Early and innovative websites dedicated to crowdfunding platforms included ArtistShare (2003) Indiegogo (2008), Kickstarter (2009) and Microventures (2010). Today, more than 450 crowdfunding websites exist. Collectively, they arguably represent the most powerful small business-funding alternative in the world.

The three general categories of crowdfunding business models are donation or reward, lending, and equity, at 71 percent, 15 percent, and 14 percent market share respectively.⁽⁴⁾

In July 2015, Deal Index reported some enlightening facts:

• Crowdfunding added an estimated $65 billion to the global economy in 2014.
• There are now 1,250 crowdfunding platforms worldwide (counting both websites and offline resources).
• Crowdfunding created 270,000 jobs in 2014.
• Crowdfunding has created 100 million unaccredited investors in the United States alone.

Perhaps most impressive is that the crowdfunding market was estimated at $34 billion USD in 2015. Compare that with average annual investment of $30 billion in venture capital and $20 billion in angel capital, and we now have a new small-business funding leader. During a recent lecture on business funding at the Wharton Small Business Development Center, I stated this figure skeptically, since the source was a crowdfunding advocate. I promised my class that I would verify the information with an additional source, so I attended a panel discussion on crowdfunding at the University of Pennsylvania.

“That $34 billion estimate is correct,” proclaimed the panel moderator, venture capitalist Wayne Kimmel of Seventy Six Capital in Philadelphia. Furthermore, Massolution, a market research firm specializing in the crowdsourcing and crowdfunding industries, also concludes that the $34 billion estimate is accurate.

From a macroeconomic perspective, “crowdfunding is still comparatively small relative to both global corporate bond and lending markets, but it is growing exponentially,” reports the International Organization of Securities Commissions. That said, entrepreneurs and small-business owners rarely need corporate bonds or large debt instruments to fund their businesses. However, both need customers—and startups need the equity that crowdfunding provides. The customer provision is more important than the equity investment. Axiomatically, customers provide the only long-term sustainable source of business funding. Veteran entrepreneurs commonly refer to this tide-rising business-funding concept as smart money. It pays to be smart with business funding.

What does all this mean for you and your business?

First, if you lead a startup venture, consider crowdfunding as a strategic funding alternative to acquire both customers and business funding.

As a startup, crowdfunding is a logical choice when launching:

• Creative works such as films, artistic works, journalism, or music
• Philanthropic causes
• Real-estate projects
• A socially responsible business cause seeking to substantiate demand

Established businesses should also consider crowdfunding to:

• Determine if there is a market (or not) for a new product or service
• Build a following of customers and audience engagement around a new offering
• Obtain feedback from end users to beta-test a new offering for improvements before a formal launch

What are the fundamental risks of crowdfunding?

• Your intellectual property could be exposed prematurely if unprotected.
• Scams — unfortunately, fraud exists everywhere, even in crowdfunding.
• If you don’t have your ecommerce systems ready and you’re not prepared to work with regular customers, then your campaign will most likely fail.
• You must spend time and money preparing for a successful campaign that, even when done properly, might yield unsuccessful results.

Crowdfunding’s leadership role in small-business funding is a good thing. Don’t think that it has taken anything away from venture capitalists or angel investors: It has expanded the business-funding pie.

“Crowdfunding is part of our entrepreneurial ecosystem now,” Kimmel proclaims. “It’s helped us equity investors work better together.”  Crowdfunding has democratized angel investing, once limited to the wealthy by law to protect wealth, for everyone. It also provides a debt-financing alternative to traditional commercial loans. Crowdfunding is a natural entry into angel investing and venture equity funding as part of the natural progression of business funding. This, fortunately, relieves some entrepreneurial funding pressure on friends and family. I for one am glad that crowdfunding has expanded our entrepreneurial ecosystem.

Jacob Winterstein and his partner founded Camp Bonfire (http://campbonfire.com/ ) in 2015 to provide affordable adult summer camps enabling grownups to relax wholesomely with nature.

Before committing to the business, Jacob wrote his business plan in The Wharton Small Business Development Center’s Strategic Business Planning (SBP) workshop with Instructor John McAdam in late 2014.  Equipped with a conservative plan, Jacob and his partner were very successful, profitable and able to pay themselves in their first summer camp season. Regarding their business start, Camp Bonfire started after SBP in 2014 and was profitable in their first year.  Jacob told us, “We hired over a dozen independent contractors, plus the host camp had over a dozen staff on site during camp weekend.” Sales and Income projections are on track in 2016.  Therefore, Jacob and his partner plan to work full time in this business in Year 3 (2017).

