Crowdfunding and Community Building
By David Lee, Springfield Advocate & Co-Managing Partner, Public Market
There’s no doubt that 2020 has been a year none of us will forget. From wild stock market runs, business closures, and overall having our lives turned upside down, there’s so much that has changed because of Covid-19. The reality though, is we have probably just seen the beginning of the ramifications of the decisions, legislation, lockdowns, etc, of 2020. Consumer spending habits, the work place, and how people choose to spend their time may never be the same. In fact, the pandemic may have accelerated shifts that were already in motion, and totally upended some others.
Ready to run through that brick wall of 2020 and into 2021 yet? Times were tough this past year, but it was the community and people that got everyone through. We can choose to sit in our sorrows, or look toward the future and determine what we can impact (and if you’re anything like me, how we can make a difference).
I first learned about equity crowdfunding in 2019 at a DSI Momentum on Main Street panel I was hosting. Momentum on Main Street, the volunteer group I helped form in 2018 for DSI, aimed to attract that next wave of property developers, investors, and entrepreneurs to our Downtown, all to increase the economic vitality and, in reality, increase the “cool factor”. New blood is always needed to keep an area fresh and thriving, and our six-part meeting series was aimed to knock out the hurdles for this potential crowd, and to get some “momentum” going to help create some buzz that would eventually turn into filled storefronts and occupied buildings. The concept mirrored the “Small Scale Development” movement seen across the country and championed by groups like the Incremental Development Alliance. The jist of this movement is that one mega project won’t save a city or Downtown, it’s the density that’s created from a wave of small, completed projects. An example of a “small scale development” could be the local baker buying a building and starting his shop and living above it. It’s the compound interest of stacking small wins over time that makes the true difference.
Crowdfunding intrigued me right away. Access to capital is one of the toughest challenges new businesses face. There isn’t a long-standing history of income. Many sectors are classified as “high-failure”. It can be tough to get a loan without a big money suitor at your side.
Crowdfunding was established through the JOBS act and was passed by Congress into law in 2016, so it’s still relatively new. Many know it’s cousin, donation-based crowdfunding, such as Kickstarter or anything else where you are donating your money to a cause. There is no ownership involved.
Equity-based Crowdfunding is quite different, and seems to just be scratching the surface of it’s potential. In equity crowdfunding, companies are giving up perks and ownership in exchange for capital. It quickly has seen successes in the tech and startup spaces, but one of the most documented successes has been in the brewing space, a company called Brewdog. They capitalized on Crowdfunding’s ability of getting both large investments and also an extensive network of small investors, which is quite different than raising capital in the past.
Pre-Crowdfunding, public offerings happened, but because of their difficulty and financial barriers to entry, they were reserved for large projects and high net worth individuals. The extensive legal and accounting work, coupled with the fact you couldn’t publicly advertise, made the private placements and offerings usually reserved for Board Rooms and Country Clubs. Now with Crowdfunding, entry investments can be made as low as $100 (depending on the offering), and are available to the entire public, meaning no income requirements and no exclusivity: everyone can get in on the action.
There has long been a desire to support local and shop local. These cries have only grown louder in recent years, with the large corporations (hello, Amazon) gobbling up more and more of the local commerce, sales dollars, and withering sales tax revenues. This phenomenon isn’t going away, and communities are realizing that they need to support their own to keep the sense of community that once was a given when going anywhere in town to shop. Also, many midwestern and smaller communities throughout the country are seeing the benefit of revitalizing their cities; whether to attract and retain top talent, or recruit new businesses to the area. Once again, the focus has turned inward for the Heartland to survive the pull of the coasts and large Metropolitan areas.
This is where I believe Crowdfunding provides another interesting outlet. The ability to not only support and shop local, but to INVEST local, becomes really intriguing. We’ve been saying it since day one of the Public Market, but we truly believe this could open up a completely new frontier of development and community building. The ability for EVERYONE to support a local project that they would like to see happen, and then BENEFIT from it FINANCIALLY, is unprecedented. What if you INVESTED in that business that you frequent? What if you earn rewards and see financial returns (dependent on the projects scope and offering, of course) from the very building, business, brewery, etc, that you enjoy?
Springfield has struggled to attract that mega project that will save Downtown and our city. Let’s face it, a project like that has probably never existed anyways. It’s the little wins that will add up to boost our psyche and rejuvenate our community. With Crowdfunding, there are opportunities that simply weren’t available before to INVEST LOCAL. Please continue to support and shop local. But also, listen to our pitch. Look at other cities that have amenities that we wish we had here. We can have these things too. It might take a little creativity here, but together, we can create whatever we want in our city. Crowdfunding is a vehicle to put your money where your mouth is. Oh, and the possibility to have a rooftop drink at “your place”. Let’s get creative Springfield. We’ve done a lot of work to provide this opportunity and create a shift in how we think about development. Come be a part of the change. Go to Publicmarket to see our offering, invest, and be a part of the Springfield you want to see.