Crowd Funding Advocacy Briefing Note: Five Reasons Why CATAAlliance is Advancing the Campaign
August 2, 2013

CF (Crowd Funding) is an acceleration of social interaction. It's acceleration of efficiency in fundraising in the market both on the capital side and on the structural side.

Chance Barnett outlined the following five benefits that entrepreneurs of all types can realize from crowd funding:

1. Crowd funding can validate an existing prototype that's working. "This is where it fits as a place in the investment ecosystem or the life cycle of a business," Barnett said. "A small business that has great customers but for some reason not enough cash on hand to want a loan can use it. The community can come in and fund that small business to help it buy the additional inventory it needs. There will be a large market and debt based investment in crowd funding."

2. Big brands will use it as a means of getting capital. "You don't have to be a small business to do this," Barnett said. Big brands, for example, might want to use crowd funding to pre-sell some of their products. "They could also capitalize either their own initiatives or partner initiatives using this more donation model of crowd funding."

3. Crowd funding will enable a new set of relationships to form around companies."Crowd funding is inherently social," Barnett said. "It is a shortcut to getting customers and merging that with the process of financing or pre-selling what you're doing. That's a shift in the way business has been done."

Financing a company and building a brand might soon become one and the same, believes Barnett. "In my utopian long-term ideal, we're starting to see a new set of relationships form around companies, whether they're corporations or nonprofits, where people are able to align around that company and contribute or support," he explained. "Whether it's through money, time or talent, they choose to be a part of it. That blurs the line between investor and participant or employee. If I give a company — a brand that I love — $500 or $1,000, I become a very small potential investor. But I'm probably going to do that more often because I really love that brand and the team. There's something that I really identify with personally and I want to contribute more than just get a return on that money."

4. Crowd funding will enable the birth of new small-business investments. "What we're seeing is technology, the social web and the right economic time creating this new marketplace of early-stage investing online," Barnett explained. "There's already great angels, and angels can be complemented by capitalization from the crowd. But you're also going to see a birth of a new small business investment world in the capital market. I think the public and our regulators will start to develop an appetite when they witness the economic development potential that this has."

5. Ultimately, crowd funding leads to job creation from the ground up. Job creation isn't about transferring workers from one position to another -- it's about creating jobs that didn't exist. "If you can find someone who has been out of work starting a business, or someone who is going to hire veterans that have been out of work, you are starting to move the needle potentially to get people back in the workforce," Barnett explained.

"I think what most people are most excited about — is that people understand that access to capital is important from a development standpoint," Barnett added. "If you look at it from a macro perspective, what we've had for a long time is a top-down effort to provide solutions. Crowd funding is essentially a bottom-up approach that says, 'We don't need centralization. We need platforms to allow people to aggregate around the things that might be working and help fund that development.'"
 

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