-- With major U.S. stock markets losing nine percent of their value in a rough and tumble three day period, and many overseas markets seeing similar losses or worse, small businesses and other independent artists who rely on crowdfunding campaigns are beginning to worry about what effect these market corrections will have on the future. According to several experts, these worries may be well grounded.
People are four times more likely to react negatively to a 1,000-point drop in the stock market than a 1,000-point gain and that psychology and mentality is going to spread across the markets,” said Anindya Ghose who is a professor of IT and marketing at NYU’s Stern School of Business. He spoke recently to Catherine Glifford of Entrepreneur about the effect of the recent sell-off, pointing out specifically that crowdfunding falls into discretionary spending and an uncertain market makes people close those purse strings first.
Although most people think of projects they find on Kickstarter or other crowdfunding platforms – and the chance to get a small token from the company in return for their investment – there is a separate arena that is more likely to be affected. Known as equity-based crowdfunding, this requires investors to be “accredited” with a certain amount of wealth. However, their investment buys them more than a gift. It gives them partial ownership of the company.
“If we think about the equity crowdfunding market,” says Christian Catalini, assistant professor of technological innovation and entrepreneurship at MIT's Sloan School of Management, “what may happen if the market continues to go down is, of course, that there will be less liquidity available and so, less investment.”
Some of the people watching this the closest are the search engine optimization companies across the country who have expanded their services to include social media management, personal promotion and crowdsource funding management, to see how it might affect their clients.
“Most of our clients who participate in crowdsource funding do so on the more basic level,” said Jennifer Finnell, owner and founder of Team Wildflower, LLC. An SEO company based out of the Midwest, her company focuses on small businesses and helps them find ways to compete against established companies. “Thankfully, we don’t have anyone in a campaign now, and those that are planning one soon we have advised to be prepared to wait until later this fall.”
Although aware that a raise in the interest rates may further slow the economy, Finnell does not believe that the recent correction is indicative of a coming bear market, an opinion that has many voices on both sides.
“It is too early to say if this is a situation that will deteriorate or get worse or if the market will be able to correct itself,” Catalini said while talking to Glifford for the same article in Entrepreneur; Ghose was far more definitive in his opinion: “I am pretty confident this is the beginning of a much needed correction.”
For more information about Team Wildflower, please visit the website: www.teamwildflower.com
**Jack Terry is a freelance writer who knows that bulls run in Spain and bears like to steal your pic-a-nic baskets
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Name: Jack Terry
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Organization: Team Wildflower
Website: http://www.teamwildflower.com
Release ID: 91178
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