The Greenville News
By Angelia Davis
Published on May 17, 2012
Angela Bell, is hoping Crowdfunding will enable her to open “Beyond the Bull,” an eat smart restaurant in Anderson. / KEN OSBURN
Not even the toughest economy in generations could douse the fires of entrepreneurism burning in the Upstate and beyond.
But it did change the way entrepreneurs big and small went about funding their dreams.
With traditional sources of start-up capital running dry, the dreamers got creative.
Latrice Folkes of Greenville and Angela Bell of Clemson are fueling their dreams with what is called crowdfunding — swapping perks for dollars in small slices in hopes of raising enough money to take their businesses to the next level.
Folkes’ tender is the raw vegan pizzas and organic smoothies she hopes to turn into the $15,000 she’ll use to open a café here. Chef Bell hopes to parlay recipes for sauces and t-shirts for the $19,000 in seed money to open a restaurant in Anderson.
The two startups are seeking takers for those perks in the crowdfunding platform Indiegogo.com, one of a growing number of websites that matches small businesses, start-ups and creative types with people who have the finances and the desire to support them.
Greenville artist and small-business owner Kay Larch used Kickstarter.com’s “pledge for rewards” crowdfunding portal to expand by creating a series of calavera paintings and Mexico’s “Day of the Dead” coloring books for children as well as adults.
She offered thank-you e-cards featuring painted mosaic skulls and project updates to those who pledged $2 or more, and a “bundle” that included a day at her downtown art studio to get one’s own face painted calavera style for a pledge of $1,333 or more. She exceeded her fund-raising goal.
“So many talented artists have amazing ideas, that are probably very profitable ideas that will never materialize because of the lack of funds,” Larch said. “Because of the economy, there’s not a lot of opportunity to get grants and funding.”
That’s why so many entrepreneurs are turning to some form of crowdfunding — using crowds of people to raise money, primarily through social media.
There is also no financial repayment obligation for “pledge-for-rewards” social crowdfunding campaigns. People who give the money toward these projects are not investors.
But it is proving to be “an excellent way for groups to meet their funding needs,” said Mary Rick, a crowdfunding consultant.
Crowdfunding is a idea that has been around for years, said Frank Knapp, president and chief executive officer of the South Carolina Small Business Chamber of Commerce. It might be the fledgling film director who wants to produce a movie and looks for people to help fund the project. Those who think the director has a good story to tell might pitch in a few dollars in return for a minimal gift that does not convey ownership, he said.
But equity investment will come with the new crowdfunding legislation that would go into effect next year, according to Knapp and Rick.
The new Entrepreneur Access to Capital Act, signed into law by President Barack Obama in April, should open even more doors for access to capital, said Knapp.
The new law will make it legal for small businesses to solicit money from millions of investors without having to go through the lengthy process of filing registration documents with the Securities and Exchange Commission. Laws designed to protect the public from scams or bad investments had made crowdfunding to find investors illegal in the U.S.
Entrepreneurs who decide to choose this route of crowdfunding, Rick said, would need to be prepared to offer a percentage of ownership in their company, and really think about what that means and the kinds of terms they want to offer.
From Wall Street to Main Street
Jay Lee, who grew up in Greer but now lives in New York, is planning to bring his Smallknot.com crowdfunding platform, specifically for small businesses, to Greenville.
It helps small businesses raise money from their communities, their friends, their families, their neighbors and their customers, he said.
“We pay those people in-kind. Rather than repay the loan in cash, we repay with goods and services, parties, lessons — the whole variety of ways that don’t involve a cash repayment,” Lee said.
Lee was working as a financial lawyer on Wall Street when the economy collapsed in 2008. At that time, he was moving dollars from Wall Street to companies across the world as investors were seeking a port in the storm.
But he also saw the fallout with small businesses struggling to raise capital.
“I thought it seemed completely crazy that you couldn’t invest in your own neighborhood, that you couldn’t invest in the businesses you went to every single day, but you could invest anywhere in the world within 30 seconds and with a mouse,” Lee said.
“We tried to build a way for people to put their money to work at home in their community. I left my job and decided to devote my life toward building this product.”
Devoted to their dreams
Bell and Folkes are devoting their lives to opening their own businesses. Capital is the main hindrance.
