EQUITY CROWDFUNDING AND THE BLACK COMMUNITY
Try listing the essentials of a business. Or do a quick search on the internet and see what the major determinants of the success of a business are. No doubt, you’d find such terms as funding, capital, and finance. All translating to a singular term- MONEY. No business can survive without it.
Big businesses required money to get started. Companies become successful because private investors and loans from banks adequately funded them. It is, however, unfortunate that many black businesses fail for lack of funding. A report by Forbes stated that black-owned firms typically face greater challenges in securing capital than their white-owned counterparts.
Even though black-owned businesses are the least likely to get funding, we know from the examples such as BET, Zoox and Carol’s Daughter that they have the potential to do just as great as any other business out there. Hence, we must find a way to ensure our businesses get the desired funding. But with the bias of the banking sector and the limited number of private investors, what options are available to us?
EQUITY CROWDFUNDING TO THE RESCUE
Equity crowdfunding refers to raising money from “THE CROWD” (or the public). In exchange for the relatively small amounts of cash, investors get a slice of equity or ownership in the business venture. In the United States, Equity Crowdfunding is subject to the approval of the Financial Industry Regulatory Authority (FINRA) and regulated by the Security in Exchange Commission (SEC).
Crowdfunding helps entrepreneurs raise hundreds of thousands or millions of dollars from anyone with money who wants to invest. At this time (July 2020), entrepreneurs can raise up to $1,070,000 via crowdfunding.
WHY BLACK ENTREPRENEURS SHOULD CROWDFUND
Fatima Dicko, Founder & CEO of JetPack, pitched almost 100 venture capitalists (VCs) during the early days of her business. She received NO after NO after NO from traditional investors.
When she raised $250,000 from 800 individuals on an equity crowdfunding platform and her initial prototype gained traction, she was able to raise $1.5 million from a VC. By raising a small amount of funding, entrepreneurs are able to attract a team that can help the business complete a prototype, market, and grow. Dicko admits that it’s hard for entrepreneurs to attract quality team members if they have to work for free. It’s also harder to get these individuals (who are not being paid) to work on the entrepreneur’s time schedule.
As more black founders turn to equity crowdfunding, they can grow stronger businesses. The best option for many black business owners is raising money through the crowd
WHY EVERYDAY BLACK PEOPLE SHOULD CROWDFUND
Here’s a real life example of the success of crowdfunding. Oculus VR, the American company specializing in virtual reality hardware and software products, was funded using crowdfunding. In 2012, founder Palmer Luckey launched a Kickstarter campaign to raise money to make virtual reality headsets designed for video gaming available to developers. The campaign crowdfunded $2.4 million, ten times the original goal of $250,000. In March 2014, Facebook, Inc. (FB) acquired Oculus VR for $2.3 billion in cash and stock. (Because this was done with NON-EQUITY crowdfunding, the initial crowd lost out. Backers who funded the standard $300 headset — the ones who purchased an actual headset rather than, for instance, the $20 t-shirt — would’ve made about $20,000 on their initial backing).
Of course the Oculus VR story is a unicorn but imagine if the Black community had a few successes like this. Imagine if we had an entire platform of black-owned businesses that showcased the most innovative and scalable opportunities in technology, healthcare, beauty, manufacturing, geriatric services, and more. Imagine if we, as a community of people, funded these businesses and could participate in the upside potential of these enterprises. Our families could close the wealth gap and our people would benefit tremendously.
BLACK AMERICA’S EQUITY CROWDFUNDING SOLUTION: THE 10K PROJECT ™
In the absence of loans from banks and traditional investors, a crowdfunding venture dedicated solely to the black community may well be the next best thing. A venture where we — the people — earn returns and profits from funding our own companies. That’s what THE 10K PROJECT ™ is all about.
The 10K Project™ is a community of black investors who fund innovative black-owned businesses for as low as $100. If 10,000 investors funded a company with just $100 each, we could raise $1 million for a business. Thus, we can fund our own companies, create our own jobs, profit from our own innovations, and help close the wealth gap. To learn more, visit www.the10kproject.com.
Joining us could be the most important step you take this year as a member of the black community. Visit us at www.the10kproject.com and become a member, let’s affect the changes you want to see in your life and the black community at large.
