Crowdfunding: Flash in the pan, or here to stay?
For both people and businesses, getting older brings its share of challenges. However, the alternative is even less desirable. Right now we’re seeing the business of “crowdfunding” mature somewhat and the process is a little painful for many involved in the industry. Crowdfunding, as you may know, is the process of leveraging the Internet to raise capital to fund a project. Kickstarter may be the most well known of the crowdfunding sites. Other notables are Indiegogo and AngelList. If you need more names, check out this article on Forbes. Two crowdfunding models For commercial fundraising, there are really two ways crowdfunding sites work. Fundraisers on Kickstarter usually offer the product they plan to produce in exchange for some cash. In other cases, premiums such as t-shirts are offered and some times nothing tangible is delivered; supporters make donations. In the other crowdfunding model, kicking in cash buys you equity in the company. The crowdfunding investors are all mini-angels. All the Internet-based pieces of the crowdfunding puzzle came together around 2010 and it really took off. Now, in 2014, the process is starting to have some history and go through a few growing pains. Rules and regulation Some of the growing pains are being caused by the anticipated Security and Exchange Commission (SEC) rules governing equity crowdfunding. Late last month Robb Mandelbaum gave an update on the proposed rules in his NY Times blog. He noted that the SEC posted the rules for comments more than three months earlier and still hadn’t shown any signs of issuing final regulations. That leaves the world of equity crowdfunding up in the air and its future somewhat in doubt. There is nothing investors like less than uncertainty. A different issue faces the “product promising” crowdfunding industry. Ethan Molllick, a Wharton School professor, says that among the tech and design-related crowdfunded projects, 75 percent failed to finish on time. It seems like no one will say publicly how many funded projects ultimately fail to deliver their proposed products. Guessing at failure rates Kickstarter is an “all or nothing” crowdfunding site. Proposals don’t get funded until their targets are met. Kickstarter is great about reporting stats on the percent of projects that get their desired funding. But failures among funded projects is left to speculation. All of these developments are indicative of an industry that’s beginning to mature. Initial unbridled enthusiasm is replaced by measured judgment. For long term success this is necessary. And if you’re considering crowdfunding a project, there is really one major takeaway here for you: thoroughly researching all your options today is more important—and probably a little more difficult—than it was yesterday. • • • Image: Flickr “Crowd,” © 2007 James Cridland, used under a Creative Commons Attribution-ShareAlike license:...
read moreShould Your Charge Card Bills Get a ‘Second Look’?
Let me ask you a few questions about your banking, credit cards and how you pay your bills: Do you go over your credit card statements in great detail, or just scan to make sure things don’t look out of whack? How many “automatic” renewal charges do you have going on your cards? Do you ever sign up for those “first month free” deals and input an account number with the plan to quit the program or unsubscribe before the first month is out? I think all of those are fairly common attributes of modern life, but unfortunately they can all lead to an unwanted slow—or not-so-slow—cash drain. We have so many cards and financial accounts today, that it’s easy to get complacent about monitoring them. Capital One just kicked off a pilot program called “Capital One Second Look” that is designed to prevent some of the problems that can occur from these situations. Extra help The Capital One program monitors credit card transaction for high bill amounts, subscriptions that renew automatically, duplicate amounts and other easy-to-miss charges. This will add an extra layer of protection and make life a little bit easier for those who hold Capital One cards. Most of us by now probably know that most credit card issuers have fraud detection programs. I know I occasionally get a call or text message asking me to verify a certain charge amount. However, Capital One says that its Second Look program will alert customers on a much wider variety of potential issues. Capital One has labeled it as a “pilot program” so it’s sort of like software that’s in beta. You can probably expect some fine tuning as customers interact with its alerts over the next several months. And, they are doing something interesting during this rollout. They’re asking customers to tell them what “Second Look” should be, well, looking for. I know that I will appreciate Capital One flagging those “first month free” services that I’m inclined to try out every so often. They always make me nervous, and sometimes I bail out before the last mouse click. Knowing that I’ll get an alert later down the road should give me a little more confidence and who knows, I might sample some good services that I would otherwise skip. By the numbers According to Capital One, data shows that two out of three of their customers overlook duplicate charges that could have been made in error. Early results indicate that Second Look alerts make customers three times more likely to question a charge. The alerts come via email. So far 25 percent of the Capital One customers trying out the pilot program have inquired about hikes in regularly occurring charges, such as when a utility bill goes up unexpectedly. I think that anything that makes us more observant and attentive consumers is a good thing. Especially for small business owners who are trying to watch every penny…which is what the Second Look program does, literally…well, digitally is probably a better...
read moreLet’s Shake on It: The Importance of Trust in Business
June 26 is National Handshake Day. For the small business owner, it should remind us that our word and handshake must be absolutely trustworthy. Without trust, there can be no commerce. Remember the story about George Washington and the cherry tree? You’ve also probably read somewhere that it didn’t actually happen. However, I recently read an account that says it probably did happen, but not in the way that you’ve heard it recounted in the past. I want to relate this today because it has everything to do with commerce and trust. Stick with me for a moment. The real story First, no one ever said that Washington “chopped down” a cherry tree with his hatchet. An early Washington biographer, Pastor Weems, said that the future president damaged the bark of a neighbor’s cherry tree with his hatchet. This, of course, can kill the tree. If you ever messed around with a hatchet in your yard as a kid, this story probably sounds authentic. Further, all the other details in Weems’ account of Washington are unchallenged, so there’s a good chance this detail is true as well. Aside from building up the legacy of our first president, why was this important? Simple: trust was critical in Washington’s time because commerce completely depended on it. You see, there was very little currency floating around the colonies in those days. Items were bought and sold generally with 20 percent in cash and the rest on account. Merchants had to be sure of their customers’ trustworthiness for commerce to happen. This is why it was important for young Washington to establish his honesty. Had he slinked away and denied his actions—when he was probably the only likely culprit—it would have been a stigma that followed him around for years. Extending a hand Offering a handshake as a greeting is polite. Extending your hand to seal a promise should signify a true commitment. Businesses will function more smoothly and with more confidence when handshakes carry meaning. As a small business owner, you probably understand this. While the major corporations keep legions of lawyers busy drawing up contracts that cover every possible contingency in a business relationship, you know the value of plain talk followed by a handshake. And the best way to honor National Handshake Day is to continue that level of trustworthiness. (By the way, that glimpse into young George Washington comes via “The Education of George Washington: How a Forgotten Book Shaped the Character of a Hero,” by Austin Washington. It’s a good read.) Image: Handshake Man-Woman by Flazingo Photos, used under a Creative Commons Attribution-ShareAlike...
