We already know the pandemic has decimated small businesses—thousands have permanently closed—and according to Sherwood Neiss of Crowdfund Capital Advisors, we are witnessing restaurants closing at the fastest rate in US history (emphasis, ours). So, the business economy is pretty much this:
As the curtain closes on 2020, it’s clear that America will need to prioritize economic recovery and stability for everyday people, which to a larger degree it won’t. Luckily, equity crowdfunding is capable of facilitating a strong recovery in 2021 and beyond.
A Federal vote of confidence
Uncle Sam may have been asleep at the wheel this year with regards to pandemic bailouts, but the SEC’s vote to raise equity crowdfunding’s offering cap from $1.07 million to $5 million is powerful. This move should bolster companies in the equity crowdfunding space because they can now raise roughly five times the amount of money to build themselves a longer runway. Not having to watch the purse strings as closely means more can be spent on marketing, promotions etc., and give startups a breather after they clear the Valley of Death. This is fantastic news for both investors and entrepreneurs.
It should be noted that since the inception of equity crowdfunding, there has been zero fraud reported to date. This shouldn’t be surprising, since appropriate guardrails and proper oversight are baked into the structure of equity crowdfunding campaigns. It’s much easier to dupe a single angel investor in the venture capital industry than hundreds or even thousands of investors in the equity crowdfunding space. Everyday people are perfectly capable of selecting their own investments, and—it turns out they identify winners as well, if not better, than professional investors. Don’t believe it? WeWork, Juul, Jawbone, Theranos, Evernote and the other 202 biggest and most expensive startup failures would like a word!
Main Street, we’re looking at you
There are plenty of small businesses still struggling to stay afloat, and the $4 trillion of Congressional bailouts have yet to be sufficiently deployed to support those most in need of assistance. For added context, $4 trillion costs more than 18 years of war in Afghanistan.
But, this Federal failure to launch doesn’t have to spell the end for small businesses—who make up 99.7% of all employers in America—and are responsible for the creation of more than 65% of new jobs. This untapped potential represents a tremendous socioeconomic opportunity for everyday people, as successful crowdfunding campaigns create and support on average, a total of 54 direct and indirect jobs. These are the folks who hire freelance graphic designers, musicians and web designers from their community, and support their local coffee shops and restaurants. Did we mention that for each dollar spent at a small business, 67% of it stays in the local community? The formula to get Americans back to work seems to lie in the equity crowdfunding ecosystem, which has consistently demonstrated that when funded and leveraged properly, the financial and social benefits cascade into the community, lifting all boats.
It’s actually equitable
On Wall Street, the bottom 50% of the country owns only 0.7% of stocks on the market. The stock market is not designed to benefit everyday people, but the equity crowdfunding arena was structured with regular Americans and small businesses in mind. The crowdfunding ecosystem welcomes the 300 million unaccredited investors who are habitually shut out of early stock market deals, and offers them ownership opportunities that would be nearly impossible to secure on Wall Street. Considering America’s wealthiest 10% own 92% of stock market gains, there’s not really much equity truly up for sale on Wall Street anymore.
Shift your gaze and notice that the equity crowdfunding ecosystem is not solely dependent on Wall Street for financial returns. It’s a separate garden which offers substantially more opportunities for everyday people to gain equity and own a slice of a young company before they have a major liquidity event (i.e. goes public).
In addition to offering equity, the crowdfunding space is equitable. According to Forbes, 95% of women-led and 93% of minority-led congressional districts in America had investment crowdfunding offerings. No need to move to Silicon Valley to make entrepreneurial dreams come true! This bodes extremely well for the economic revival Americans need in 2021.
Fund me like one of your unicorns
There’s lots of economic heavy lifting necessary in the new year, but the tools are finally in place. The Feds have generously upped the equity crowdfunding limit which signals an immense vote of confidence in a system that has yet to report any fraud, and has been breaking funding records this year. Since equity crowdfunding platforms are online, it has proven itself a practical and reliable method to get money into small businesses. And with a pipeline of funding plugged into small businesses, we can expect job creation, community support and innovation. The economic pressure of 2020 illuminated the power of the crowd, and crowdfunding hit its stride during a year when the stock market behaved like a yoyo. Unaccredited investors, unfunded entrepreneurs and small business owners won’t need to solely rely on the Feds for funding into 2021.
What’s perhaps most encouraging, is that common sense seems to prevail in the crowdfunding ecosystem: good ideas get funded, meh ideas don’t necessarily. This showcases that regular people are capable of handling their own investment decisions, and they certainly don’t need Wall Street anymore in order to secure ownership and build generational wealth.
So let’s have a win-win in 2021, where the 99%—aka everyday people—become investors in the 99.7% of the businesses doing most of the hiring and innovating. That’s the power of equity crowdfunding.
Need small business pandemic support? Check out TruCrowd Services’ micro-funding program, ‘Keep The Light On’
If you’re curious to learn more about investing in and via equity crowdfunding, check out TruCrowd’s online investment portal.