Crowdfunding Main Street

proper pie logoIn many communities, someone from out of town who is interested in starting a new business can turn to the local Main Street organization for help. The local Main Street organization can often provide square footage, rent and utility costs and introductions to owners of vacant and available storefronts. They can introduce the potential business owner to the Main Street business owners, service providers and local bankers. Most have a strong knowledge of the business start-up requirements (who to go to for a business license) and resources (local revolving loan funds or business development assistance programs).

Although most Main Street organizations do not have funds to invest in a new business, they can help encourage potential business owners to look at some of the various crowdfunding websites to help gauge local demand for the proposed products and services and to raise debt-free start-up capital.

Crowdfunding real estate development offers opportunities for the development, renovation or purchase of real estate assets on Main Street. Main Street Arkansas is experimenting with Kiva Zip, a crowdfunding platform that enables individuals to make direct loans to entrepreneurs. Loans can be made for as little as $5. Over time, as the loan is repaid, you get your money back, and you can then withdraw it or re-lend it to another entrepreneur.

Kickstarter is probably one of the most familiar crowd funding platforms on the Internet. It allows creative people to pitch their project or business ideas and ask for financial backing from the online community.

Project funding on Kickstarter is all-or-nothing because, as the theory goes, if you need $5,000, it is hard to complete your project with only $1,000. This requirement helps a potential business build a customer- or fan-base and provides a sort of market feasibility test of the idea. If enough people like the idea, they will fund it. Many different types of returns on investment are offered, but offering financial returns or equity is prohibited.

People contribute on Kickstarter because they are rallying around their friends’ projects, supporting people they have long admired or are inspired by a new idea. Backing a project is more than just giving someone money. It is supporting a dream to create something that the contributor wants to see exist in the world, or on Main Street.

Take for example, Proper Pie, a New Zealand-style, savory pie restaurant in a historic storefront in the Church Hill neighborhood of Richmond. Needing $15,000 to help them finish the installation of their commercial kitchen, the owners decided to launch a funding campaign on Kickstarter.

The owners offered various incentives for contributing including free pies (pick-up only, no mailing of pies), a punch on a frequent visitor card, logoed pens, coffee mugs, t-shirts, an opportunity to name a pie for a week and more. In less than 30 days, 318 people contributed a total of $15,836. One person contributed $1,500, but most of the contributions were small, with about 20 percent contributing $10, 32 percent contributing $25 and 22 percent contributing $50.

What is interesting here is that Proper Pie had not yet opened when it launched its Kickstarter campaign. Few, if any of the contributors, had probably ever tasted a New Zealand-style savory pie. Most of the contributors were not contributing because they knew and liked the pies from Proper Pie. They were buying into a vision of their community that included a New Zealand-style pie shop filling an empty storefront in the neighborhood where they live, work or visit. With no guarantee of success, they were willing to invest a little bit of their money into a stranger’s business because they liked and supported a vision for the development of their community. What does the vision for your Main Street include, and how are you going to help fund its development?