They felt their best bet was crowdfunding – wooing small investors over the internet – not only because they wanted to bypass the banks but also to test the market for their business, Half Pint Vegan Dairy. So they pitched their project on Pozible, an Australian crowdfunding platform, and raised the money they needed in about a month.
“With crowdfunding you know straight away that if you can raise that kind of money then you have an audience – that you can make sales,” says Donovan.
She sees crowdfunding as a financing and marketing tool all wrapped in one. If investors commit money to a product or service, they are likely to become advocates and customers. “They are involved investors from the start,” she explains.
Two years on, the business supplies a plant-based spread called Butter Me Up to about 150 stores across Victoria and other outlets in NSW, the ACT, South Australia and New Zealand.
The Half Pint Vegan Dairy story has echoed across the country as smaller enterprises harness modern technology to do business better. Using the cloud, the crowd, peer-to-peer lending and bartering, business owners are finding alternative ways to raise capital, share services and reach customers.
In May, RateSetter launched a new product for business loans up to $150,000 on six-month to five-year terms. Its target market is established businesses wanting to fund growth. Daniel Foggo, chief executive officer of RateSetter Australia, says major banks are “reasonably rigid in how they go about lending to businesses”. Alternative funding models like RateSetter gives small to medium businesses more options.
“It’s exciting that businesses are going to have many more options, but they’ll need to understand which businesses fit in the different market spots over time.”
Silk Home Staging and Styling, an interior styling business in Newcastle which dresses up properties for sale, has embraced the peer-to-peer lending model. It accessed $35,000 from RateSetter a year ago to buy container-loads of furnishings in readiness for a summer property sales rush. Things are now “going gangbusters” on the back of a hot property market, says co-owner Andrew Dart. He had initially approached a couple of banks for financing, “but it would have involved reams and reams of paperwork and application processes,” he says. So instead, Silk Home went for the new model and got the money in far less time.
The cloud and beyond
Thanks to the cloud, modern SMEs can now access the kind of technological grunt that was once the preserve of the big end of town.
Cloud-based services and tools are revolutionising processes, from accounting and payroll to project management and marketing. Accounting software such as Xero, e-commerce platforms such as Neto, storage and file exchange systems like Dropbox, and customer relationship management (CRM) tools such as Salesforce are just the top of a mountain of useful business apps.
Looking ahead, the rise of artificial intelligence promises to take agile SMEs to another level. Cloud tools that analyse big data will mean that even small businesses will be able to monitor activity across all their assets. Having easy access to these data algorithms will allow SMEs more insight into their operations and may even let them better compete against larger companies.
Bartering is back
One of the ironies of the digital era is how new technology is supporting much older forms of trade, such as bartering. Proquo, a joint venture between Telstra and National Australia Bank (NAB) launched in 2016, is a digital marketplace where small businesses can buy, sell and swap goods. A fee is charged if a service is sold, but there are no costs for straight swaps.
Kevin Munro, founder of technology education business Checklist, uses Proquo to promote his services and network with like-minded innovators such as Forty Four Degrees lawyers, a start-up law firm in Melbourne. Munro is now helping the firm on the tech front, and the two businesses engage in a mix of paid work and contra deals.
“It really cuts out the middle man,” says Munro, who believes the platform is akin to “an eBay for services” in the way it connects enterprises.
Proquo users can source services from other providers, create briefs for projects, exchange quotes and manage payments. Munro says service reviews and ratings posted on the site mean it is a business referral system, too. Only trustworthy and accountable companies will thrive.
“If you give poor service to someone it’s going to go up on the testimonials and you’ll be out in no time.”
As the crowdfunding industry matures, it has spawned other services such as CrowdAssist, which provides advice on crowdfunding campaigns and associated marketing activities. The notion that companies can simply post their projects on platforms such as Kickstarter, Indiegogo and Pozible and just expect the money to flow in – well, it is unlikely to happen.
At Half Pint Vegan Dairy, Donovan confirms that successful crowdfunding requires rigorous planning. She and Colligan ran a comprehensive 30-day social media campaign on Facebook, including daily posts and product photographs, to maintain fundraising momentum.
“It’s called ‘crowdfunding’ for good reason,” Donovan says. “You have to be prepared to flaunt yourself every day of a campaign.”
Used well, crowdfunding can help give a business a market advantage by allowing it to move faster and at a lower cost than competitors. The flip side is that companies must live up to their promises with crowdfunding investors. As Donovan explains: “If you don’t do what you say you’re going to do, then all that potential good publicity very quickly can become bad publicity.”
But for Donovan, crowdfunding has been a real success, and she is considering other crowdfunding campaigns to drive further business growth.
Recommended reading …
Cloud computing rewriting the business playbook for Australian start-up, Sydney Morning Herald
New paradigm: How smart companies are getting ahead in the cloud, BusinessThink, UNSW Business School