Alternative Funding For Entrepreneurs: Equity Crowdfunding and Blockchain Based ICOs

Alternative Funding For Entrepreneurs: Equity Crowdfunding and Blockchain Based ICOs
Alternative Funding For Entrepreneurs: Equity Crowdfunding and Blockchain Based ICOs

One of the challenges  new entrepreneurs have to face is raising enough money for their business to be able to get off the ground. That is the beginning of the dream, but getting a fair funding is never easy. Traditional funding models may become a complete nightmare if things don’t end up as expected.

Current ways, represented mainly by banks and state funding schemes require high plans in advance, endless bureaucracy and a lifetime debt on the entrepreneur’s back. The most important thing, the idea of what the business is about, become less important then the funding.

New funding methods have emerged in the past years though, changing the scenario and the well-being of the new businessmen and businesswomen. Crowdfunding was a revolution in this matter. A sort of salvation for those who had great ideas but were struggling with old-fashioned bank mindsets.

Democratic Venture Access: Crowdfunding

Based on the digital world, crowdfunding brought funding opportunities to almost everybody as investors (mainly current users) because there was no judgement of the person behind the idea but the idea itself. If the business idea was inspiring or novel, the cash would start to flow,  thus bringing funding to a more democratic level where access to capital became easy and actually realistic.

Crowdfunding is a good example of how quickly things are changing and how it helps the most vulnerable people. Thanks to this, more workers are starting to get access to capital.New challenges have taken even further the crowdfunding scheme. In order to provide venture capital to new entrepreneurs, a new scheme, called equity crowdfunding has seen the light in the past year. Lead by the platform Seedbloom, they self-describe it as a “a seeding, equity crowdfunding, and governance platform for co-ops and ethically driven enterprises.” The company results from the effort of Victor Matekole, the founder of Seedbloom, who comes from a corporate background, where he saw first-hand the problems of exploitative financing.

Seedbloom plans to support existing co-ops, to map out potential growth strategies and decide the best ways to raise the much needed capital. They are even committed to combine progressive cryptographic technologies including IPFS, smart contracts, and immutable ledgers, with the work of a team of legal experts and coders. All of these can be seen in their more recent project, 6fund.

This is how Seedbloom’s 6Fund will provide capital to platform coops and start-ups

The Distributed Ledger also distributes capital: Blockchain and ICOs

More recently, one model that people are exploring (and so is Seedbloom) is the use of blockchain and alternative cryptocurrencies. Blockchain is an open, distributed ledger that records transactions between parties transparently.Blockchain, as a technology, has many functions and can be used in many diverse ways. And it can also serve as a means of funding.

“In this different kind of economy we have to rethink what is money, what is the relationship of money, and how it is used as a form of exchange,” says Boyd Cohen, joint professor at the EADA Business School and the Universitat de Vic in Barcelona, Spain. “Cryptocurrency changes a lot of things in these equations, and opens up opportunities for new business models.”

In fact, 2017 has seen a massive spike in the amount of funds raised by what are called Initial Coin Offerings. While, the Initial Coin Offering (ICOs) market is incredibly speculative and prone to the same types of financial abuses as traditional markets, some advocates see potential in redirecting this technology.

Funding the unfunded: Platform Coops

One sector that is taking advantage of these new funding models is the so-called Platform Coops.These plan to share the same values, like democratic access to venture capital.Expert Nithin Coca explains in an article how platform coops are embracing this new alternative funding models. For him, platform coops represents an ethically driven and a more fair way of doing business, where sharing profit and labor conditions are their main goals. He says:

“The platform cooperative movement has grown in leaps and bounds in the past few years. The network and support that aspiring platform cooperatives have today is greater than ever before. In the meantime, venture capitalist money is not as plentiful as it was just a few years ago, which could stem the tide of venture-backed start-ups, creating an opening for platform cooperatives to enter the market.”

Many Platform Coops are using these new means of funding. One of the first examples of a platform cooperative using the equity crowdfunding model is Resonate, a music-streaming service based in Ireland that is in beta, but currently accepting new members to join and test the service.

On the other hand, Outlier Ventures, a London-based investment firm with deep knowledge of cryptocurrencies, is working with three start-ups to launch a meta platform cooperative token in the coming months. The idea behind creating a platform cooperative-specific currency or token is that it would create self-reinforcing ecosystems of financial and technical resources for emerging platform cooperatives.

Either Outlier Ventures or Resonate are good instance of how equity crowdfunding and Blockchain based ICOs are the motors of a new wave of doing business. They aim to make the capital something reachable to those who actually yearn for and deserve it. Venture capital doesn’t belong to businesswomen or businessmen in exclusivity any more but for the rest of us, and Platform Coops are giving a meaning to those words.

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