Crowdfunding seminar preview: Expert discusses benefits of funding model

Equity crowdfunding not only will help local businesses get more access to capital. It also will help local communities sustain local businesses.

That’s according to Jonathan Sandlund, the owner of thecrowdcafe.com, a leading crowdfunding research and news site who is scheduled to speak Monday at a crowdfunding seminar hosted by Commonwealth Crowdfunding, a local committee working to raise awareness of financing through crowdfunding.

Have you ever wondered why so many small towns are filled with national food franchises, rather than locally owned restaurants?

Sandlund said in an interview that it’s mainly because most investment money comes from out of town, and out-of-town capital seeks less risky investments.

Locals might know about a great local business that enjoys enormous goodwill in the community, he said, but bankers in New York can’t lend money based on that kind of social capital. However, locals can, and crowdfunding platforms will enable them to do that.

For years, businesses seeking investors have been forbidden to solicit funds directly from the public, but the Jumpstart Our Business Startups Act of 2012 changed all that, pending some rulemaking by the U.S. Securities and Exchange Commission. Once the SEC approves the new rules, businesses will be able to conduct equity crowdfunding — selling stock to the general public, not just select investors.

Crowdfunding will give locals with good ideas for businesses easier access to capital, Sandlund said. As it is now, someone who wants to raise seed capital is virtually confined to raising it from his friends and family.

“What if you don’t have wealthy friends or family?” Sandlund asked.

For more about the Commonwealth Crowdfunding seminar, see yesterday’s report on the crowdfunding seminar.

Source: Business First