COULD CROWDFUNDING BE THE PERFECT WAY TO FINANCE YOUR FRANCHISE?
In the wake of the credit crunch following 2008, which saw franchise growth falter for the first time, crowdfunding has been embraced as “a whole new path to franchise ownership”. Already one New Zealand franchise group is getting in on the act. Could crowdfunding simplify and accelerate your franchise recruitment process?
Crowdfunding has become somewhat of a crowded house in the United States. So much so that the industry has begun to divide into specialist industry funding groups. Franchising is one of these. Franchise crowdfunding specialist Apple Pie joined an already crowded marketplace in February and now has 13 major franchises signed up. Other crowdfunders in the genre include Crowdclan and Fundafranchise.
Crowdfunding and franchising were made for each other
“Crowdfunding and franchising were made for each other,” declared attorney and crowdfunding advisor Kendall Almerico of Florida-based law firm Almerico & Mooney.
Crowdfunding has been called “the true democratisation of private equity” by another Florida lawyer, Mark Mohler, who is also the CEO of Sprigster, a franchising crowdfunding platform which specialises in helping US military veterans to get into franchising.
"We certainly believe crowdfunding has tremendous potential for franchise finance specifically," says Mohler.
Crowdfunding is the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet, according to Wikipedia.
The word “crowdfunding” was coined in 2006 and the practice gained popularity as an alternative source of funding after the credit crunch started in 2008, especially with the rise of crowdfunding platforms such as IndieGoGo in 2008 and KickStarter in 2009. Crowdfunding websites such as these helped companies and individuals worldwide raise US$89 million in 2010. By 2013 this had escalated to $5.1 billion.
The US crowdfunding industry is exploding
Once, small businesses in the United States were only allowed to raise up to US$5 million per year from both accredited and non-accredited investors. The crowdfunding explosion started when a revolutionary new capital raising law, known as Regulation A+, boosted the maximum to $50 million. Traditional lenders such as banks and venture capitalists may not have been happy, but many franchises have benefited, especially those offering multiple unit franchises.
In New Zealand, crowdfunding is still in its infancy
The practice only became possible last year through what the New Zealand Herald
called a “once-in-a-generation overhaul of securities legislation” which for the first time allowed companies to issue shares to the public through online platforms.
Already three equity crowdfunding providers – Snowball Effect, PledgeMe and Equitise – have sprung up, and more are coming.
My name is Robin La Pere, and I have been working with disruptive new business models since Apple burst into the market with its unique personal computers.
I was at the forefront of major new movements in the retail, financial, construction and franchise industries and work with established businesses as well as start-ups on creating and renewing business models and improving franchise performance.
Crowdfunding is just one of the latest innovations that could benefit your franchise. Contact me
for a free Initial Consultation to discuss the possibilities.
