How Crowdfunding Is Creating More Social Enterprises
When I ran a crowdfunding campaign for Kuli Kuli last May we had zero money, no full-time staff and a network that consisted mostly of other broke 20-somethings. And yet, within a day we had raised $22,000. We went on to raise $53,000 from 800 people, most of whom we’d never met.
Prior to our crowdfunding campaign, even my close family and friends didn’t know what I was doing. My own father still couldn’t pronounce the name of the plant that we were trying to make the next big superfood (for reference it’s moringa — MO-ring-GA).
The success of our campaign landed us on the front page of major papers and enticed Whole Foods to pick up our first moringa product, a nutritional bar, before we had even finished manufacturing it. Our email list grew from zero to nearly 2,000 people and our social media flourished.
In essence, Kuli Kuli wouldn’t exist without that crowdfunding campaign. And we’re certainly not the only ones. New crowdfunding platforms are popping up everyday with Kickstarter alone funding more than 60,000 projects.
I’m a strong believer in the power of democratized financing. I believe that if more businesses were created by the crowd, they’d be more likely to succeed and have a positive impact on the world.
By already having hundreds or thousands of customers before they manufacture, many product-focused businesses are finding that crowdfunding puts them on the path to success in a way that a bank loan never could. Along a similar vein, these businesses now have a responsibility to their first “backers” to do something meaningful with that money — making them more likely to conduct their business in a socially responsible manner.
Crowdfunded businesses are also more likely to be run by women or minorities — two demographics that on average receive half as much funding as businesses run by white men. This diversity also contributes to their success, with Kauffmman estimating that women entrepreneurs bring in 20 percent more revenue with 50 percent less money invested. Studies by the Center for Talent Innovation have demonstrated that diversity increases performance.
In essence, crowdfunding produces good businesses that are good for the world.
This is why I’m so excited that recent changes in legislation are making it easier for businesses to crowdfund not just donations but also investments. As of last August, businesses can now publicly advertise that they are raising capital, provided that they only raise capital from high-net worth (accredited) investors.
After successfully raising enough money to do our first manufacturing run and enter into 40 stores in Northern California, Kuli Kuli has decided to do another crowdfunding campaign — this time to raise investment. Starting this week, we’ll be raising $350,000 through a new platform called Agfunder.
Crowdfunding is bringing the people power back into fundraising, proving that even non-traditional entrepreneurs without wealthy networks can still find a way to finance their dreams.