The Rise Of Crowdfunded Businesses & Communities

The advent of investment crowdfunding platforms revolutionized communities across the globe. It bridged the gap between non-accredited investors and people in need of capital to fund innovative ideas for many startups.

Before investment crowdfunding became a common means of raising money, the concept of gathering crowds to ease the financial burden of small businesses, charities, entrepreneurs, and artists was seen as more of a novelty than an established choice. 

Before this current trend began, it was difficult and rare for founders to get the attention of investors. To make connections and access scarce resources like investment capital, someone trustworthy in an influential position with the right interests, like a lead investor, a strategic advisor, or a co-founder with deep industry connections, was needed. This, naturally, was not always easy to find without any history together or internal connections.

The first known equity-based crowdfunding platform for startups was launched as a private beta in June 2009 by Grow VC Group, followed by a full commercial launch in February 2010. This was the beginning of raising capital by offering companies’ securities to potential retail investors to expand and yield more significant funding amounts. 

Several companies like Netcapital and StartEngine later established themselves as reliable equity crowdfunding platforms that helped many startups raise funds and expand their ventures by allowing various accredited and non-accredited individuals to invest in them. These companies allowed virtually anyone the opportunity to grow along with the company they trust, establishing a mutually beneficial relationship.

Pushing the Crowdfunding Scene to the Limelight: Tracking Its Steady Rise 

As the idea of investment crowdfunding platforms became more popular, Fundersclub was one of the innovators that pushed its viability to the spotlight. Co-founders Alex Mittal and Boris Silver knew the potential of investment crowdfunding; that’s why they focused on taking it to the next level by creating opportunities for more people. They came up with a platform wherein people could get the same experience that sites supporting general crowdfunding provided (like Kickstarter and Indiegogo), while becoming a reliable source of money to raise equity-based capital for startups. FundersClub became an excellent option for accredited angel investors, but it wasn’t until 2016 that non-accredited individuals could invest in private businesses via crowdfunding.

Fast-forward to 2021, crowdfunding now takes on flexible forms as it offers a finely-tuned financing opportunity for specific audiences such as the following:

1. Donation-Based Crowdfunding - one of the most popular types of crowdfunding, donations are when individuals create campaigns to help gather financial support for a specific cause—be it to have money to invest in new equipment, fund a new idea, and other concepts that people can fully support. Usually used for personal needs and non-profits through sites like GoFundMe, this does not require anything in exchange and works solely on the goodwill of people who want to see your business/cause succeed.

2. Debt-Based Crowdfunding - as the moniker suggests, this type of crowdfunding works similarly to a loan. Think of the supporters as lenders, so the backing pledged by people will be compensated with additional interest once the project sees its completion.

3. Rewards-Based Crowdfunding - Rewards-based crowdfunding consists of individuals contributing money, goods, or services in return for participation in the project itself later down the line with an expectation that they are receiving rewards from it, such as freebies or early releases at different stages during production.

4. Equity-Based Crowdfunding - one of the perennial choices for businesses, startups can use equity-based crowdfunding to raise capital. In exchange for their support investors earn an equity position in the company, allowing them to benefit from the company’s long-term performance in the event that the business becomes successful.

Exploring the Boom of Crowdfunded Businesses, Websites, and Organizations

Nothing beats the simplicity and versatility of equity crowdfunding today when it comes to allowing businesses everywhere to generate capital while offering equity in return. Here are some of the most successful examples of equity crowdfunded startups:

1. Backstage Capital

One of the best examples of how investment crowdfunding platforms fueled the success of multi-billion dollar companies is the growth of Backstage Capital, which found its way to Republic.co in 2021.

Founder and Managing Partner, Arlan Hamilton, had a mission in mind when she brought Backstage Capital to life - getting investments for underrepresented founders who are women, People of Color, or LGBTQ+. The reason for doing so was the statistics that indicated that less than 10% of venture capital deals went to these founders collectively. 

Backstage Capital is a syndicate that joins forces to invest in a company they believe in. Syndicates allow multiple investors to fund one or more startups providing more initial funding and expanded human resources (network, experience, advice). They mostly offer deal-by-deal opportunities and often facilitate end-to-end processes that include collaboration, presentation, deal-closing, and communication.

Backstage Capital has successfully invested in 160 companies since 2015. It has raised over $5M providing founders the necessary funding to help them expand and be a part of the venture capital ecosystem.

In 2017, Backstage Capital launched an open application for investment in startups they believe in, and more than 1,000 founders applied that year. By 2018 the team had met their goal of sourcing and investing in 100 companies led by founders from underrepresented backgrounds who want to make an impact - a huge milestone!

Through Republic.co, Backstage was able to raise $5 million with the help of 6759 investors through investment-based equity crowdfunding. With this capital, Backstage Capital aims to create a world in which underserved founders have readily accessible capital to build tomorrow's leading companies.

2. PopCom

Similar to Backstage Capital, another innovative startup is PopCom, with an automated retail technology for vending machines and kiosks that allows retailers to engage customers, sell more products, and learn from big data.

They are a forward-thinking company that lives in the now with big plans for AI, computer vision, and robotics to help companies learn more about their customers with automation.

After two successful and oversubscribed Reg-CF campaigns on StartEngine, the company is opening a Reg A+ offering to take its production-ready machines into mass production. Reg A+ Offering is a Securities and Exchange Commission (SEC) regulation that allows public investment in private companies up to $50 million. Like an IPO, this type of offering allows companies to raise capital by offering shares to the general public.

