The Future of Post-Pandemic Entrepreneurship Resides In The Burgeoning Equity Crowdfunding Space
The financial industry has been in flux since the pandemic shuttered small businesses and pushed millions of Americans into unemployment, during the spring of 2020. This instability has threatened venture capital’s dominance and shifted focus to broader and more benevolent sources of funding, such as equity crowdfunding.
Investors in this economy can’t necessarily afford to roll the dice on more expensive unicorns, which should dial down the so-called ‘disruption’, allowing creative entrepreneurs and truly radical innovations a place in the spotlight.
Crowdfunding offers an inclusive environment where entrepreneurs are judged by the merit of their ideas, as opposed to their age, ethnicity or social connections. This will be paramount to getting small businesses off the ground and people back to work in post-pandemic America.
A wider path to success
Success in the equity crowdfunding space is more formulaic and predictable than other mainstream funding methods like venture capital. Save for a few exceptions, trying to secure startup VC funding is akin to winning the lottery. Most founders lack social capital and can’t bank on securing money in a cliquey industry plagued by nepotism and groupthink.
Conversely, the crowdfunding ecosystem is structured to be groupthink-proof. Generally, a bad idea simply won’t gain traction or support, if the crowd isn’t convinced of its merit. Duping a handful of angel investors is much easier than fooling a legion of everyday people looking to invest their more modest, hard earned dollars. The crowdfunding space is more egalitarian, has reported no fraud to date, and is more consumer-centric. Considering consumer spending accounts for 70% of the U.S. GDP — that’s rather important context when looking for opportunities in the post-pandemic economy.
Radical Innovation > Disruption
Venture capitalist Marc Andreesen was spot on when he said that “software is eating the world.” This focus has resulted in a tired formula of startups challenging bigger tech companies through new software applications and calling it disruption. Radical innovation is a departure from this humdrum model, as it prioritizes the “creation of new knowledge and the commercialization of completely novel ideas or products,” according to 40 years of research conducted by Harvard Business Review.
This pandemic has forced a collective awakening to the ill-effects and dangerous consequences of big tech, and the market is hungry for radical innovation. Fresh ideas and niche products are poised to change the world — and they tend to gain more traction over in the crowdfunding space — which highly rewards ingenuity, the creative economy, and diversity of thought.
The financial fallout from this pandemic has increased interest in intrinsically people-oriented innovations that change lives and are impactful for local communities. Crowdfunding taps directly into visionary entrepreneurs across the country who are persuasive, brimming with creativity, and highly motivated to succeed.
Impactful and inclusive of the 99%
Craig Newmark founded Craigslist when he was 42. Arianna Huffington founded Thrive Global when she was 66 years old. Pop culture (and VC) has long peddled the stereotype of the average entrepreneur: some young white guy, fresh out of an Ivy league school (with or without a degree) with a ‘brilliant’ software idea. Yet, we know better that that’s not the entire picture. And while this may be the only group who can expect VC funding and splashy publicity, we also know DAMN well they are not representative of the typical entrepreneur that is truly moving the needle forward.
Data shows that approximately 50% of entrepreneurs are in their 30s, and 32% are over 40. This is a stark departure from the wunderkinds we’re accustomed to seeing in the media, and it’s actually refreshing. According to a report from Entrepreneur, folks over 35 were most likely to achieve success, and the decade from 35–45 was “the perfect recipe for entrepreneurship.” This bodes well for the future of innovation, because age, ethnicity and gender are barriers to entry in VC, but not in the crowdfunding space. In 2020, the average success rate for companies raising money via crowdfunding was 63.7%, compared to only 2% over in venture capital. Demographically, crowdfunding is proving to be more inclusive, reliable and vetted than other funding methods available for entrepreneurs looking to make their business dream a reality.
Until now, the nebulous world of VC has dictated who’s allowed to matter and who is neglected, but crowdfunding is directly challenging that power. The post-pandemic economy can’t afford to ignore the 99% of founders anymore if they want to get Americans back to work. Democratically structured for everyday people to succeed through merit, hindered by fewer blindspots — crowdfunding is changing who gets a seat at the table and what products/services reach the market. This will have a direct effect on American businesses, generational wealth and family legacy. Now that’s radical!
Big Tech Became What It Most Feared
And you’ll see why 1984 won’t be like ‘1984.’