Bolstr is a community funding marketplace for small businesses. Data shows that 80% of donations to successful crowdfunding campaigns come from the social network of the person asking. So after meeting each other as interns at JP Morgan Chase, co-founders Charlie Tribbett and Larry Baker, both 28, saw a way to help entrepreneurs engage local investors without breaching SEC laws.
“We wanted to do something that solved a market problem,” says Tribbett.Â “Mainstreet businesses are having a terrible time trying to access working capital.”
Before the Jumpstart Our Businesses Startup Act was enacted a year ago, it was illegal to publicly solicit investment capital, unless you utilized Regulation D of the Securities Act of 1933. But complying with Regulation D could become extremely costly, especially if you had investors in different states. In that situation, an entrepreneur would probably need to hire attorneys in every state where a potential investor resided. Even after the JOBS Act, complying with the securities regulations, which are different in all 50 states, can be like playing minecraft with your eyes shut.
“On Bolstr, a lot of this work is automated similar to how Turbotax automates your taxes, so the legal fees for the attorneys in our network are fixed, and reduced by over 70%,” explains Tribbett.
Bolstr thereby decreases the legal costs businesses incur to source smaller amounts of capital from a larger group of people. Among Bolstr’s investor’s are John Rogers of Ariel Investments LLC and Doug Lebda, founder and CEO of Lending Tree.
“As a business solicits capital through Bolstr, the platform automatically calibrates to their raise depending on where their investors are located to make sure they remain in compliance with every state in which they accept investor capital from,” explains Baker.
In celebration of the one year anniversary of the JOBS Act this month, Bolstr is Black Enterprise’s Tech Startup of the Week. You can learn more from Tribbett and Baker at the 2013 Black Enterprise Entrepreneurs Conference, held May 15-18, in Columbus, Ohio. Tribbett will be a panelists for “The Art of Uncovering Alternative Financing.”
Here, Tribbett and Baker provide three tips on landing socially motivated investments through “equity-crowdfunding” platforms like Bolstr:
- Those that do best are consumer facing businesses. For example, a business that has high foot traffic does better than a home-based business.
- A great business pitch happens when a business owner is able to connect with the community. It incentivizes them to really be a part of that local business.
- A lot of small business owners are reluctant to ask people for money. We view Bolstr as a way to give people in the community an opportunity to contribute to a local business that is growing and could employ their cousins or children in the future.