Equity Crowdfunding is a Gateway To Reconstruct Socioeconomic Conditions in America
The 2018–2019 Federal government shutdown revealed that 80% of Americans were teetering on the brink, having to live paycheck to paycheck. Now unfortunately, the situation is much bleaker, with over 44 million citizens filing for unemployment amidst the pandemic decimated economy. However, financial opportunities belong to the everyday people and that’s where equity crowdfunding steps up to the plate.
Catering to 300 million non-accredited investors who are typically excluded from Wall Street opportunities in America, equity crowdfunding offers tangible access to previously unattainable ventures, like owning a slice of a startup, or securing startup funding (especially for minorities).
Address and alleviate unemployment
Stagnant wages have been an issue for decades, but now we’re also grappling with the added pressure of mass unemployment to boot. The economic fallout has been particularly hard on small businesses, which is a prime concern, considering that young businesses drive America’s productivity, growth and job creation. Equity crowdfunding is perfectly positioned to assist small businesses as it is a “proven jobs engine,” according to Sherwood Neiss of Crowdfund Capital Advisors. In fact, successful crowdfunding raises can create and support on average up to 54 direct and indirect jobs.
Community driven equity crowdfunding programs like the one we sponsor, #KeepTheLightOn, have sprung up to address small business funding needs. However, a flood of new prospects are expected since receiving the nod from the SEC to increase funding caps to $5M from $1.07M. Equity crowdfunding will continue to play a crucial role in funding the unfunded and will likely be heavily leaned on by small businesses without proper access to PPP.
Shrink the Grand Canyon sized wealth gap
The US wealth concentration is mirroring the 1920s and the financial elite own the lion’s share of assets, like stocks and bonds. During the last recession in 2008, the ‘burst’ of the housing bubble benefited mostly the rich, while the poor and middle class are still struggling to regain the ground that they lost. This recession devastated many Americans, but it also sparked tangible hope with the emergence of the JOBS Act, specifically the regulation crowdfunding legislation.
Since the Great Recession, equity crowdfunding has hit its stride, by pumping nearly $1 billion into local economies and shows no signs of slowing down. This is excellent timing for the coronavirus ravaged economy, because it connects a more diverse group of founders, companies and ideas, with tangible money sources. The ripple effects could change small businesses, the economy and social classes forever, because diversity drives innovation. Founders who are typically shut out of the elitist enclaves of venture capitalism now have real opportunity through equity crowdfunding to fund their businesses, support their communities and foster economic recovery.
For non-entrepreneurs, crowdfunding is an opportunity to invest in your community and own equity in a company while it’s still young and affordable. After investing, it’s normal to start telling everyone that you invested because of the pride and how much you like it. Each coffee ordered or sandwich eaten for example, puts money back into your pocket, as well as into your community. This is a significant first step on the road to building generational wealth and bolstering diverse communities.
Implement meaningful diversity
Accessing funding and securing equity in young companies are powerful methods of building generational wealth and establishing a solid financial foundation. It’s about time that diverse entrepreneurs and investors got a seat at this particular table. Typically shut out from venture capital money and oftentimes stuck in the Valley of Death, diverse founders have had much more success in the crowdfunding arena. It’s good business, because ethnically diverse teams outperform homogeneity by 33% in profitability and that’s how the economy can have a better shot at recovery. We are in need of fresh ideas and creative founders now more than ever, as we brave our new world trajectory.
While PPP money wasn’t initially effectively distributed to small businesses, especially those with diverse entrepreneurs, that bias is not an issue in the equity crowdfunding arena. In fact, women-only and minority-only founders enjoy respective success rates of 87.5% and 46%, compared to men-only founders who clocked in at the lowest rate of 41%. These changes will likely have a profoundly positive ripple effect on the underperforming economy. More Americans can have opportunities to climb social ladders and have brighter futures: college, homeownership, self-employment, life without poverty, a simple savings account and so much more. The future looks more comfortable than ever, by fostering financial dignity, innovation and championing diverse ideas.
Enduring financial structures only work for certain financial classes, and the rest are left out in the cold. Equity crowdfunding flips this dynamic on its head because it offers diverse founders and investors a shot at tangible financial possibilities. Getting money into the hands of underfunded founders with creative ideas means more jobs in their communities, an opportunity to shrink the wealth gap, and a real way to send the elevator back down. Our world has traditionally been shaped by 98% of venture capital money funnelled directly to white male founders — how will the business landscape morph with diverse founders and ideas receiving funding from crowdfunding now? Only time will tell, but being that time waits for no one, my team and I stand ready to help all people, especially minority businesses, take the lead in a rapidly changing world.