Tag Archive for 'crowdfunding'

Jim Blasingame’s 2016 Crystal Ball Predictions

Here is the 16th edition of my New Year predictions.

· Wall Street’s digital greed, Washington’s anti-business policies and collusion between the two continue to create a moribund Main Street economic environment for small businesses.

· With a declining global economy and having exhausted financial manipulation options since 2008, capital markets will struggle in 2016.

· Main Street small businesses that are mature and established will fare well in 2016.

· Economic and regulatory pressures, plus demographic trends will perpetuate an unprecedented population decline in small businesses.

· New Crowdfunding rules lowering the standards for direct investment in small businesses will not become a funding silver bullet for this sector.

· Unlike its investor equity sibling, Crowdfunding lending will proliferate across the small business sector (especially with Generation Y) at the expense of traditional banks.

· Global headwinds, the specter of terrorism, seven years of anti-business policies from the Obama administration, and the unprecedented drama of presidential politics will all contribute to a flat 2016 economy, with annual GDP stuck below 2.5%.

· The perfect storm of a slowing global economy, a crude oil glut, newly approved exports from U.S. producers and OPEC’s loss of pricing power, will keep crude averaging below $50 per barrel.

· Slow global growth and deflationary threats will prevent the Fed from making more than one rate increase in 2016, if that.

· Due to the sustained price decline in crude oil, Putin and Iran will become more desperate and dangerous, using nationalism to distract citizens from their declining economies.

·  In an unprecedented response to ISIS, moderate Muslims around the globe will denounce intolerance and violence in the name of their religion in more actively claiming their role as the 21st century stewards of Islam.

· You will hear more about blockchains and distributed-ledger technology applications, disconnected from Bitcoin. This is very complicated stuff, but it’s the future of currency and capital management, so just start learning.

·  A mere shadow of its former self, Obamacare will continue to collapse under its own structural defects, causing the President’s namesake policy to go from legacy icon to caricature.

·  Already referred to by pundits as “the lawless president,” in his last year Obama will increase his assault on the Constitution with more unprecedented, and now desperate, executive actions.

· Obama’s newest Constitutional assault will be on the 2nd Amendment. Buckle up.

· Obama’s Justice Department will not indict Hillary Clinton in 2016, but as evidence of her lying achieves critical mass it will cost HRC Millennial votes, who value honesty over political ideology.

· The GOP primary process will not produce an apparent nominee going into their convention, unless it’s Trump or Cruz.

· Republicans will not win the White House unless the ticket includes a Hispanic and at least one person from Ohio and/or Florida. Look for Trump/Rubio or Cruz/Kasich.

· The social conservatism of Republicans and the socialistic economics of Democrats will create electoral challenges for both parties in 2016.

· If Trump wins the election, it will be because he’s the only candidate most likely to avoid defending the bankrupt elements of either party.

·  A liberal member of the Supreme Court will exit in 2016, probably in the first half.

· With every member of Generation Y, aka Millennials (80+ million born 1978-1998), old enough to vote in 2016, the electoral influence by this generation is now at critical mass.

· More than just a president, the 2016 election results will reveal the future trajectory of liberty and opportunity in America.

· Alabama will become the NCAA Football Division I Champion.

Write this on a rock …My 15-year record is almost 73% accuracy. Politics may put that average in jeopardy this year.

Jim Blasingame is author of the award-winning book, The Age of the Customer: Prepare for the Moment of Relevance.

RESULTS: Would you consider raising capital from a crowd funding source?

The Question:
Would you consider raising capital from a crowd funding source?

30% — I might consider crowdfunding.
67% — I would not consider crowdfunding.
3% — I considered crowdfunding, but decided against it.
0% — I have already used crowdfunding.

Jim’s Comments:
It’s interesting that none of our respondents has yet used this capital source.  I have to admit, my thoughts on how relevant crowdfunding will be for most small businesses in the previous three Feature Articles may have influenced some of you. Because as you can see, two thirds of you would not consider crowdfunding. It will definitely be an option for some; just not as universally applied across the sector as traditional sources, like bank loans.

Remember, the best source of small business capital is profits you earn from doing business with customers and have the discipline to leave in the business as retained earnings. The beautiful irony of that capitalization plan is that management behavior is the most attractive to bankers.

