New IS technology allows small business owners to compete on a level playing field, "flattening the world" into a global village. Besides the barriers mentioned in the blog, capitalization during the startup and growth phases also pose a challenge to entrepreneurs and home-based businesses. Without adequate capital, a small business can't grow or take advantage of increased demand for its products.
New crowdfunding websites offer a nontraditional approach to capitalization. Instead of liquidating personal assets and savings, borrowing from banks or family and friends, or accessing government backed lending, an entrepreneur can fund a project or venture by raising monetary contributions from a large number of people, typically via the internet.
There are three main types of crowdfunding platforms: reward, debt and equity investment. (Outlaw, 2013) With rewards crowdfunding, entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity/shares. Popular rewards crowdfunding sites include Indiegogo, RocketHub, Kickstarter, and Peerbackers.
On the other hand, equity crowdfunding allows people to become shareholders in a company. There are already thousands of companies online seeking and raising investment for their businesses online at sites like Crowdfunder.com and Circle Up. (Barnett, 2014)
In the U.S., debt-based crowdfunding from non-banks became more prominent as a form of crowdfunding in 2012, with the launch of the Lending Club, which had advanced more than $500 million in loans via its website by April 2012. Prospective borrowers of the Lending Club first submit their requirements, and are then matched with pools of investors who are willing to accept the credit terms. Platforms such as the Lending Club gained popularity, as banks increased interest rates or reduced their level of lending activity. Another credit-based platform, Prosper.com, was established in 2006 and had funded nearly US$325 million in personal loans by April 2012.
The crowdfunding industry has grown exponentially over the last five years, helping people raise billions in funding for everything from donations for personal art projects to equity financing for businesses.
According to the Crowdfunding Industry Report by Massolution, in 2012 there was $2.7 Billion raised online via crowdfunding. In 2013 an estimated $5.1 Billion was crowdfunded online. In 2014 a host of different crowdfunding sites are further accelerating the rapid industry growth. (Barnett, 2014)
While the new technologies mentioned in the blog and in our comment enable small businesses to get started and grow, they are simply tools. A successful small business must still have a sound business model, a marketing plan that differentiates the business from its many competitors, and be led by strong managers.
References:
Barnett, C. (29 August 2014) Crowdfunding sites in 2014. Forbes. Retrieved from http://www.forbes.com/sites/chancebarnett/2014/08/29/crowdfunding-sites-in-2014/2/
Outlaw, S. (10 October 2013). 10 top crowdfunding websites. Entrepreneur. Retrieved from http://www.entrepreneur.com/article/228534
Submitted by: Marilyn Antoine, Dave Crane, and "Christine" Yuen Wong
Hi guys, Marilyn, Yuen and I (David) posted comments to your blog previously, but the comments didn't appear. Please let us know when the comments will be posted. Sincerely, David Crane
New IS technology allows small business owners to compete on a level playing field, "flattening the world" into a global village. Besides the barriers mentioned in the blog, capitalization during the startup and growth phases also pose a challenge to entrepreneurs and home-based businesses. Without adequate capital, a small business can't grow or take advantage of increased demand for its products.
ReplyDeleteNew crowdfunding websites offer a nontraditional approach to capitalization. Instead of liquidating personal assets and savings, borrowing from banks or family and friends, or accessing government backed lending, an entrepreneur can fund a project or venture by raising monetary contributions from a large number of people, typically via the internet.
There are three main types of crowdfunding platforms: reward, debt and equity investment. (Outlaw, 2013) With rewards crowdfunding, entrepreneurs pre-sell a product or service to launch a business concept without incurring debt or sacrificing equity/shares. Popular rewards crowdfunding sites include Indiegogo, RocketHub, Kickstarter, and Peerbackers.
On the other hand, equity crowdfunding allows people to become shareholders in a company. There are already thousands of companies online seeking and raising investment for their businesses online at sites like Crowdfunder.com and Circle Up.
(Barnett, 2014)
In the U.S., debt-based crowdfunding from non-banks became more prominent as a form of crowdfunding in 2012, with the launch of the Lending Club, which had advanced more than $500 million in loans via its website by April 2012. Prospective borrowers of the Lending Club first submit their requirements, and are then matched with pools of investors who are willing to accept the credit terms. Platforms such as the Lending Club gained popularity, as banks increased interest rates or reduced their level of lending activity. Another credit-based platform, Prosper.com, was established in 2006 and had funded nearly US$325 million in personal loans by April 2012.
The crowdfunding industry has grown exponentially over the last five years, helping people raise billions in funding for everything from donations for personal art projects to equity financing for businesses.
According to the Crowdfunding Industry Report by Massolution, in 2012 there was $2.7 Billion raised online via crowdfunding. In 2013 an estimated $5.1 Billion was crowdfunded online. In 2014 a host of different crowdfunding sites are further accelerating the rapid industry growth. (Barnett, 2014)
While the new technologies mentioned in the blog and in our comment enable small businesses to get started and grow, they are simply tools. A successful small business must still have a sound business model, a marketing plan that differentiates the business from its many competitors, and be led by strong managers.
References:
Barnett, C. (29 August 2014) Crowdfunding sites in 2014. Forbes. Retrieved from http://www.forbes.com/sites/chancebarnett/2014/08/29/crowdfunding-sites-in-2014/2/
Outlaw, S. (10 October 2013). 10 top crowdfunding websites. Entrepreneur. Retrieved from http://www.entrepreneur.com/article/228534
Submitted by: Marilyn Antoine, Dave Crane, and "Christine" Yuen Wong
Hi guys,
ReplyDeleteMarilyn, Yuen and I (David) posted comments to your blog previously, but the comments didn't appear. Please let us know when the comments will be posted.
Sincerely,
David Crane