Entrepreneurial

from The Edgy Optimist:

Amidst a banking dry spell, small businesses kickstart themselves

As the U.S. jobs market continues its slow, not-very-impressive-but-nonetheless-forward march, one area of the economy still lags. Banks have only very recently begun to lend. Both individuals and small businesses have faced tight credit standards enforced by risk-averse banks; mortgages have been hard to obtain, and small business credit has been tighter yet. From 2008 to 2011, loans to small businesses fell 20 percent. The net effect has been to mute an already muted recovery.

These trends haven’t been confined to the United States. Lending has been even tighter in Europe, particularly in stressed markets such as Spain. While there are some signs of a thaw, the days of easy credit spurring new and small entrepreneurs to create new and innovative companies seem increasingly of the past.

Or so the data points from the banking and credit industry tell us. What they don’t tell us is that as traditional sources of credit and funding have withered, alternate sources have blossomed. We have been so focused on the negative shifts triggered by the financial crisis of 2008-09 that we may have neglected to notice some new and powerfully positive trends.

Take the case of Kickstarter. It may be no coincidence that the site launched in April 2009, just as the global credit crunch was reaching its apex (or nadir, depending on your perspective). With the almost complete evaporation of traditional forms of financing, especially for high-risk entrepreneurial projects with shoot-for-the-moon ambition, Kickstarter took an entirely different approach: It used the Web to connect people with ideas to people with money. In Kickstarter’s case, however, the connection isn’t to people with lots of money ‑ it’s to anyone willing to put up a little bit for an idea that inspires, excites or intrigues.

Kickstarter is an exercise in what has been called “crowdfunding,” and its numbers are startling. According to its own published numbers, since the site launched less than four years ago, 3 million people have pledged more than $400 million to 35,000 different successful projects. The majority of them have raised $1,000 to $10,000, but more than 400 projects have raised $100,000 to $1 million. The most successful projects have been clustered in the arts (especially film), but the largest project is a smartphone watch called the Pebble E-Paper Watch that is expected to launch sometime this year; its creators raised more than $10 million in pledges made by almost 70,000 people. The launch has had several delays, but that has little to do with funding.

NPR looks at crowdfunded athletes

The big business of sports may have a new challenger. Endorsement deals, giant salaries, big name sponsorships — this is what we’ve come to expect when we watch our favorite teams compete at their huge stadiums broadcast on major television networks. But what about the lesser-known, lesser-viewed sports? And the athletes who don’t have broad appeal and access to these sorts of lucrative deals? How do they support their athletic hopes?

That’s the subject of a Mike Pesca’s report on NPR’s Morning Edition: Olympic Runners Find Unique Ways To Raise Funds. A few athletes are changing the way they get paid to compete. For Anthony Famiglietti, a steeplechase runner, the reason for looking for alternative sponsorships was fairly simple. None of the shoes produced by shoe companies willing to sponsor him fit comfortably. He literally could not compete in their products. So he tapped into the crowd, raising smaller amounts of money and offering advertising space on his running uniform to bidders.

Nick Symmonds, an 800 meter runner, also tried an alternative sponsorship idea: auctioning a sponsorship placement in the form of a temporary tattoo he applied before a race.

Looking at the new crowdfunders and the JOBS Act

The crowdsourcing site Kickstarter just turned three years old, and the New York Times has a nice profile that explores how the company has evolved and how its changed the way entrepreneurs, artists, and anyone else with an idea can raise capital online.

Much as the introduction of cheap Web services lowered the barrier to entry for people seeking to create a start-up, and as offshore manufacturing gave entrepreneurs a chance to make products without having to build a factory, Kickstarter offers budding entrepreneurs a way to float ideas and see if there’s a market for them before they trade ownership of their company for money from venture capitalists.

Tapping into the wisdom of the crowd is nothing new. And now that Kickstarter has beaten the path, there are a few similar, and niche-focused, alternatives to Kickstarter. One interesting development to consider, though, when thinking about the online fundraising space, is the Jumpstart Our Business Startups Act, also known as the JOBS Act. As Talking Points Memo reports:

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