Crowdfunding: Pandemic Life Support for Small Business in America

September 1, 2020
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David vs Goliath

When we think of successful business people, Wall Street leaps to mind for a lot of folks.  However, small businesses across the country are actually doing the most heavy lifting. Young businesses drive America’s productivity growth, employment and job creation, yet they remain the most vulnerable. By May, more than 100,000 small businesses had permanently closed, and roughly another 15,742 closed from June to July. America is home to 30 million small businesses and only roughly 4 million received pandemic assistance. The Main Street bloodbath was capped off with over $500 billion (up to $4.5 trillion) in bailout money going to Wall Street. The feds either learned nothing from the Great Recession or just don’t care, but this time is different because of recovery legislation passed in response to the 2008 crash. Now, the JOBS Act legislation is coming in supremely handy as Main Street contends with economic fallout from a pandemic, while receiving bare bones government support. 

The crowdfunding cavalry has arrived

It appears that equity crowdfunding working overtime seems to have caught the attention of the SEC, because they approved a temporary cap boost to $250K from $107K, as conditional relief to make raising money using equity crowdfunding (requiring minimal documentation) easier. This is a boon for small and micro businesses seeking startup funding and support during this devastating time.

By March of this year, Wefunder recorded their best month ever. And in even better news, July smashed records in the crowdfunding ecosystem—not bad for a month that’s usually one of the quietest. It witnessed the highest:

  • month of new offerings ever in the history of equity crowdfunding
  • amount of investor commitments 
  • number of investors 

Since the Great Recession, equity crowdfunding has pumped nearly $1 billion into local economies and shows no signs of slowing down. And with the lumbering venture capital industry largely sidelined, crowdfunding has been furiously funding small businesses. This is spectacular news because companies with successful crowdfunding raises create and support on average, 54 direct and indirect jobs. Small business support, which feeds job creation, is exactly what Americans need in the coronavirus ravaged economy. 

Join the convoy

The flood of investors and entrepreneurs into the crowdfunding arena is heartening and will hopefully continue to keep the light on. In addition, it would be a powerful show of faith to American entrepreneurs and the economic recovery, if the Feds would take our friends at Crowdfund Capital Advisors up on their suggestion of a co-investment fund; we most certainly will. This could greatly expand  the amount of small businesses who could access support during this ruthless economic time. It won’t be long before crowdfunding is running circles around venture capitalists and becomes the new normal of funding.

If you’re curious to learn more about raising money via equity crowdfunding, check out TruCrowd’s online investment portal.

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By Kirsten Campbell