Who protects the crowdfunding crowd?
Crowdfunding is rampant!
To make this real let’s look a well know brand/entrepreneur that used alternative funding to get his business moving, (and I hope he doesn’t mind me picking on him!!).
Levi Roots went to Dragons Den ( a kind of crowdfunding with a crowd of between 1 and 5) in 2007 and gained £50,000 investment from the Dragons. Now had they bought into a sauce or had they bought into the man and the brand? If you look at the “audition” it was clearly Levi they bought first and his product second. He sealed the deal and had the personality to give the investors confidence that his personality would sell the product. If you don’t believe me picture yourself, or me, in that room pitching reggae reggae sauce to the dragons…. ok.
Now had the company taken out a Key Person policy on Levi and/or an Executive Income Replacement Plan then they could have received a lump sum or an income to mitigate the financial impact on the business. There’s only one Levi, he’s irreplaceable. But the funds could have been used to bring in, on short notice, an experienced head to steer the ship through the choppy waters and help run and promote the business while Levi recovered. It could be used to help Levi recover more quickly, private hospitals, operations, care and rehabilitation. Worst case scenario there would have been funds to at least repay the investors and make sure Levi’s family were looked after.
I wonder how many businesses have thought about this in their business plan?
Here’s a report on crowdfunding that gives an up to date insight on current thoughts and trends http://thecrowdfundingcentre.com/?page=report
Head Honcho at Business Protect
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