he’s just getting started. He is planning a neighborhood block party to raise more funds, and he wants to launch a series of promotional videos. “I’m not just gonna brush it off after six months,” he says.

If he can make it to the $250,000 goal, Hopkins has big plans: buying his own building, renovating and expanding the bookstore space, buying a tour bus to put Black and Nobel’s programming on wheels and take it around the country. And although the campaign has a long way to go, he’s heartened by the progress he’s made. “Mainly we started it to keep up with rent,” he says. “It’s getting to the point now where I feel like we’re going to be open, because we do have people who care.”

Promoting the fund-raising campaign is a bit like having a second job, Hopkins says – a sentiment shared by many campaign founders. “It’s very draining. It’s like begging. And I’m an earner,” he says. Hopkins, who started his business as a street vendor with a table and a box of books, says he’s never had a bank loan, or even a credit card. Every dollar he spends on his business is a dollar he earned.

But Black and Nobel is too important to give up without a fight, he says. He’s watched elementary school kids who saw the bookstore as a haven grow up and graduate from college, and he feels his store made a difference in their lives.

“We helped build the community,” he says. “It’s more than a bookstore.”

Anti-Bullying App Gets Microloan Boost

The current edition of BizVoice® magazine includes a story about the Madison County Young Entrepreneurs Academy (YEA), an after-school program for students in grades six to 12 that helps students learn how to brainstorm ideas for companies, present those companies to an investor panel and secure funding for their ideas.

As part of the YEA program, Pendleton Heights High School junior Brandon Boynton created an anti-bullying app called The Bully Box, which is marketed to schools and allows students to report acts of bullying anonymously, while allowing the school district to collect bullying data to help comply with anti-bullying laws and protect students.

Boynton’s app won the local contest held through the Madison County YEA program, as well as the regional contest in Boca Raton, Florida. He placed in the top six of a national competition at America’s Small Business Summit in Washington D.C. in June.

According to a press release from the Flagship Microloan Program, the app has also caught the attention of the microloan organization, which provides small loans of between $1,000 and $5,000 to businesses in a 10-county region of East Central Indiana. The program announced it will make a working capital loan to Most Beastly Studios, which produces The Bully Box app. The Flagship Enterprise Center, a technology incubator in Anderson, is a sponsor of the Madison County YEA program and is a partnership between the City of Anderson and Anderson University.

To raise additional capital for the app, Boynton is running a campaign via crowdfunding site IndieGoGo. His goal is to raise $25,000 by Sept. 24.

Also in Boynton’s toolbox is The Curfew Buddy – keeping parents and children connected quickly about where children are and when they’ll return home.

Kudos to this young Hoosier entrepreneur and the Madison County YEA program for giving Boynton and other enterprising students the experience and opportunity to change the world through their innovative products, services and ideas.

Crowd-funding a Hot Topic for Government, Businesses

Legislation is going through the United States Congress to make it easier for small businesses in America to benefit from crowd-funding. The Wall Street Journal blog relays:

The U.S. House advanced legislation this week that would make it easier for smaller companies to raise money from investors.

House lawmakers, in overwhelming bipartisan votes, completed work Thursday on four bills as the measures drew interest in the Senate. President Barack Obama also signaled support for at least one of the bills.

Among other things, the House by a vote of 413-11 approved a bill to make it easier for companies to advertise private offerings with wealthy investors and voted 407-17 to allow startup companies to raise up to $10,000 from individuals over the Internet.

Supporters hope the bills, if signed into law, will help small firms grow in size and hire new workers.

Sen. Kirsten Gillibrand (D., N.Y.), who is weighing introducing capital formation legislation in the Senate, said there is widespread need for Congress to act. “Everywhere I spend time across the state I talk to small business owners and entrepreneurs that need access to capital to grow and create jobs,” Ms. Gillibrand said.

The advertising provision would end a Securities and Exchange Commission ban on “general solicitation” that effectively limits the ability of companies to reach out to potential new investors. “Under the current ban, if you have a good idea but you don’t have a prior relationship, it cuts off a whole section of investors,” said Rep. Kevin McCarthy (R., Calif.) said in an interview.

The Internet bill would allow startups to use “crowd-funding” methods to tap thousands of investors for very small amounts of shares without the firm having to register first with the SEC. Introduced by Rep. Patrick McHenry (R., N.C.), the bill would allow startups to raise up to $2 million through Internet solicitations and social networking and online sites designed for capital raising.