Crowdfunding For Minorities: The Report

Crowdfunding For Minorities: The Report
By Ambrose Moses, III
OhioMBE – August 1, 2014

The Crowdfund Capital Advisors, led by Sherwood Neiss and Jason Best, issued a report titled “Crowdfunding’s Potential for Minority and Women Owned Enterprises” in July, 2014.  The report was co-authored with Habib Jamal.

The report begins with background information concerning the lack of access to capital by minority owned enterprises from traditional sources like banks, institutional investors, and venture capitalists.  While the background findings were nothing new, it was encouraging to see it identified and discussed, with references to research sources.

After describing the various types of crowdfunding, the report went on to assert that crowdfunding provided an opportunity for minority enterprises to gain more access to capital because the minority owned enterprises are able to raise funds from a wider pool of nontraditional investors.

Interestingly,  the report found that there is some evidence that racism and sexism may still play some role in how individuals allocate their donations and investments.  In a 2012 study conducted by Prosper, a peer-to-peer lending website, researchers found that black borrowers are 25 to 35 percent less likely to receive funding than a white borrower with similar credit.  The Prosper.com  report studied 110,000 loan applications from the popular lending website created between June 2006 and May 2007.

Having a well-financed network of supporters, and a clear mission appear to be significant factors in the success of a crowdfunding campaign.  Thus, as previously stated in the pages of OhioMBE, having that viable three tier network of 1) family and friends, 2) friends of family and friends, and 3) the crowd, is an essential part of a successful crowdfunding campaign.

Minority owned enterprises should consider the basics when developing their crowdfunding campaigns.  Equally as important, the community of family, friends, customers, and other supporters of minority owned businesses should consider supporting crowdfunding campaigns as part of their efforts to address some of the economic and job creation challenges within selected communities.

Crowdfunding is still a game-changer.

Contact the Ohio Business Development Center at www.OhioBDC.com for information on crowdfunding.

 

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