Is a crowdfunding business loan right for you?

In my last column I introduced the concept of crowdfunding — the new word and online methods of fundraising and capitalization. The two crowdfunding examples I described were contributions and business transactions doubling as fundraising.

Let’s continue with the third type, which is, crowdfunding structured for loans.

Crowdfunding debt, AKA peer-to-peer and social lending, is like traditional borrowing: a request for funds comes with the promise of repayment with interest over a specific term. But the former is done online, and the latter is not. Individuals use crowdfunding for personal loans, but our focus here is for business borrowing, which typically involve four crowds:

1. Business borrowers

2. An online crowdfunding platform aggregating loan requests

3. A funding and underwriting source, likely a hedge fund

4. Individuals who invest with #3, knowing it’s for loans to small businesses

Remember the innumerable and anonymous crowdfunding factors from the previous column? These two are also in play with crowdfunding debt, because a large crowd is required to provide a pool of loan funds and dilute the risk, and investors are only known to the funding source aggregator.

Regardless of the funding source, crowdfunding or traditional, small business loans are expensive for the borrower because this sector is considered high risk for two primary reasons:

1. Most small businesses are undercapitalized and operate on a thin survival margin

2. Too many small business owners don’t track financial performance well enough to know how they’re really doing.

And since crowdfunding loans are unsecured, taking the risk to an even higher level, crowdfunding business loans are doubly expensive.

So is a crowdfunding business loan right for you? Here’s some context: If you can borrow from your bank, this year you’ll probably pay an average of about 6% annual interest rate. A crowdfunding loan APR will likely be 15% or more. Any questions?

Crowdfunding business lending has achieved some level of critical mass and is growing.  As I’ve said before, the future of small business capitalization will look a lot different than it does today largely due to this emerging alternative.

Next time we’ll wrap up this series with a tour of the good, bad, and improbable of investor equity crowdfunding. And more tough love.

Write this on a rock If you can borrow money from a bank, don’t borrow from a crowd

Jim Blasingame is the author of the award-winning book, “The Age of the Customer: Prepare for the Moment of Relevance.”


Crowd funding is not new, but crowdfunding is

Crowd funding is not new, but crowdfunding is. Completely intuitive, both terms mean funds conveyed by a crowd to a solicitor.

Crowd funding is actually traditional banking, insurance, stock markets, charities and the like, where the crowds are relatively small and absolutely defined. Now a new word, crowdfunding is very similar except that it’s conducted on the Internet where the crowds are innumerable and possibly anonymous.

It’s largely due to those two words, innumerable and anonymous, that crowdfunding has caught on to the point where several online platforms now aggregate funds seekers with funding crowds. Now with crowdfunding, the Internet simultaneously facilitates and disrupts our experiences with what I call the Four Cs of Modern Society: Connect, Communicate, Communities and Commerce.

So far, crowdfunding fits primarily into two categories:

Contributions/Fundraising

This is where an emotional connection motivates members of a crowd to give to a cause, project, idea, ideal, etc.  Besides the emotional motivation, merchandise like a T-shirt or first album, for example, are likely to be involved as a token of thanks. This crowdfunding form is nothing more than donations.

Business funding

This money goes to a commercial venture, often a startup, with the expectation of receiving a first-of-its-kind product or future discount. The crowd knows the funds partially pay for the merchandise and partly capitalize the venture to which this crowd also has an emotional connection. This is business funding in the form of a commercial transaction, not investment.

Recently, crowdfunding has nudged closer to debt and equity capitalization. Peer-to-peer lending is an emerging form of crowdfunding, while the investment model still has legal and practical hurdles.

It’s clear that the future of small business capitalization will look a lot different than it does today. But for most small businesses the jury is still out on how the crowdfunding options will be part of their capitalization future.

In my next column I’ll use a practical approach and some tough love to reveal the challenges facing both the debt and equity sides of crowdfunding.  Ironically, those two advantages of crowdfunding mentioned earlier, innumerable and anonymous, will manifest as potential barriers as we discuss the more sophisticated forms of crowdfunding.

Write this on a rock…

Crowdfunding is just new tools to accomplish traditional fundraising and capitalization.




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