It was looking like the right time for founder Katie Hotze to start raising capital.
Her startup Grocery Shopii just won Charlotte Innovation Week and she told Hypepotamus that the team had “a lot of momentum and energy.”
The only problem: It was early 2020. While check writing all but stopped at the beginning of the pandemic, Hotze knew that her B2B platform was crucial to help grocery stores move into the e-commerce era.
While checks weren’t showing up in those days, Hollywood came knocking. The Davidson, North Carolina startup found its way onto Unicorn Hunters, a reality TV show about pre-IPO investing opportunities. Hotze landed investments from the celebrity panel of judges and took that momentum into a new crowdfunding campaign.
Hotze is one of a growing number of founders rethinking their cap tables and how they go after funding. And we aren’t talking about little Kickstarter or GoFundMe campaigns you might be familiar with. The SEC changed regulations around crowdfunding investment (RegCF) in 2021 so companies can now raise $5 million through such efforts on specific regulated platforms. And it is changing how early-stage founders in different tech verticals are thinking about access to capital.
The State of Funding
There are over 60 regulated crowdfunding and capital raising platforms, with ones like Republic, WeFunder, and DealMaker becoming popular. Many Southeast startups have turned to these, including Alpharetta-based Unbanked. The crypto banking service startup is raising an equity round on Republic, and Birmingham-based Insured Nomads is trying its hand at crowdfunding this month on WeFunder.
“I love raising via a Reg-CF. It allows us to promote our company to a larger group of people with one public, transparent set of terms.” Unbanked co-founder and CEO Daniel Gouldman told Hypepotamus. “Anyone can invest into our company and become a shareholder even with as little as $150. Republic has been a great partner and I think raising capital this way is a great equalizer giving companies a chance to build special things without having to lose control of their mission nor having to compromise on things that sometimes are involved in a term sheet from a Venture Capital firm.”
Other Southeast founders have created unique platforms to make capital more accessible to minority-owned businesses. One of those is Atlanta-based EnrichHER, a fully-accredited online platform for women entrepreneurs to access debt-based funding to build their businesses.
Founder Dr. Roshawnna Novellus and her team launched a new $5 million “ownership reimagined campaign” to help more small businesses and entrepreneurs. Novellus sees this type of platform as a “third option” on the funding spectrum, which has traditionally been just about venture capital or small-dollar Kickstarter accounts. Places like EnrichHER, on the other hand, help users get a return on lending investment while supporting local businesses. Novellus said EnrichHER funding often helps small businesses gain crucial capital to restock inventory or begin expansion efforts into new markets.
“A lot of small business owners have been focused on surviving with all the constant changes…from the pandemic to the Great Resignation. And the demand for capital is skyrocketing for small businesses because they need working capital to have some breathing room and make decisions,” she told Hypepotamus.
Most companies on the platform are in the service industry and run by women and people of color. About 10% of companies on the platform are in the tech space. To date, EnrichHER has deployed $14 million in capital to over 200 women-led, POC-owned businesses in 47 states.
Crowdfunding as an alternative to launch or grow a startup is becoming more popular across the startup space. Research suggests upwards of $200 billion could be raised in this manner between 2021 and 2025. And as startups like Grocery Shopii and Unbanked prove, even startups in highly-regulated or highly-competitive markets are seeing the benefits of this type of funding.
While it could change how individuals jump into the investing world, it is certainly reshaping how many early-stage entrepreneurs are thinking about capital today.
“I never thought that crowdfunding was for me. But now that I’ve done it, I think it’s it’s excellent,” added Holtze when asked about why Grocery Shopii took such a funding route. “Every check I’ve ever had I got through blood, sweat, and tears. I’ve never had a self-service vehicle where people can click a link, type in their credit card information, and become an investor.”
She added that her background in marketing, along with the Unicorn Hunters exposure, was crucial in making that decision as well. “A crowd fund has to be directly connected to a powerful marketing engine, or it will die. If the marketing engine is just an entrepreneur blasting on LinkedIn, it won’t make it.”