By Kati Suominen
As the global economy rebounds, exporting is a great way to grow your small business. Consumer wallet space and infrastructure spending is booming in the emerging markets, frontier economies of Africa, Latin America and Asia are on a growth spurt, and advanced markets in Europe and Japan, collectively a 630 million consumer market, are recovering.
There are growing opportunities across sectors – industrial machinery, ICT equipment and transport equipment; consumer goods, electronics, fashion, and entertainment; clean tech products and services; water technology manufacturers, suppliers, engineers and consultants; internet of things, data visualization, wireless communications, cloud infrastructure, and so on. U.S. companies can also tap into “Womenomics”, the rise of the emerging market women who control households’ big spending decisions and have their own spending power and appetite for computers and electronics.
According to surveys, three-quarters of current small business exporters and almost one-quarter of non-exporters look to expand their global sales. America’s own recovery and macroeconomic fundamentals, such as lowering energy costs and competitively priced labor, fuel companies’ optimism and investments.
But going global is an investment – to cover upfront costs, such as creating distributor networks and meeting foreign product standards; finance the costs of export transactions, such as shipping, logistics, and trade compliance costs; and, perhaps most important and toughest, secure growth capital to expand production capacity to serve the global customer base and fulfill what can be large international orders.
Of course, few small businesses feel that capital is amply available.
This is where crowdfunding can help. Equity crowdfunding, where companies can several millions in debt and equity financing online, is a rapidly growing industry. This is traditionally fundraising applied online: Companies can use equity crowdfudning platform to connect with accredited investors and funds, who upon investing become owners or shareholders of the company or receive interest payments on a loan to the company.
Equity crowdfunding stands out from the traditional, rewards-based crowdfunding hosted by such platforms as Kickstarter and Indiegogo. In rewards-based crowdfunding, the “investor” does not expect a financial return, but is more like a contributor, receiving a coffee cup or a T-shirt or goodwill for her donation. Rewards-based crowdfunding campaigns are often on the smaller side, below $50,000, and used by startups and creative, philanthropic and social endeavors.
Equity crowdfunding opens the potential for companies to raise serious money, in the millions. Crowdfunding is especially great for small business owners are already stretched in working to bring clients in the door. The platforms open visibility and access to many more investors than you would ever get to on your own. Several crowdfunding platforms have emerged, targeting specific stages and sectors such as startups or consumer brands (see a list of crowdfunding sites).
But crowdfunding isn’t a silver bullet. The platforms expand your reach, but you still need the basics investors appreciate – a great team, great product, smart plan, ideally already in business and making money, and excellent investor materials like a Powerpoint deck and clear statement of the purpose of the use of investor money. It is also important not to put all your eggs in one basket, but to consider crowdfunding as just one of many ways to raise capital.
Kati Suominen is founder and CEO of TradeUp, an equity crowdfunding platform that helps globalizing companies and accredited investors (angels, superangels, VCs, PE funds, family offices, lenders, etc.) connect and transact on deals of $100,000 to $20 million.