Investment capital has been somewhat difficult for startups to attain for the past couple years, and entrepreneurs are getting increasingly creative when it comes to raising money. The Hartford Business Journal recently quoted me in an article about Bloomfield-based LiquidPiston being one of the more active Connecticut companies leveraging crowdsource funding, raising more than $42 million since 2016.
Crowdsourcing is certainly not a new phenomenon, but as the article states, financial regulation changes have opened new doors in this high-interest-rate environment. Because of this, more platforms are emerging to help kick-start small businesses with crowdsource funding.
Here are the excerpts from where I was quoted in the article:
Amid rising interest rates and other challenging economic conditions, “access to capital has gotten harder,” said Frank Milone, CPA and founding partner of Glastonbury-based accounting and consulting firm Fiondella Milone & Lasaracina LLP.
A young startup company — especially in the technology, bioscience or manufacturing space — will often have limited or even no revenue, and need to raise money through non-traditional avenues, Milone said.
“A traditional bank is not a funding source for those companies because there are no real assets, no real revenue,” he said. “There’s no profit because those companies are generating losses from investing in technology and innovation.”
With crowdfunding, a company can have thousands of supporters and a base of loyal customers who want to be part of the business, while the founders maintain control.
Milone said crowdfunding makes it impossible for all investors to have a seat at the table.
“Say 100,000 people gave you $100. If you had every one of those individuals at your table, as a holder of a share, it would become extremely hard to manage as a company that’s growing,” Milone said.
Crowdfunding also opens the door to younger generations, which may not have accumulated enough wealth to become accredited investors, Milone added.
