Most entrepreneurs don’t have the luxury of pinning their hopes on the slim 6% chance of securing VC money, especially not in the midst of the coronavirus pandemic. Crowdfunding, on the other hand, offers the absolute best shot at securing funding because comparatively, it averages a 60% raise rate. While the economy seemingly plunges into a deep recession, crowdfunding’s ability to raise 10x more capital than VC could provide a necessary lifeline of stability for small businesses and entrepreneurs. In the years since its inception, crowdfunding has proven its merit by already injecting $1 billion into local communities.
In addition to boosting local economies, crowdfunding has created a slew of local investors – separate from the traditional stock market. This represents a powerful opportunity for the community, in addition to investors and entrepreneurs, because when one dollar is spent at a small business, 67% of it stays in the local community. Supporting local communities is beyond necessary considering the global recession seems to be obliterating small businesses across America. Crowdfunding provides tangible opportunities for everyday people who are largely ignored by federal bailouts and venture capitalists.
The coronavirus-induced global recession has sucker punched small businesses, unemployment has spiked to a record high and hope is in short supply. Crowdfunding has offered marginalized entrepreneurs their shot at the American Dream since its inception only a few short years ago. The ability to source money from a wider pool of investors significantly reduces risk for any single investor and entrepreneurs enjoy more freedom and far fewer constraints than when funded by VCs.
Now that crowdfunding’s admirable success has caught the attention of the SEC, they are currently seeking to increase the cap for Reg CF from $1.07M to $5M. This is a powerful beacon of hope for the coronavirus economic recovery as well as the grad class of 2020. From 2000 to 2017, small businesses created more than 65% of new jobs. Crowdfunding offers more than financial opportunity; it’s a practical opportunity to send the elevator back down and spread hope.