By A Cecile Watson
A Cecile Watson is the founder of pitchandchoose.com. She is a former senior regional banker, an international speaker, a certified financial education instructor and the Women’s Entrepreneurship Day Ambassador Regional Leader for the Caribbean. Find her on Linked in, or contact her at cecile@befinanciallyempowered.com
In parts I and 2 of this article, I introduced crowdfunding, shared how it worked and I also identified some of the key enablers to get it working in the Caribbean. I trust by now you have sufficient appreciation of the impact of crowdfunding and that you are therefore motivated to learn more, contribute to a campaign or to start one of your own. If not, perhaps this segment which completes the account about the power of crowdfunding to be a game changer for Caribbean economies will help you make the transition to an early adopter.
When I started researching crowdfunding I was quickly sold on the concept as I saw its power to democratize capital deployment to entrepreneurs and especially to early stage startups who have limited funding options. My environmental scan of the Caribbean revealed that most of the islands were faced with highly leveraged governments, stagnant economies, growing unemployment, declining physical and social infrastructure, declining corporate sponsorships and growing reduction in funding from multilateral donor agencies. I therefore knew that as a region we needed to act decisively to breakout of the path of decline that would undoubtedly retard our progress to building wealth. And I didn’t believe that we had to wait for it to be top down. We need engagement and we need it fast and those of us positioned to make a difference needed to be acting decisively to do so.
I aligned myself with the movements that were supporting the growth of entrepreneurship as a priority agenda. And I became a strong advocate of building the supporting ecosystem so that our entrepreneurs can play on the world stage, undergirded by the use of technology to grow and scale into world class countries. I believe that this is not only possible, but that it’s also ours to grasp. So I founded Pitch and Choose as one of those enablers, and with the goal to ultimately support Caribbean entrepreneurs to leverage all models of crowdfunding to get access to capital.
How crowdfunding contributes to the growth of economies
Crowdfunding currently provides us with the facility to pool contributions from around the globe in support of charitable endeavours which can ultimately lead to an upgrade of our social and physical infrastructure. That means inflows of new capital into our economies. And it also becomes the catalyst for renewed relationships with our diaspora who we know harbour special feelings for and crave closer bonds with their birth countries.
However crowdfunding also provides access to capital for entrepreneurs. Deal Index in its July 2015 Democratising Finance report introduces its executive summary with its key finding: “Private investment is moving online.” It also noted that “alternative finance is drawing more established issuers.” And these are the trends we must embrace to realize the potential of alternative finance to change the wealth creation prospects for our island states.
Most entrepreneurs in the Caribbean are not able to get their businesses out of their heads, nor off the drawing board because they get stuck thinking about how to finance their dream. No personal wealth! No track record or collateral to approach traditional lenders! No access to the few wealthy investors! Access to capital is challenging. Those who break through do it by the sweat of their brow, some luck, and oftentimes at the cost of their health, well-being and relationships. Crowdfunding however can broaden the funding options for entrepreneurs by opening the way for a large pool of connected investors from around the globe to sow into new ventures and innovations right here in the Caribbean.
Crowdfunding Capital released a study in 2013 which solidly points to the economic impact of crowdfunding for entrepreneurs. The research confirmed that crowdfunding creates jobs … 39% of firms hired on average as many as 2.2 employees. The crowdfunding campaigns were also noted to have raised the visibility of companies in their markets. Post-campaign revenue increases were also reported, with quarterly revenue increases of up to 24% for donations-based and rewards-based campaigns whereas equity crowdfunding lead to as much as a 351% increase in annual revenues. The capital injections were shown to enable the entrepreneurs to accelerate their growth and many of the companies were also able to raise follow on financing. I already shared the expectation of the economic growth of crowdfunding by 2020 when it is expected to annually contribute over US$500 billion in funding, generate over US$3.2 trillion in economic value and create over 2.2 million new jobs. So the power of crowdfunding for entrepreneurs is huge and growing, and it is delivering strong economic impact elsewhere in the world. So why not also here in the Caribbean?
It however bears saying that crowdfunding is not easy business. It is work. And it works when you work it. It requires the time to build the community, connect with them and engage them with a compelling story of what you are doing and why it matters. All this work should start well in advance of launching a campaign. Yes, some campaign creators get lucky with causes that go viral and the awareness leads to more inflows that seal the success of their campaign. But that is the exception. A crowdfunding campaign is an investment of time and the more complex types of funding – lending and equity – require more due diligence because of their higher risk profiles. However more projects can still get funded because the higher risk of early stage ventures can be shared over many more persons, all of whom are individually less exposed.
It is estimated that at least 43% of all campaigns are successful, meaning that they meet or exceed their funding goal. That may actually be better than the success rate of getting the traditional forms of financing. It seems to me therefore that with those odds, we will be well served to start building our capacity (know-how, will, facilitating regulatory environment) to crowdfund, so as to provide new avenues for our entrepreneurs to get funding to grow and scale their businesses. With that we will be preparing the way to see job creation, the growth of a new breed of investors and world class innovation coming from the Caribbean. And ultimately through entrepreneurship, our economies will grow and we may even reverse the unfavourable trend that is entrenching economic stagnation.
FundRiseHER – Proof of crowdfunding concept for Commonwealth
The crowdfunding experience in the Caribbean will get a fillip in July 2016, when we will formally launch FundRiseHER a crowdfunded grant that is positioned to assess the proof of concept of crowdfunding in the Commonwealth. Powered by pitchandchoose.com and endorsed by the Commonwealth, this grant programme is being launched as the flagship initiative for Jamaica born and Guyana resident, entrepreneur Valrie Grant of GeotechVision, who was named Commonwealth Business Woman Ambassador in 2015. The program is a 1 -10 – 50 initiative as it is targeting to raise US$1 million from rewards-based crowdfunding campaigns launched in 10 Caribbean countries/territories for the benefit of 50 women entrepreneurs. Two fundamental components of its design are to: 1) have entrepreneurs supporting entrepreneurs by donating the rewards that will be the benefit for contributions made; and 2) invite corporate entities to incentivise the achievement of campaign targets by providing matching cash contributions. The thrust is to stimulate our economies through fostering the growth of entrepreneurship and grantees will have the added benefit of tapping into the resource networks of the Commonwealth.
When our entrepreneurs are successful, our economies will grow and it will redound to the benefit of all who live and work in our countries.
The bottom line is the extremely favourable economic stimulation prospects should have already elevated crowdfunding to the top of the regional agenda of policymakers and legislators. If not now, when? Digital investing is growing and in less than ten years it will be mainstream. That’s my prediction. Technology has enabled us to get here, and as our millennials emerge as the new decision makers, so too will their economic support of innovations that are technology and digital media dependent. We’re experiencing it already. So we in the Caribbean are currently late adopters. But more and more technology and digital media is levelling the playing field for our innovators, and like the rest of the well-educated world, we too have the opportunity to leverage its use for our benefit. Given the state of our economies, this needs to be on the front burner. What is clear is that if we are seeking economic growth, we cannot afford to ignore the opportunities that crowdfunding avails us through its power to provide access to capital for our entrepreneurs.
