The “Power of the Crowd” in times of pandemic
It might take some time before we can say that it’s going to be “business as usual” for many entrepreneurs around the world.
This global pandemic has taken its toll on nearly every facet of our lives, including the very means we earn a living from.
A reality we all have to face
As people avoid engaging in public activities in a bid to stop COVID-19 from spreading, small businesses here in the United States are challenged to adapt quickly before it’s too late.
Ajene Watson, CEO of the hybrid accelerator DigitalAMN, acknowledges that the pandemic has changed our ways of living forever.
“We’re staring down the barrel of a major disruption in the lives of ‘everyday people’,” he explained. “The financial and moral/ethical pressures that small business owners face is already weighing heavily on the entrepreneurial psyche. Money is drying up and people are struggling to survive with dignity; many businesses and entire industries are beginning to shutter.“
While we all have yet to assess the full impact of this pandemic in the coming months, businesses in retail and the restaurant sector are already taking major blows this early.
Vincent Petrescu, CEO of the equity crowdfunding platform TruCrowd, Inc., shared that the smaller businesses are hit the earliest and the hardest.
“This is mostly because they do not have the strength (financial, organizational, etc) to fight such crises,” Petrescu noted.
He’s right. Several states and major cities across the United States have already seen stores and restaurants either closing indefinitely or drastically limiting their services.
While big corporations are set to be treated with the biggest bailout in modern history, small businesses are left with few options.
“Small businesses in the US account for 99.7% of all employers and from 2000 to 2017, they were responsible for the creation of more than 65% of new jobs,” Watson explained.
“They are the lifeblood of this country and they are being ignored in favor of Wall Street. They need support, now more than ever – but will only get the appearance of help. Pisses me off!”
How “the crowd” can make a difference
Fortunately, physical social distancing does not affect the power of the crowd when it comes to crowdfunding.
Earlier this month, the CDC Foundation launched its own crowdfunding campaign to raise funds to bolster public health response efforts in addressing the pandemic in the United States and other countries.
This funding will be used to support a wide variety of needs from public health responders, at local, state, national and international level.
Meanwhile, a research team from Columbia University is hoping crowdfunding can help scale its COVID-19 test kits that can detect the virus in asymptomatic people.
For businesses that would require to tide over the loss during the crisis, crowdfunding also offers a viable alternative.
According to Watson, crowdfunding offers entrepreneurs their best shot at securing startup funding as it gives them valuable benefits not found elsewhere: the solidarity and the power of the crowd.
“Businesses, especially a ‘local business’, can get a jumpstart by appealing to the support of their most loyal supporters - their customers. By turning customers into owners, the entrepreneurs can raise capital to kick their companies back into gear and they’d be giving the people in their communities the opportunity to become investors. A real win/win,” he said.
Petrescu also gave his thoughts on how Regulation Crowdfunding works in helping businesses rebound in these challenging times and long after.
“Now, more than ever, small businesses should tap into the power of their customers, followers, friends and families in order to survive. Driven by solidarity and the desire to be part of businesses built around and by the community they live in, they are the most likely to invest and support these companies,” he pointed out.
With the money raised, businesses can, for example, keep paying employees, adapt to new demand by developing their online segment, promote their services and so much more. In addition to capital, going the Equity Crowdfunding route can help companies to gain brand ambassadors, to increase brand awareness, to pre-sale their products and to build a bigger customer base.
“Suddenly, the pain created by social distancing might get somewhat lessened by the 'economic closeness' of the community,” he added.
REG CF is getting bigger and better
Earlier this month, the SEC announced new proposals that would raise the maximum funding cap for REG CF to $5 million. This promises some exciting changes for both issuers and investors.
“The moment couldn’t be more serendipitous!” Watson noted. “With the cap increase, stronger operating companies – outside of pure startups – will look to participate in equity crowdfunding. During and after this global pandemic, businesses will need fresh capital to kick things back into gear. What better way to raise money than from your supporters, while allowing them to create a stronger financial future for themselves… so that they can better weather unpredictable storms such as COVID-19?
Supporting this idea, Petrescu pointed out that such changes will attract bigger investors, will permit higher investments per investor, and will allow more developed companies to raise an amount that is meaningful for them.
Riding out the storm
The current crisis may be tough on many industries, but experts say that equity crowdfunding investors will find worthwhile investment opportunities during and after the crisis.
“One exciting aspect of Reg. CF is that more industries are getting funded,” Watson explained. “This includes restaurants, beverages, consumer goods and much more. These industries have already taken quite a hit from COVID-19; they’re going to need the most financial support to get back on their feet.”
“That said, aside from local businesses, investors should really look to support those companies that emerge from the rubble with products, processes and/or services that address the needs of people during and after COVID-19.”
We are all in this together
As soon as the pandemic started wreaking havoc across the world, groups and companies turned to the power of the crowd to fight the new coronavirus.
From providing protective gears to frontliners, to developing COVID-19 test kits for patients, crowdfunding has shown its ability to deliver even at times like these.
We are just witnessing the early stages of the economic impact of the coronavirus. As we can not predict how this will all turn out, small businesses must explore every available option to raise much-needed capital.
Sometimes, the most viable solution is the most obvious. Small businesses can never go wrong by starting with family, friends and the customers who value what they offer and would be happy to support them.
Upon us is a great challenge that requires a collective effort. TruCrowd, Inc. and TruCrowd Services, LLC., are now preparing something special to help small businesses survive through the coronavirus crisis.
We will be on the lookout for businesses that play an important role in the community. Announcements are to come soon!