Crowdfunding occurs when individuals come together to pool their money to fund a common goal. It has been a popular means of grass roots financing in Europe for several years, but really started gaining attention in the U.S. when the Jobs Act of 2012 was signed into law last April by President Obama.
Actually, the crowdfunding idea is not really new, but has been around at least since the 19th century, according to Gene Wright of Northstar Consulting in Atlanta.
“The example I use in my presentations is that of Joseph Pulitzer, who used crowdfunding in 1885 to raise $102,000 to finish construction of the pedestal for the Statue of Liberty,” Wright said. “The U.S. government ran out of money to finish the project and Pulitzer was able to raise the money through his newspaper and thousands of people contributing a dollar or less.”
Wright, a Carrollton native, will bring his “Crowdfunding Made Easy” lunch presentation here from 11:30 a.m. to 1 p.m., Wednesday, Feb. 20, at the Burson Center, 500 Old Bremen Road, Carrollton. Registration is required for lunch, with a cost of $10 to Carroll County Chamber of Commerce members and $15 to non-members.
Registration can be done online at www.carroll-ga.org, or by calling 770-832-2446.
“We’re excited that Mr. Wright will be providing this training here in Carrollton,” said Donna Lackey, vice president of Business Development and Community Relations for Carroll Tomorrow and director of the Burson Center. “Crowdfunding is going to change the landscape for small business investment and will open the door for businesses that are having a hard time getting financing. Burson Center is always looking for ways to help small businesses move forward. This program falls right in with the Burson model.”
Wright said several factors have come together in recent times to boost crowdfunding’s popularity.
“What really enabled this was the Internet, where people can easily find a worldwide audience to fund projects,” he said.
The Jobs Act of 2012 was another major influence.
“The Jobs Act lifts the ban on how businesses can solicit or advertise for investment capital,” Wright said. “Previous law prohibited private businesses from advertising for investors. High growth, well-deserved businesses often spent months attempting to raise money to fund growth through a complex, inefficient and costly process in which they could introduce their business only to accredited investors.”
Wright said the Jobs Act is accelerating entrepreneur spirit and small businesses are finding creative ways to “tap the crowd” to fund businesses and create more jobs.
Another major factor which has driven interest in crowdfunding is that many small businesses can’t get financing from banks, because the banks aren’t lending.
“Banks are in a tough situation, caused by the 2008 bank crisis,” Wright said. “We see well-deserving businesses that can’t get access to bank funds. I get referred to small business clients many times by banks who can’t lend them money.”
Wright said the small community banks, the ones who in the past have been most helpful to small businesses, are the ones that have failed.
“The number of community banks in Georgia went from 423 in 1994 to 232 last year,” he said. “The big problem is that the ones left standing are not in the best of shape and are trying to work their way out. Some have the money to lend, but are not lending it because they’re handcuffed by regulations.”
Wright said a lot of thought in this new form of financing is being put into investor protection.
“Our clients who start crowdfunding disclose their financials and do a ‘day in the company’ report for prospective investors,” he said. “We invite conference calls for people to get to know the business. What we find is that most donations and money raised come from customers who already know the business. They are people who are established in the community and want to support the business.”
Wright said most of his customers already have their “crowds,” who are often their customers or suppliers.
He said although crowdfunding is gaining in popularity, many small business owners still don’t understand how they might benefit from it. That’s why he’s conducting his series of lunch presentations and seminars.
Wright was born at Grady Memorial Hospital in Atlanta and grew up in Carrollton. He graduated from Carrollton High School in 1968 and West Georgia College in 1972, with a bachelor of business administration degree, with a double major in marketing and business management.
His first work experience was with Anderson Consulting, where he worked in a global retailing consumer products practice.
“I founded Northstar Consulting in 2000 in Chicago, where I was working at the time,” Wright said. “I relocated the business to Atlanta three years ago to be closer to my family and grandkids.”
More information on Northstar Consulting can be found at the website, www.nstarconsulting.biz.
The Burson Center is a business incubator and resource center for small businesses. Since opening in 2006, it has hosted 97 businesses, created 345 jobs and more than $18 million in private equity investments. The center has held more than 1,300 seminars and programs, attended by more than 18,000 visitors.