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'Crowdfunding' Gives Small Maine Start-ups a Boost
03/16/2012   Reported By: Patty B. Wight

Getting a loan to start or expand a business may never have been a sure bet, but it's particularly challenging now. As banks are more cautious about where they invest their money, some businesses need to find funding elsewhere. One of their choices is called "crowdfunding." That's where the public pools money together to support new projects or enterprises.

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Patty story

Some Maine start-ups, like Union Bagel in Portland, are finding crowdfunding a useful tool to see their ambitions come to fruition. "So I've already added the water, I'm gonna add a little salt and the other ingredients," says Paul Farrell, who is mixing bagel dough in the community kitchen at the Public Market in Portland.

Farrell (right in photo at right) says he's been dreaming about making and selling his own hand-made bagels for years. Last November, he took the plunge. But the money to set it up quickly disappeared. "Most of whatever I had saved up has gone into this already," he says.

Farrell is getting help from business partner and friend Nina Murray (left in photo) and a few others. They needed more funding, so Murray says they decided to try Kickstarter, one of several online platforms for crowdfunding. "It's a pretty easy set-up. All you have to do have is a bank account and an address."

Once you've got that, you post a video to the Kickstarter website and a pitch, set a minimum funding goal and a timeframe, then spread the word so that people go to the website to make a donation. Union Bagel met its goal of $7,500 in just 18 days, and donations are still coming in.

"You know, you set a 30-day timeframe on raising your funds, you wait 14 more days, and we'll have $7,500 in our hands immediately. So that's the kind of immediacy a bank loan can't give you," Murray says.

And unlike a loan, that's money that doesn't have to be paid back. In lieu of a financial debt, Paul Farrell says he feels an emotional one.

"We're almost more on the hook. Money's just money, but when people are giving you their confidence, their belief, their trust, their faith, it's like - alright- it's good. It's good for us. It's going to keep us on our toes and hopefully force us to be successful."

Another Maine business that is seeing success is The Gelato Fiasco, which opened in Brunswick five years ago. "Over the years we've developed a thousand flavors at this point," says Josh Davis, one of the owners.

Davis says he and co-owner Bruno Tropeano are no strangers to the challenges of getting funding. He remembers when they tried to get loans to start their business. "We went to about 20 different banks, and got turned down by all of them," he says.

Eventually, they did find a bank to back them. And things went pretty well--so well, that they decided to open up a second location in Portland. But once he signed the lease, the bank told him they actually weren't in a position to give a loan.
"Banks are just really, really reluctant to deal with anything less than the absolute sure bet," Davis says.

Two more banks turned him down, then Davis went to a local CDFI--a community development financial institution. They granted him a loan, thanks in part to a new crowdfunding initiative from Starbucks. It's called "Create Jobs for USA." You can donate money at Starbucks, and get a special red, white and blue bracelet if you give at least $5.

All of that money goes to a national network where it is eventually distributed as loans for businesses that will create jobs. Jennifer Sporzynski oversees some of the lending programs at Coastal Enterprises Inc., which loaned Gelato Fiasco money for its new location. "We're filling a need that frankly is just not profitable for a bank," Sporzynski says.

So far Coastal Enterprises has received more than $170,000 from the Starbucks program, but Sporzynkski says the money will go much further. "We'll be able to revolve this money, so while it's $170,000 now, we can continue to lend it as long as it gets paid back. So in fact we'll get more than that first deployment."

The money is just a drip in Coastal Enterprises overall lending bucket of $8 million. But it's Director of Communications Grace Cleaves says the attention the Starbucks program brings is significant.

"The exciting thing about the Starbucks program is that it allows people like you and I to give $5 at the cash register at a retail store and feel like we're doing something to create jobs in the country," Cleaves says. "You know, the government can't do it all."

So far, the Gelato Fiasco has hired six employees for its Portland location. And it is going to give back to the program that helped expand the business. Josh Davis says they're going to release a special gelato flavor.

"Yeah: Sweet Resurgam," he says. "Resurgam is the motto for the City of Portland, and it means 'I will rise again' in Latin."

It's made with burnt sugar almonds and a salted caramel and chocolate chip swirl. It's a limited edition, and the Gelato Fiasco will donate $1 from each pint to Create Jobs for USA.

Photo by Patty Wight.


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