Many of the small business owners we talked to were, in fact, more than a little surprised by how many of their contributors were not friends, family, or even regular customers. Last year Aurora Anaya-Cerda opened La Casa Azul, a bookstore in East Harlem specializing in Latino literature and bilingual books for children. She raised almost $40,000 raised through Indiegogo. (A private investor matched the amount.)
“Seventy percent were people I didn’t know,” said Ms. Anaya-Cerda, who offered incentives ranging from t-shirts, discounts and autographed books to one’s name on a donor wall. “There were people from East Harlem, but also people from different states, London, South Korea and Australia.” Ms. Anaya-Cerda turned to crowdfunding because banks wouldn’t give her the amount of financing she felt she needed to make a go of it.
“I’m now working harder not just for myself, but for everyone,” Ms. Anaya-Cerda said.
But is crowdfunding really a solution to a lack of bank loans with reasonable interest rates, or retail rents that force out even beloved independents? Ami Kassar, the CEO and founder of MultiFunding, which advises small businesses on lending options, doesn’t think so.
“I’m all in favor of new ways for businesses to access capital,” said Mr. Kassar. “But as a country we shouldn’t be putting all of our eggs in one basket and think we’ve solved the problem. We should be focusing on getting banks to lend to small business. In my mind, crowdfunding is an experiment that’s nascent and I can’t see it having a big impact.”
The looming Securities and Exchange Committee regulations—which offer great promise in that they would allow for equity investing in small businesses—might also prove prohibitively onerous for a lot of mom-and-pop’s, Mr. Kassar said, possibly requiring them to provide costly audited financial statements to raise any crowdfunding capital at all.
“My frustration is that mostly it’s going to help tech startups,” he said. “I can’t personally see it being this magic bombshell. Nothing is as easy as you think it’s going to be.”
Even Amy Cortese, the author of Locavesting: The Revolution in Local Investing and How to Profit From It and a big booster of the practice, thinks that until crowdfunding can offer equity stakes and investment returns, its potential will be limited. Social returns are great, sure—Ms. Cortese noted that she’d contributed $40 to La Casa Azul bookstore even though she lives in Brooklyn and doesn’t know the owner—but she wouldn’t spend her savings on a small business unless she expected the money to earn a decent interest rate of 5 or 10 percent.
“If we really want to shift money from big, bad Wall Street companies to ones that we care about, people will need a return on investment,” said Ms. Cortese. “You can’t retire on a film credit or a t-shirt.”
Video stores has been disappearing around the city, but Aaron Hillis believes a $50,000 renovation to turn his new store into a boutique/event space could save them--or at least his. (Jennifer Loeber Hillis)
Aurora Anaya-Cerda crowdfunded $40,000 to open a La Casa Azul, a bookstore in East Harlem that is focused on Latino culture and carries bilingual books for children. Ms. Anaya-Cerda said that many of her contributors were strangers and some didn't even live in New York. (Laura Booth).
With perks like free coffee cards, a coffee of the month club and a special one-time dinner with wine pairings, Park Slope's Kos Kaffe raised $4,500 on Smallknot to buy an awning. (Ben Rossen)
People are willing to pay for the things they want in their cities. A statue of RoboCop in Detroit, for example, that's becoming a reality after raising $50,000 on Kickstarter. (Oddculture)
Although beloved by the community, St. Mark's Bookshop cannot afford the rent increase in its Cooper Union home. The store has not crowdfunded, but it is vying to snag a competitive, $250,000 grant from Chase Bank to finance a move to smaller location, most likely out of the East Village.
After attracting a following with Bistro Truck, Yassir Raouli and Elsa Leon raised $8,000 to buy kitchen equipment for their new brick and mortar restaurant at 124 Ridge Street on the LES.
Dun-Well Doughnuts, a vegan doughnut shop in Williamsburg, raised $15,000 through Indiegogo. Although there were some perks, 33 people agreed to contribute $5 for "A personal thank you from us and our undying gratitude." Must be a lot of vegan doughnut lovers in Brooklyn.
Cake Shop, a LES club that has helped launch many musical acts, is looking to raise $50,000 with Pledge Music in order to escape mounting financial difficulties that have left them almost $80,000 in debt.