For small businesses and entrepreneurs, especially those in developing or remote parts of the world, access to funding to start or expand a business can be difficult to obtain. The rise of crowdfunding, where funds are raised through monetary contributions from a large number of people and can be done through online platforms, has opened up a new investment avenue for businesses.
There are four main types of crowdfunding: rewards-based, donation-based, equity, and debit crowdfunding.
Rewards-based crowdfunding is where backers give a small amount of money (typically between $1 – $1,000) in exchange for a reward. Often the reward is the item being produced, such as a watch, an album or a film. Kickstarter and Indiegogo are the two most popular rewards-based crowdfunding platforms.
In donation-based crowdfunding, donors donate a small amount of money in exchange for gratitude and the feeling of supporting a cause they believe in. This is typically used to raise money for a non-profit organisation or cause and/or for a personal campaign, like an individual’s medical treatment. GoFundMe and CrowdRise are two popular donation-based crowdfunding platforms.
Equity crowdfunding is generally used to raise money to fund the launch or expansion of a business. In equity crowdfunding, investors give larger amounts of money (at least $1,000) in exchange for a small piece of equity in the business. Popular equity crowdfunding platforms include AngelList in the US and Seedrs in Europe.
In debt crowdfunding, lenders grant a loan with the expectation that they will recoup the principal plus interest. This is similar to a loan granted by a bank but instead of borrowing one large amount of money from one bank, smaller amounts of money are borrowed from multiple people. Platforms for debt crowdfunding include Kiva, which is an international not-for-profit with a mission to connect people through lending to alleviate poverty.
Situated on an island in a remote part of the Pacific Ocean, Green Banana Paper, a manufacturing company recycling post-harvest banana trees into plant-based products including wallets, business cards and paper, in Kosrae, Micronesia, is a crowdfunding success story. Green Banana Paper has showed that having a story and sharing that story through social media, means that even a small island in the Pacific can extend its reach to access global funds to grow its business.
Green Banana Paper, founded by Matt Simpson in 2014, emerged from Matt’s love of Kosrae.
“I came to Kosrae in 2008 as a high school teacher with the WorldTeach program and loved the Kosraean people and the island lifestyle. At the same time, I also noticed that there were hardly any businesses, job opportunities and even fewer export products. Many of my former students were unemployed or in the US working for minimum wage. Here in Kosrae I saw a natural resource that we could recycle and transform into a beautiful product. Green Banana Paper recycles banana tree stems that would otherwise rot, while simultaneously employing locals who would otherwise struggle to find work.
“We began our initial building phase of our open-air eco-factory in May of 2014. We equipped it with custom fabricated machinery in order to stay agile and rapidly innovate new prototypes. We then spent three years experimenting and fine-tuning the technique of producing handmade paper with the natural fibres and tropical climate in Kosrae.”
As Matt and the Green Banana Paper team perfected their offering, they needed a platform on which to raise awareness of their products and mission, so they could expand. They chose the reward-based crowdfunding site Kickstarter for their campaign with an initial goal of raising US$10,000. By the end of the campaign they had doubled it, raising US$24,965 from 292 backers.
“Kickstarter was an excellent tool for us as a grassroots company and we couldn’t have asked for a better welcoming from the world. We raised well over twice our financial goal, which enabled us to expand our team of artisans and invest in new equipment to expand our production abilities.
“We are thankful to PTI Australia for getting behind our Kickstarter campaign and running a social media campaign to promote it. Kosrae is a remote part of the world, many don’t know that our island exists and having organisations like PTI Australia promoting us to their networks, helped to raise our profile in the market enabling us to exceed our goals. It’s enabled us to increase our team by nine people and it continues to grow. We just received our ‘Monster’ beater and over 100 new screens to double our papermaking capacity. We have also been able to do significant factory upgrades and renovations to maximise our space and resources.”
Green Banana Paper is a true ‘waste-to-wealth’ community business. With 27 employees, the capital injection from their crowdfunding campaign has seen them grow to be one of the top three private sector employers on the island. Green Banana Paper also work with over 100 farmers who collect extra income for their families by selling their unwanted banana stems in a natural ‘waste-to-wealth’ cycle.
27 Jun 2018
