Crowdfunding: A Way for Small Businesses to Grow to the Next Level

The President recently signed into law the JOBS (Jumpstart Our Business Startups) Act, which among its provisions would allow for crowdfunding for small businesses. Under the new law, companies can raise up to $1 million during a 12-month period under streamlined Securities and Exchange Commission (SEC) reporting requirements.

While businesses in high-growth geographic areas, such as Silicon Valley or Cambridge/Kendall Square have exposure to a variety of fast-growth organizations and leaders, this opportunity has not been widely available for other growing companies. The crowdfunding provision opens the door for innovators to access this same type of equity capital through a wide-scale, organized grassroots approach to funding businesses.  By tapping constituents, clients and colleagues, small businesses can utilize crowdfunding as an enabler for takeoff to a new stage of growth and development.

For small businesses like Boston-based Waka Digital Media Corp., headed by Jacob K. Braun, president and chief operating officer, access to new capital and financing is critical to the ability to grow and keep pace with customer demand for their services. Braun is not alone in his thinking. A recent CompTIA survey of 400-plus IT businesses found that micro IT firms (less than $1 million in annual revenue) and small IT firms ($1 million to $20 million in annual revenue) place the most emphasis on the importance of developing new capital options, at 39 percent and 38 percent, respectively.

“The key to driving continued growth and profitability across the technology sector is through innovative and disruptive products and solutions,” Braun commented. “Empowering fledgling and growing organizations with the flexibility of crowdfunding will enable a new wave of innovators, market challengers and thought leaders. Furthermore, these companies often develop focused products which IT and IS outsourcing organizations can leverage as part of the overall solution portfolio that they deliver to their customers.”

Sectors outside traditional VC view, including those in the IT sector, can raise small limited equity capital to differentiate, attract attention and grow to next level. In the IT sector, access to capital is particularly important for existing organizations that are working to harness distributed and cloud computing, or repackaging or redesigning solutions as cloud approaches.

The next step with the implementation of the law is for the SEC to issue regulations. This may be months away. However, the SEC is working to speed the process by soliciting early comments, and CompTIA’s public advocacy team is soliciting comments from members like Braun to make sure that the perspective and needs of small and medium sized firms are represented in the final rules.  Want to make your voice heard regarding this issue? Contact Lamar Whitman.