This will allow them to fund additional pilots with major alcohol and cannabis retailers in regulated markets across North America. The vision is to redefine omnichannel strategy for worldwide brands– from Fortune 500 companies to nimble e-commerce entrepreneurs, providing a completely new direct-to-consumer channel backed by unparalleled data and frictionless transactions.

Through StartEngine, they have currently raised over $2 million since they joined the platform and wish to become the largest provider of automated retail sales and marketing operating systems by scaling out the existing software through partnerships and acquisitions. 

3. Firelight Camps

The recent COVID-19 outbreak threw the economy into a worldwide downturn, and the social distancing restrictions plus the impact of the pandemic caused established businesses everywhere to shut off their lights. 

Firelight Camps is a perfect example of how crowdfunding gathers supporters who passionately believe in businesses. With an avid fan base for camping and living life with a bit of adventure, the thoroughly enjoyed activity found a way to reinvent itself into a hassle-free yet thrilling version because of the founder, Robert Frisch.

Starting in 2015, Firelight Camps wanted to introduce glamping (AKA glamorous camping) to nature lovers. This type of camping is hassle-free, luxurious, and is a huge hit amongst avid adventure seekers. Firelight meets the enormous demand for an easy, comfortable way to spend the night outside in nature. They have a proven model with $4M+ in revenue at their pilot locations and are poised for rapid growth.

Through Wefunder, the company raised over $500k in investment crowdfunding with the help of 294 investors. Now more than ever, Americans want to escape to the outdoors after the Covid-19 pandemic—and that isn’t changing any time soon. The glamping industry is projected to grow at 12.5% annually through 2026 to $5B+, and Firelight Camps seem to be poised for success in this growing market.

4. Top Shelf Cookies

Another great example of how investment crowdfunding can propel businesses forward is the success of Top Shelf Cookies, which found its footing in 2014 with a desire to serve top-shelf cookies to the masses.

With a broad selection of unique, delicious cookies, Heather Yunger launched Top Shelf Cookies in 2014. What started as a passion became a calling, and Boston’s craft cookie company was now a reality.

Top Shelf Cookies can now be found all over Boston, from farmers’ markets to breweries - you name it! They've expanded in recent years by securing wholesale accounts and increasing their e-commerce business with the wildly successful Cookie of The Month Subscription Service that was popular previously on Kickstarter. 

They spent nearly six years learning about the process, developing flavors, collecting feedback, and learning about our customers. This helped their online sales grow substantially within six months, along with our corporate gifting and catering. 

By listing their investment on Mainvest, Top Shelf Cookies raised over $100k via revenue share that essentially provides an alternative for investors, where instead of buying company stocks they receive payments at certain intervals. Because of the funding they raised, they successfully launched a brick-and-mortar store to solidify brand recognition and centralize operations.

5. Graze

StartEngine has successfully funded many unique businesses in the past couple of years, and Graze is one such business. This fully autonomous commercial lawn mower company raised over $3 million through Reg A+ offering.

Their mission is simple - reduce labor & fuel costs while lowering the risk of injury.

The company has huge customer traction and signed non-binding commercial contracts executed by customers in the US and around the globe for a total of 335 mowers worth a combined potential value of over $30 million. Along with this, the commercial landscaping market is projected to grow by 15% in the next five years, which is very profitable.

Machine learning and computer vision will allow Graze to map job sites, plan paths for mowing with precision in mind, and avoid obstacles such as trees or people while collecting data on how best to optimize its efficiency. With specialized machine learning, computer vision, and fully electric vehicles, Graze is paving the way for a future of autonomous commercial lawn mowing.

The Bottom Line: Rise Of Crowdfunded Businesses And Communities Along With It 

Technological advancements in the dawn of a digitally-oriented world continue to evolve different facets of society. The crowdsourced funding platforms that helped power the rise of equity crowdfunding are now becoming an accessible alternative to traditional financial institutions. Investment crowdfunding offers a reliable and trustworthy way of providing assistance that is otherwise hard to come by when dealing with banks.

As one-third of the world’s population has access to the internet, it’s no surprise to see crowdfunding platforms fueling innovation and growth in multiple sectors. Equity crowdfunding websites are, therefore, more useful because they allow entrepreneurs access to worldwide audiences who might not otherwise know their work or investment opportunity exists.

Are You Looking for Crowdfunding Sites and Investors to Fund Your Vision? 

Chasing after your dreams as an aspiring entrepreneur is undoubtedly exciting, but it takes more than determination and a leap of faith to reach your goals. Every startup needs enough funding to bring novel ideas to fruition but finding the proper support can be tricky.

In just six weeks, Beanie & Blazer’s Test The Waters program can help you prepare and launch a trial investment crowdfunding campaign. We leverage the best practices from dozens of successful investment crowdfunding efforts and hundreds of investor discovery calls to help creators build investable companies.

Consider subscribing to our newsletter to stay up-to-date on investment crowdfunding, creator mindset and cooperative capitalism.

Beanie & Blazer does not provide investment advice and is not a registered investment advisor or broker-dealer. Investing in startups is risky, never invest more than you’re willing to lose.

To read the full disclaimer, click here (https://beanieandblazer.com/disclaimer/)

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