Sample companies that utilized crowdfunding
Yet most of the brands above, raised capital via a 3rd party site except for Sony & Dick's Sporting Goods. Here's what we foresee as the outcomes and opportunities given the regulatory changes:
One potential way to also increase brand loyalty is by increasing a customer's switching costs thereby making it easier to continue buying the same brand rather than competing brands. The catalyst we need is a new type of investor that supports the brands s/he loves. A custvestor (noun) is a customer of a privately-held business that provides a product or service that s/he consumes AND an investor in the same business. In addition to being a cost-efficient, faster and friendlier source of capital for Small & Medium Sized Businesses (SMBs), private companies will also benefit from additional resources provided by the same vested consumer.
In addition to capital, these could include the following examples:
1) Customers turned promoters: startups using t-shirts and laptop stickers as cheap and effective marketing. Similarly off-line promotion via word of mouth and online social media channels are obvious ways that consumers will help the same brands where they donated or invested their money.
2) Customers turned mentors: I am guilty of this. As I've helped tea houses owned by Sherpas on the Mt. Everest Basecamp trail, set up their own Trip Advisor pages or food places that I frequent with tip or two on accounting, marketing and technology matters. I believe that if good rapport exists between a small business owner and customer, mentorship can naturally take place. Most of the most successful VCs are also gret mentors. Beware, of course, of nasty investors who'd want to get into every detail of your business. For that reason, the 'crowd tranche', the portion of a business capitalization table typically reserved for the crowd, is usually a single line item with a general partner representing the interests from those investors.
3) Customers turned networking hubs: customers that are invested in the brands they love can facilitate intros to vendors, industry experts and other investors since there's mutual benefit (more so if financial gain is attached of course).
New Rules, New Game - Equity Crowdfunding in the United States over timeAs of the summer of 2015, there are 17 states that have approved crowdfunding exemptions and 21 that will soon follow. These rules make it possible for a regular customer to also invest in a privately-held business. Also, at the federal level, Title IV (aka Reg A+) of the JOBS Act in the USA made it possible for anyone to invest in a privately held business within certain limits (usually 10% of your income if you are not accredited).
A "CustVestor" - a new type of investorIn the near future, there will be better ways to raise capital, build brand loyalty. For established businesses with high transactional volume or web traffic that are looking to expand, however, converting their own customers into investors is probably a good place to start since trust already exists and incentives can be aligned as there are no disconnects between random accredited investors, consumers and investors in a private label. They are all the same when an customer is turned into an investor.