“I exhausted all traditional means that I have at my disposal for getting financing,” said Bell, whose plan is to open “Beyond the Bull,” an eat-smart restaurant on State 81 in Anderson. “I haven’t been able to get anything from any traditional avenues like financial institutions of any sort.”
Bell, who lives in Clemson, came to South Carolina after the economy took its toll on the retail store and restaurant she operated in Maine.
Charleston is where the 64-year-old and her husband initially settled after she accepted a teaching position at the International Culinary School at the Art Institute.
Bell said that job got her focused on different diets and further studies of nutrition, topics that became more interesting to her as she began to experience “age-related” health issues including joint pain, weight gain and thyroid problems.
“Everything was kind of creeping up on me and I panicked. I started to do research in nutrition and I turned my life around,” she said.
During an accident, she broke her arm, hindering her ability to teach at the Art Institute. Eventually, she was laid off.
There was nothing keeping them in Charleston, so the Bells decided to find a climate they liked a little better.
“We found a place to rent up here and moved. We absolutely fell in love with this area,” she said.
Not only was the climate right, the opportunity to start a business was better, Bell said. “I think the best time to buy or start a business is when business is really bad.”
The more she researched nutrition, the more Bell began to uncover a need for more dining venues that served healthier foods to prevent chronic diseases.
“I think it was all preordained. I think someone up there was manipulating me. You know how that is, right?” she said.
“Beyond the Bull,” is an “anti-aging” restaurant Bell plans to open. She has option on space in the Publix shopping center and has been keeping her fingers crossed, hoping to get $19,000 to move in before someone else comes along and takes the space.
As she waits, she teaches at Tri-County Tech, writes for online publications, and does whatever she can to have money come in while she tries to fund her project.
“I really got impassioned about this. I’m at an age now where if I don’t start another business and have an income, I’m going to be in hot water in a few years,” Bell said.
A lifeline to Lifeit
Lifeit Café is, likewise, Folkes’ lifeline.
The single mother of girls 8 and 11, Folkes is a vegan chef who operated a plant-based cafe in Greenville in 2007-2008. She closed it to take time off to write a book.
Her goal now is to re-open the café in a family-owned building on Greenville’s West End. To do so, she needs at least $15,000 to bring it up to zoning and code standards.
Folkes has been on the journey to re-open the café since 2010. News about the extent of the upgrades is one of many low periods she’s endured along the way.
Folkes said she is motivated by her children. She wants to establish a family business they can grow into.
“I did a chef demo in Atlanta and my youngest daughter was with me. She was passing out books and cards – it warmed my heart. I was like, ‘Okay. I’ve got to keep it going. I have to have something for them.”
The National Association for Moms in Business (NAFMIB) uses an annual social crowdfunding grant competition to help make dreams like Folkes’ come true.
Gina Robison-Billups, president and founder of NAFMIB, an association for entrepreneurial, CEO and working moms, said she’s heard many people say, ‘I don’t want to ask for money for my business. I don’t want to be part of crowdfunding.
But part of being in business is asking for someone to buy your product or service, showing them why it’s important to buy your product or service, and exciting them so that they not only buy for themselves, but they tell others about it, she said, and those are the basic elements of crowdfunding.
“It’s just through the Internet, and your specified goal, your monetary goal, and the reason you need that money is stated right there in public,” Billups said.
“A lot of times, she said, people don’t come out and say, ‘I need you to buy my apple pie so that I can buy a new oven to bake more pies because Whole Foods wants to buy my pies.’
“They just keep selling pies and saving a little bit more. In crowd-funding, you’re really stating, ‘Hey, I’m building a company or I already have a successful company, I have this project and I need an extra bit of cash flow to get it done. Here’s why it’s important for you to support my business.”’
The money pledged is not a hand-out, said Bell. Those who pledge, she said, are actually buying something. “They are getting something in return,” she said.
They are also giving more than money. They are giving entrepreneurs like Bell and Folkes the opportunity to make their dream a reality.
It is also giving entrepreneurs a “wonderful way” to test out their entrepreneurial skills, the viability of their business or an upcoming product, Billups said.
“If people think it’s great, if you’re good at marketing, people are going to back it, they’ll support you and you can get a lot of new clients,” she said.