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Crowdfunding as a Viable Funding Mechanism for African Americans

Crowdfunding as a Viable Funding Mechanism for African Americans

Crowdfunding as a Viable Funding Mechanism for African Americans

Crowdfunding as a Viable Funding Mechanism for African Americans

Crowdfunding as a Viable Funding Mechanism for African Americans

Crowdfunding as a Viable Funding Mechanism for African Americans ~ Technological advances, such as the internet, social media platforms, smart phones, and more, have illuminated a longstanding alternative funding mechanism. While platforms, such as GoFundMe.com and Indiegogo.com, have become immensely popular over the last several years, the financial mechanism of crowdfunding is not new by any stretch of the imagination. In fact, authors and publishers crowdfunded their book projects centuries ago.

During the 1730s, the Bank of England was saved by citizens who underwrote a diminishing British pound by crowdfunding the value of their own money. This was done until confidence in the pound had been restored, being capable of standing on its own.

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Over the last two centuries, crowdfunding has been a primary alternative funding source for businesses, startups and organizations who are unable or unwilling to secure more conventional loans. Here is where I want to take time to address several concerns of mine. It is important, in our quest to create power and economic stability within the Black collective that we do not succumb to the idea that current behavior is indicative proper practice. What I mean by this is that crowdfunding has historically been used as a way to finance projects, business ventures and stabilize shaky economies; however, lately, especially within the Black community, it is most often used to deal with some personal emergency issue, like the burial of a loved one, or hospital bills.

Don’t get me wrong, I personally believe that any way that we can alleviate the financial burden of another, especially during a time of duress, it should be done — as long as that person doesn’t make it a habit to depend on others to do what they should be able to plan for and accomplish on their own. My concern is that the manner in which most Black people use crowdfunding is setting a false standard and expectation of what crowdfunding is all about. Not that long ago, I read a social media post in which someone was chastising people for creating crowdfunding campaigns to fund their businesses, when in all actuality, that is what crowdfunding as always been about.

The truth is that other groups of people use crowdfunding to finance weddings, vacations and so much more, and very little is said; however, we have become very critical of those who actually use the platform for what it has always been used for — to fund projects and business endeavors that cannot be funded through more traditional channels. As a person who has attempted to use crowdfunding as a mechanism to help fund my work in Black inner city communities, it is frustrating to see other groups fund almost anything they feel like giving to, without much being said at all, while the very idea of a black organization or business using crowdfunding is frowned upon by Blacks.

While crowdfunding can help a financially burdened family pay for medical expenses or funeral expenses, it would be an even more powerful mechanism if it were used to financially empower others to build what their mind has conceived.

We must understand that one of the ways that institutional racism made it next to impossible for Blacks, as a collective, to gain financial equality was to unfairly limit access to funding. When funding is needed to launch, build or expand, and the banks deny funding, what other option does the entrepreneur or organization leader left to pursue? They could do what I have been forced to do, and that is used revenue generated from other sources to fund growth and pending projects, but that is often a very slow process that diminishes the impact of the organization and business. It also places the burden of building something that will benefit many on the back of one or a few, when it can be more easily carried by a larger group.

In the case of business enterprise, the lack of capital to expand when necessary could cost in the area of competition, driving the company out of business. In the case of an organization, it can lead to communities being underserved — despite having the blueprints and programs necessary to end their suffering.

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Crowdfunding startups and community based programs should be a part of the black group economics financial agenda. We should avoid traditional funding as much as possible, in lieu of funding our own programs. There is close to $1.3 trillion (projected by the end of this year) currently flowing through the hands of African Americans, but it has very little positive impact, because there is no spending agenda or focused economic plan for business and organizational startups. We could literally fund our own educational system, which is so needed. We could build our own banks and underwrite them with our own money. We could launch investment houses to manage how our money is invested to maximize growth development.

What I am saying here is that using the crowdfunding mechanism to pay for a funeral or medical expenses is not a bad use of the mechanism — it is a form of community spending. However, it is a backend use, meaning that after the bills and expenses are paid, there is no further benefit, the power of the money raised dies. When crowdfunding is used as it was designed, to invest in projects that reinvest in particular interests, it creates a perpetual ROI in the form of economic fluidity within the community, the development of generational wealth, the development of political influence based on economic power, and more.

I guess the point that I am attempting to get across here is that crowdfunding could be a significantly more powerful tool for the Black collective than it currently is. While any type of funding mechanism opens the possibility of misuse and abuse — creating the need to have certain security mechanisms in place, we cannot ignore the potential for growth. We tend to be more willing to give to organizations and causes that have actually proven to be hostile towards our people than we are willing to support black-owned and operated projects and enterprises. Our underuse and misuse of this great mechanism is leading to poorly funded movements, business launches and organizations that are so desperately needed now.


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While blacks have tended to use crowdfunding as an insurance policy, more than anything else, that is not the initial intent and design of this mechanism; it was designed to fund projects and businesses, and we need to maximize the power and leverage associated with it. ~ Dr. Rick Wallace, Ph.D.

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