“SBP spurred us to invest more in advertising and publicity so that we could widen our reach beyond our current networks and make the case that our camp is worth the price tag.” “We had customers from over 10 states. We brought money into a Philadelphia-based business. The summer camp we rent is in Pennsylvania and owned by a family in Philadelphia. My partner and I have created more financially stable lives for ourselves. We’re building jobs around our passions to the point where we can work for ourselves rather than for someone else.  We started small (as our Instructor John McAdam advises), with our own savings. The Wharton SBDC made our success more likely and helped us keep our families more financially secure. The Wharton SBDC’s Strategic Business Planning course gave us the foundation on which to build what we hope will become a national company that will always be based in Philadelphia.”

Do you want to relax like a kid again? There is still time to register at http://campbonfire.com/register/.  We’re certainly tempted.

John in the morning…

It’s 4:00 AM in midtown Manhattan. My favorite time of the day to write, in an exhilarating yet exhausting city—but I need coffee first. Should I make hotel-room coffee? No thank you, I’ve heard too much information about those machines. I check at the front desk and an overly awake woman proclaims, “Our first brew time is at 7:00 AM.” What?

It’s time to go hunting for coffee in midtown. Here’s what I find:

• Thai and Greek food-truck vendors with no coffee;
• A nightclub just closing, without coffee;
• Living-room furniture for sale;
• Services of ill repute.

  I’m moving on.

  Before doing so, I suggest to the Thai food-truck vendor to sell coffee, since no one else does during these transitional hours before dawn. The vendor laughs, says something in a foreign language, and then points east, down West 44^th Street toward Times Square. I’m walking….

  While strolling east on 44^th Street with music blaring through my headphones, I remember the last time I stayed in midtown. I had to be at the City College of New York on a Sunday morning at 6:00 AM as a guest for a two-hour radio interview. Around 5:00 AM, I had hailed a cab and said to my driver, “First, take me to a coffee shop, then to City College. I’ll pay extra.” He drove me to a Starbucks near Times Square. I bought a latte, placed it on top of the cab while removing my sports coat, and got into the cab. As I watched that latte fall from the sky and into the gutter on 7^th Avenue, I fought the urge to scream while my forehead struck the back of the passenger seat headrest. At that moment, I realized that I might have a caffeine problem.

While my radio host didn’t drink coffee (of course), I became fast friends with Ricky Young of WHCR 90.3 FM Harlem Radio that day. During our interview, we bantered about business, the upcoming release of www.theonehourbusinessplan.com, and helping entrepreneurs in Harlem. I remember someone taking a photo of us at the radio station with him boxing me and me wrestling him—great stuff.

Back to coffee. It turns out the Thai food-truck vendor sent me in the right direction. I stumble upon an oasis in the form of the 24-hour Times Deli. It’s about 5:30 by now. It’s a cool store, with competent coffee and nice people who seem curious about me, in gym clothes with my writing tablet and headphones blaring. On this morning, instead of writing, I choose to people-watch: passersby are obviously either waking up or going to bed. Oops—I’ve drunk that coffee too fast. And back up 44^th Street I go.

I rediscover a worthy Starbucks competitor called Gregory’s. They aren’t operating outside of Manhattan and Brooklyn yet, but in midtown they’re ubiquitous. They’ve found a nice niche by offering milder yet more savory flavors than Starbucks, with a gourmet flair. Now I find myself peering through the window like Tiny Tim looking at the Christmas goose, fogging up the entrance window. I knock and they say, “Ten minutes!” I reply, “Hurry.” The baristas look at me as if I have a problem, which I do. I smile and give them the thumbs up.

How does the “City That Never Sleeps” transition from late evening to early morning without coffee?

As I ponder this question, I realize that I’m in the perfect city to be different. I am wired for entrepreneurship in that when I look at the world, I don’t just see what’s there—I see what’s not there and should be. While this might sound great, not so much—since I often see frustrating situations more than I prefer.

The next time I visit this amazing city, I will bring my own coffee-brewing travel package. Fortunately, these exist and I don’t have to invent one. If you choose to join me in my quest for caffeine 24/7, you’re going to need a manual portable coffee grinder, coffee beans, and a measuring device (potable water and cup are assumed). With a little planning, you can enjoy coffee as good as what you’d brew at home.

Some ex-marines who are fellow mobile-coffee addicts wrote a great piece about portable coffee-brewing options, aptly titled “How to Take (and Make) Great Coffee Anywhere” http://bit.ly/1PorACL. These guys enjoy being well supplied and on the move.

On second thought, perhaps I won’t pack a coffee-brewing travel package. That might keep me in my hotel room. The people I met during my quest were fun to experience. One businessperson in a rush to get to a meeting uptown asked me, “Where did you find that coffee?” I told him about Times Deli and he didn’t have time to turn back. I offered him mine (having been there), but he smiled, thanked me, and proceeded to hunt for coffee along his route. If I brewed from my hotel room, I would have missed these fine city folks, not to mention the light morning rain, the fresh city air, and smiling at people rushing to get to bed before dawn. I’ll probably pack the coffee travel unit, make a brew, and go for a walk instead of hunting—it sure was fun.

Copyright © John J. McAdam 2015. All Rights Reserved (unless you need coffee).