Skip to Main Navigation. Each navigation link will open a list of sub navigation links.

Skip to Main Content

Apply to the University of Wyoming apply now

Global Resource Navigation

Visit Campus
Download UW Viewbook
Give to UW

Wyoming Business Tips for April 30-May 6

April 21, 2017

A weekly look at Wyoming business questions from the Wyoming Small Business Development Center (WSBDC), part of WyomingEntrepreneur.Biz, a collection of business assistance programs at the University of Wyoming.

By Cindy Unger, WSBDC business adviser

“Over the past several years, crowdfunding was all over the news as a miraculous source of financing for small businesses. I have not heard much recently. What are the current trends in this area?” Bill, Douglas

“Reward funding,” via websites such as Kickstarter and Indiegogo, made the initial headlines. These sites match people and funding with relevant ideas and inventions online.

Companies receive what is essentially a contribution from an interested party who receives some free trinket or service in return. Securities-based crowdfunding or “regulation crowdfunding” became legal in May 2016. Regulation crowdfunding permits private companies to secure funding from investors without registering the offering with the Securities and Exchange Commission. Prior strict regulations involving investor qualifications also have been relaxed.

Although the increased availability of financing is very attractive, especially to startup companies that have difficulty finding traditional bank financing, the process to actually offer the securities is complicated and costly. The securities must be offered through an approved crowdfunding portal.

To achieve success, a company must carefully implement an effective marketing campaign. These companies are not just trying to induce customers to purchase products; owners are seeking considerable investment in new ventures.

The most important component to a successful fundraising campaign is a video that explains the product or service. Professional videos get a far better response than smartphone videos. In addition to the numerous filings required, the details of the offering must be worked out and explained to the public in a simple, easily understandable manner. To conduct a successful campaign, the issuer must have an extensive social media following.

According to Douglas Ellenoff, expert in crowdfunding, the data suggest that, unless an issuer has several thousand online contacts, they will have difficulty raising even $100,000.

Despite the hurdles, how is crowdfunding doing? At the end of 2016, there were 21 Financial Industry Regulatory Authority-approved portals, with 186 participating entrepreneurs actively seeking financing. Of that group, 79 were able to raise at least their minimum funding requirements.

Looking at reward-based crowdfunding, platforms such as Kickstarter and Indiegogo have become considerably more sophisticated over the past few years. As a result, successfully marketing these campaigns also has become more sophisticated. Traditionally, specific product categories tend to perform better than others. According to Entrepreneur.com, these popular products include affordable electric transportation alternatives for urban commuters (electric bikes, skateboards, etc.); active apparel with built-in chargers, extra pockets and extreme durability; and smart home devices for every need.

Another wrinkle in the crowdfunding landscape is the proliferation of companies doing crowdfunding that don’t need financing. Last year, Indiegogo launched “Enterprise Crowdfunding” to help large companies do market testing, launch products and support new innovations.

Although this industry may be off to a slow start in comparison with the total amount of funding raised last year, the $17 million raised to support securities crowdfunding, in addition to the numerous companies that have been funded via the reward-based websites, has helped numerous entrepreneurs start new and innovative businesses.

A blog version of this article and an opportunity to post comments are available at www.wyomingsbdc.org/blog1/.

The WSBDC is a partnership of the U.S. Small Business Administration, the Wyoming Business Council and the University of Wyoming. To ask a question, call 1-800-348-5194, email wsbdc@uwyo.edu, or write 1000 E. University Ave., Dept. 3922, Laramie, WY, 82071-3922.


Share This Page:

Contact Us

Chad Baldwin

Institutional Communications

Bureau of Mines Building, Room 137

Laramie, WY 82071

Phone: (307) 766-2929

Email: cbaldwin@uwyo.edu

Find us on Facebook (Link opens a new window) Find us on Twitter (Link opens a new window)

1000 E. University Ave. Laramie, WY 82071
UW Operators (307) 766-1121 | Contact Us | Download Adobe Reader

Twitter Icon Youtube Icon Instagram Icon Vimeo Icon Facebook Icon

Accreditation | Emergency Preparedness | Employment at UW | Gainful Employment | Privacy Policy | Accessibility Accessibility information icon