read moreWould Your Governor Sign Your State’s Small Biz Report Card?
The smiles in Texas must be stretching from Stetson to Stetson. The San Antonio Spurs made mincemeat of Miami and their state gets an “A+” rating in the third annual Thumbtack and Ewing Marion Kauffman Foundation survey of small business friendliness. Other “A+”-rated states in the survey are Idaho, Utah and Virginia. Colorado, Oklahoma, Tennessee and Louisiana grabbed “A” ratings. On the other end of the scale, small biz owners handed out failing grades to California, Rhode Island and Illinois. More specifically, the cities of Sacramento, Providence and Buffalo received the worst marks from those surveyed. While there was some movement between earlier surveys, most of the highest and lowest performing states seem to have a lock on their positions. Texas, Utah and Idaho have been among the top five every year of the survey, while California and Rhode Island have been bottom five cellar dwellers each year. Taxes vs regulations Although the highest ranking states are generally among the lowest taxing states—and the converse is true for the most poorly ranked states—regulatory compliance issues are a bigger driving force when it comes to final rankings. Fully two-thirds of all respondents feel they pay their “fair share” of their state’s tax burden. It’s licensing requirements and the hassle of filing taxes that get under the skin of small business owners. Have you seen the TV ad blitz that declares “New York State (is) Open for Business”? You probably have. The last time I saw a figure, Gov. Andrew Cuomo was spending $140 million on the campaign. Melissa DeRosa, a spokeswoman for the governor, told the NY Times that “we are doing everything we can to level the playing field to bring businesses and jobs to the state of New York.” The commercials and “The New NY” campaign tout tax-free zones, funding assistance, help finding resources, export tools and more. The program’s website offers a lot of information. However, despite this high profile effort, New York has only bumped up from a “D” grade in 2012 to a “D-plus” in 2014. There is one more point I want to note about New York; although it sports an overall low rating, it gets an “A-minus” for “training and networking.” The fundamentals I’m detailing what’s happening in New York for a specific reason: It’s not short-term government programs that create a positive climate for small businesses, it’s the long-term policies, approaches and infrastructure that make a place good for business. Politicians at all levels campaign on the promise to enact special programs to “create jobs,” but they are virtually worthless to an area’s long-term economic health. The key is to establish policies that make it easy to do business and then get out of the way—stop messing with things. That way the requirements of doing business are understood and predictable from year to year. So here’s some advice to New York and the other low-ranked states. Model yourself after Texas, Idaho, Utah and Virginia and then stand back and see what happens. Can you imagine how small businesses could transform this country if all 50 states received “A”...
read more3 Steps for New Venture Success
Opportunity knocks but once. Nothing ventured, nothing gained. Carpe Diem. Just do it. The early bird…well, you get the idea. There are a lot of proverbs and sayings written to inspire us to act, yet reticence, hesitation and delaying tactics are often the order of the day. Talking to small business owners and aspiring entrepreneurs, I see this phenomenon all the time. An attribute of the human instinct for survival is fear of the unknown. We all have it in varying degrees. For a few, it is easily overcome. For others, it takes a little effort. And for some, it is very difficult to venture into the unknown. Where do you fall on that continuum? If you’re among the group that needs to spend months thinking through any new venture, there’s a good chance that you are missing out on some excellent opportunities. The odds are also high that someone else will pick up on the opportunity that you forgo. Have you every said yourself, or heard someone else say, “Oh, I had that idea years ago, but never did anything with it”? There are a few steps you can take to help you blow past any fears that might prevent you from pursuing a potentially successful new business venture. First, understand that failure is the “worst” thing that can happen. Unless your new business idea is to become a freelance tester of new parachute designs, the absolute worst thing that can happen is that the new venture won’t work out and you may lose a little money. Money can be replaced. Second, understand that failure is a prerequisite to success. The point here is not to view failure as an end result, but as a necessary place to pass through on the way to your greatest successes. I recently reviewed some survey results published by EMyth that looked at the traits of successful entrepreneurs. One of the most important traits for an entrepreneur is to be a “repeat offender.” In other words, when people get beyond their first business idea, they are much more likely to enjoy good success. Third, take the first step. I’m not going to go hunting for them right now, but I’m sure there are also a lot of adages that say the first step is always the most difficult. This is because our “reason” and our “will” are always battling one another. Sometimes reason tells us to do something, but our will puts on the brakes. Other times our will pushes us to do things that our reason says are ill-advised. If a new venture looks “reasonable,” don’t be thwarted by a balky will. Review the first two steps above and make the move. Once you complete the first step, the rest usually become much easier. Now it’s your turn: Have any successes or failures you would like to share? Image: David Benbennick, “Thumbs up,” © 2005, used under a Creative Commons Attribution-ShareAlike license:...
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