Is crowdfunding a possible way for economic development agencies to help their local businesses?
Eve Picker replied:
I'm going to provide a slightly different response. As a developer that has completed numerous small public/private projects, I understand first-hand how far economic development agencies have to stretch their dollars. There is never enough to go around. While a pooled fund would be fantastic, it is also a huge amount of work. There might be some smaller steps you can take to integrate crowdfunding into the way you do business. Perhaps you can encourage small businesses/developers to try crowdfunding by offering matching funds? Or technical support to complete their disclosure packet? By doing this you shift the burden of work/risk onto the business/developer. Even better, locals who invest will get a chance to participate in the up side. And that to me seems to be the key.
Michael Sauvante replied:
However, if that were to be done one business at a time it would likely result in the same difficulties that individual small businesses (especially startups) would have. Liquidity (or lack thereof) in such an investment creates resistivity on the part of the investor public.
Instead of helping to use crowdfunding on a one-on-one basis, I believe a better approach is to have those agencies form a pooled fund that can be taken public and have that pooled fund do the investments in those individual companies. That way the companies get the money they need but the investors can have the liquidity of a public company.
See this article I wrote on the topic: How to Increase the Flow of Capital to Small Businesses While Enhancing Liquidity for Investors (SBHCs) 9/6/2016 https://www.linkedin.com/pulse/how-increase-flow-capital-small-businesses-while-michael-sauvante//
Samson Williams replied:
I'd say "Absolutely."
Because the real question is why don't local economic development agencies also have their own FINRA approved crowdfunding portal?
Setting them up isn't very hard and if they would like the CfPA can run it, as part of its non-profit mission.
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