Crowdfunding Site Launches for the Female Entrepreneur
(Wall Street Journal) Plum Alley launched just over a year ago as an e-commerce website that put the spotlight on products created by women. Now it’s going to target fundraising for their start ups.
As the project progressed, founder and chief executive Deborah Jackson realized women needed more than a place to sell their wares: They needed funding. So she’s launching the latest crowdfunding site, and focusing it on female entrepreneurs.
At the official launch Tuesday evening, Ms. Jackson, who spent more than two decades in finance helping clients raise money, said it gives early stage companies an avenue to gauge appetite for their products.
“The beauty of this is you can actually test it in the market,” she said. “In a way, it de-risks the business.”
Capital-raising challenges were hardly a secret to the female founders at Tuesday night’s launch. For the women behind Smart Women Smart Ideas, a reality TV competition between female entrepreneurs, the obstacles will be central to their plot line. The company executives are hoping to raise $25,000 for the pilot.
“We are going to discover the next Tory Burch, the next Kate Spade, the next Bethenny Frankel or the next Sara Blakely through our program,” said Heidi Lehmann, one of the founders.
For the first eight companies joining Plum Alley’s crowdfunding realm, snapping up small donations is just one slice of their broader fundraising plans.
“Crowdfunding is great early validation,” said Ms. Lehmann, but the show also has a financial services sponsor and they’re seeking venture capital funding too.
Elizabeth Wasserman, chief executive of online shop True Goods, which sells nontoxic products, was raising $10,000 for an accompanying smart-phone app. But she’s also using her personal credit to fund the business and talking with angel investors.
Investors who step up to fund a Plum Alley company receive a free product or an experience. For instance, if you spend $20 funding VROU, a vitamin water company, you get a bottle of each VROU flavor. If you spend $10,000 you get a trip to Las Vegas to play golf with pro-golfer Natalie Gulbis, plus a year’s supply of VROU.
There’s a reason for the incentive structure: The crowdfunding world is still a complicated one. For the first time Wednesday, the Securities and Exchange Commission published rules to help regulate how startups can sell shares through crowdfunding sites. Critics are already saying the rules leave plenty of room for bad actors to take advantage of inexperienced investors.
Meanwhile, the platforms are becoming more popular worldwide. Crowdfunding sites raised $2.7 billion in 2012 and, globally, that tally is expected to climb to $5.1 billion this year, according to research firm Massolution.
“I don’t know if it will ultimately solve the problem for women entrepreneurs that want to really scale their business,” VROU chief executive Kathryn Moos, who was trying to raise $30,000, said of the crowdfunding model. But “we see this as an opportunity to start to really build upon our brand.”