Friday, April 19, 2024

THE ISSUE: Crowdfunding for entrepreneurs

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Is there a need for alternative funding options?

 

Access to funding remains one of the main challenges for people who want to start a business or pursue a project. Such difficulties continue to be highlighted by people with a desire to establish a micro or small enterprise.

One of the solutions to this is alternative financing, better known as crowdfunding. This concept, which is very much in its embryonic stage in Barbados, is a system through which funding is raised through small contributions by a large number of people. It is usually done via the Internet, and hence why crowdfunding is categorised as “fintech”.

Barbadian, who is principal consultant and managing director of SAMDOR Services Limited, addressed the issue in 2014.

He said that “while crowdfunding is not generally a household word in the region, it is, however, a buzz among entrepreneurs, especially those in the tech space, who see crowdfunding as a potential source of funding for their business”.

“Crowdfunding describes an evolving method of raising capital that is generally used ‘outside of the securities arena’ to raise funds for a variety of projects, products or artistic endeavours,” he noted.

“Crowdfunding has been used to finance art-related or philanthropic projects, where the ‘crowd’ has assisted in achieving funding goals, but the objective of these efforts is usually not to build a company or for the investor to seek a profit.”

There was also equity crowdfunding, which “raises capital to build a for-profit business”. Hinkson viewed such developments positively.

“One thing that is clear from all of the global discussion and debate on crowdfunding is that technology is changing access to capital, expertise and distribution. I am excited about how equity crowdfunding can improve access to finance for local and regional businesses while making a lasting contribution to regional economies,” he said.

“My advice on what to do is clearly embrace crowdfunding to ensure that our new and upcoming entrepreneurs have access to financing, as the next innovative technology solution may be under development in Massiah Street, just awaiting investment, which could be provided through crowdfunding, to assist this entrepreneur to move his idea to commercial reality.”

Crowdfund Insider.com said based on research on how African start-ups had fared with crowdfunding, there were lessons for other regions such as the Caribbean.

The six “key lessons” were:  crowdfunding is much more difficult than most entrepreneurs anticipate and is not for everyone; business needs should dictate platform choice; payment systems impact platform choice; quality and quantity of contributor networks are key; entrepreneurs should tap into complementary resources and organisations to increase their likelihood of success; and crowdfunding can have non-monetary benefits.

Last year, the Miami Herald reported on the crowdfunding efforts of Commonwealth Woman Entrepreneur of the Year Valrie Grant of GeoTechVision Enterprises and fellow entrepreneur Cecile Watson, the founder of pitchandchoose.com, a Caribbean-focused crowdfunding platform.

The duo are pushing another crowdfunding venture called FundRiseHER. Its goal was to raise US$1 million to benefit 50 women entrepreneurs from at least ten Caribbean countries.

Grant was reported as saying that FundRiseHER was not only an opportunity to elevate women, but also to show that Internet fundraising can work in a region where traditional financing remains difficult following the 2008 global financial crisis.

Watson, a Barbadian based in Jamaica, pointed to a World Bank report, Crowdfunding’s Potential For The Developing World, which predicted that crowdfunding would be worth US$93 billion by 2025. It projected that about US$11 billion of this would be from Latin America and the Caribbean. (SC)

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