Jessica Jackley talks ProFounder, crowdfunding

As most small business owners will tell you, acquiring funding from traditional sources for a young venture can be challenging, if not impossible. Enter ProFounder.

Launched in 2010, ProFounder is an online crowdfunding platform that allows entrepreneurs to raise investment capital from their communities.

ProFounder helps entrepreneurs craft an investment pitch that tells their business’s story in a compelling manner, creates a fundraising website that is published only when they want to go live, and tracks the emails sent to prospective investors to facilitate easy follow-up.

Once entrepreneurs reach their fundraising goal, ProFounder makes sure the money is transferred, sends reminders about making quarterly revenue reports, and even creates a downloadable chart detailing the payment each of their investors is owed.

If you’re curious about what’s next for ProFounder, or wondering if crowdfunding could be a good fit for your business, the following interview with Jessica Jackley should interest you. Not only is Jackley founder and CEO of ProFounder, but she is also a respected authority on microfinance and social entrepreneurship. (She co-founded Kiva, an online peer-to-peer microlending organization, in 2005.)

The Metropreneur: The concept behind ProFounder is that communities, not traditional funding avenues, are the best source for the capital small businesses need, right? Why are communities a better source?

Jessica Jackley: We do believe that communities, i.e. friends and family and beyond −classmates, colleagues, loyal customers, et cetera− are a powerful source for funding for a few reasons. The truth is, they are already providing the vast majority of funding to private companies in the U.S. right now: 87 percent, or $144 billion, of it! Communities provide a great deal of additional non-financial support as well, by being spokespeople and ambassadors for the small businesses they love. Small businesses don’t get this when they just receive funding alone from a big institution.

[M]: What are other advantages to crowdfunding?

JJ: Crowdfunding allows you to take advantage of your biggest existing resource: your community. And in addition to accessing the capital you need, crowdfunding gives you an excuse to create a marketing tool in addition to a financing tool, as those invested in your business will become more loyal customers and avid supporters. Many entrepreneurs on ProFounder have expressed an appreciation for sharing risk as well as reward among many investors, putting less financial pressure on just a few individuals and letting many people participate in the financial success of the venture as well. Last but not least, we think crowdfunding on ProFounder can lead to better terms and a friendlier process for all.

[M]: Is crowdfunding a good idea for every small business? Or does it work better for specific types of enterprises?

JJ: Crowdfunding isn’t for everyone, but we believe that many startups and small businesses can benefit greatly from it. Businesses that really value their customers, colleagues, and communities at-large, and want to do the work of engaging them will find crowdfunding the most valuable. And it helps if entrepreneurs have already started the work to build a large, supportive community around them. It is especially helpful if that community is forward-thinking and tech-savvy enough to be comfortable using an online investing platform.

So, for crowdfunding to work well, it really comes down to the attitude and values of the entrepreneur as opposed to the type of company. We’ve had everything from iPad apps and an electric motorcycle company to a small fashion designer and a small candy store raise money successfully.

[M]: How many entrepreneurs have used ProFounder to grow their businesses since its launch?

JJ: While my cofounder, Dana Mauriello, and I have been working on ProFounder since August 2009, we only officially launched in December 2010. In the last few months since then, 13 businesses have raised a total of $366,000 from 273 investors. One of the more surprising and notable things we’ve observed is that the average number of investors in each business so far is 20 and the average investment is actually around $1,300. This goes against a very common, popular idea that crowdfunding takes hundreds of people contributing $5 to work.

[M]: What would you like ProFounder to achieve in the months and years ahead?

JJ: ProFounder’s mission is to ensure all entrepreneurs have access to the resources they need to succeed through the engagement of robust, supportive communities. We are very excited to roll out both new compliance options, as well as new term sheet options, for our users, which will give them more and more ways to structure the type of investment opportunity that fits their business and their community best. We just made equity terms available for use last week,and have already seen a huge amount of interest here. Stay tuned in the next few weeks for other terms, like convertible debt, and other compliance engines, like ones to allow for semi-public, locally-based marketplaces, to launch!

We also have other ways for individuals and organizations, like universities, incubators, companies and other groups, to champion small businesses and startups they love, through specially branded sites. ProFounder is just beginning to work with a few initial partners to create special landing pages, customized dashboards and admin tools, and more. These branded sites give organizations the ability to not only engage their entrepreneurial community in a unique way, but also allow them to provide other value-added services to their members to augment the ProFounder experience.

Through all of these new developments and more, we know we’ll be getting closer and closer to our vision to see all people empower to pursue their dreams through entrepreneurship.

[M]: You were the keynote speaker at the Alleviating Poverty Through Entrepreneurship Summit at The Ohio State University in April. When you were in Columbus, who did you meet and what was your impression of the local entrepreneurial community?

JJ: I was really impressed with Columbus! Having grown up in Pittsburgh, not far away, there was a wonderful familiarity and great culture that definitely felt like home to me. I enjoyed my meetings with students, community leaders, incubators, and more. The city has a lot to offer: OSU, leading corporations and research institutes, more than a dozen Fortune 1,000 companies, and thousands of small and large tech-based/tech-enabled companies. I hope to be back soon to meet entrepreneurs one-on-one and get to know more of the incredible professional community there.

[M]: As evidenced by Columbus area organizations like Dine Originals, Local Matters, and The Small Business Beanstalk, as well as 25-plus farmers markets, the “buy local” concept is definitely taking hold here. Do you think communities that embrace buying local are especially ripe for crowdfunding platforms like ProFounder?

JJ: Yes! You couldn’t have asked a better question. Local communities are primed to understand and readily adopt crowdfunding. We look forward to continuing to expand our product offering to more directly offer an “Invest Local” option. Keep an eye out for new development there later this year!

To learn more about ProFounder, visit ProFounder.com.