The Great Funding-Drought
Nationwide, the number of small businesses owners and start-up founders has surged. This may be a result of generational trends, as independently minded Gen-Z adolescents reach adulthood and pursue their interests by way of business establishment; it may also be a result of the COVID19 pandemic’s inciting the population’s collective challenging of the established constructs of ‘work’, with evermore new industries and niches being created daily. However, nationwide, the flow of capital dollars via traditional vectors has not increased to match the chorused demands for funding sparked by the nation’s current enterprise boom. In this post, the option for founders to fundraise via publicly-funded credit platforms is highlighted as a viable means of perpetually procuring business-credit in an era characterized by constricted venture-funding and limited institutional business-credit.
The current surge of new small businesses serves a welcome influx of economic stimulation into the nation’s economy. Nonetheless, with rampant small business creation and numbers of start-up founders on the rise, this nation faces a funding crisis … there is not enough institutional lending and venture investment being injected into enough of the nation’s most promising projects.
We face a nationwide funding bottleneck … an abundance of innovative new businesses led by great creators, all of whom are fighting for too few investor dollars. Additionally, financial institutions have tightened lending limits due to the inflated rate of new business creation, lending to a lesser percentage of new businesses being founded. The net effect of this phenomenon is the heightening of the hurdle to be faced by growing businesses intent on scaling from sustainability true profitability. This bottleneck leads us all to the question, “What is the best method of procuring funding for a growing business in 2022, during our current Great Funding Drought?”
It’s important to know that I am partisan; I created The Blender Platform for the provision of credit access for people and entities via a publicly-funded inter-peer lending and borrowing platform. Nevertheless, I recommend that businesses and organizations adapt to The Great Funding Drought by additionally seeking funding via decentralized crowd-funding approaches by which entities are provided the sought funds by their own customers/constituents. To make this fund-pooling sustainable for the funding constituents, the funds must be lent with some assured means of repayment (unless the entity intends on mailing out stock certificates to every constituent contributor to the fund-pool … not ideal).
Fundraising via publicly-funded credit platforms, by which an entity may request funding dollars in the form of repayable credit, with or without interest, is a viable source of funding for businesses and organizations with substantial bases of supporting constituents/customers.
Below is a real-world example of a business entity utilizing publicly-funded credit platforms:
A coffee shop would like to build an extended patio to sport a new lounge area with access to unused outdoor space on its property, but doesn’t have the required funds for the project. You live across the street and, along with other frequent locals, would support the coffee shop’s project, as it helps to improve the neighborhood and should boost the shop’s revenue. You and your neighbors lend the funds to the coffee shop, and receive piece-wise repayments as the project is underway, and you all continue to benefit as the store operates and repays you monthly (assumedly with interest).
The possibilities for the business entity, the coffee shop, to utilize this type of platform for business expansion are endless. In reality, this type of publicly-funded credit platform can be used by both large and small entities; however, entities with populous constituent/customer bases may cumulatively reap exponentially increased capital over time due to increased lending participation to the fund-pool.
In the current Great Funding Drought, entities seeking funding via the traditional methods of institutionally provisioned credit and venture capitalist investment, now have additional options of procuring capital funds. The business entity can scale its operations as desired, enabled by capital provisioned from the constituent supporters of the entity/business/organization itself.