How Equity Crowdfunding Could Save My Island’s Only Bookstore

Written by Co-Founder Arthur Hardy-Doubleday 

Today’s independent book stores are having a hard time surviving.  The growing popularity of E-Books has crushed the book store’s traditional business model.   I have watched as Martha’s Vineyard has gone from three book stores down to just one.

Last week, the owner of the last surviving bookstore, Bunch of Grapes, announced that she would be moving her store across the street to downsize and save money.  Many islanders commented in the Martha’s Vineyard Times  about the planned move and whether it was the right strategy.   Judging by the number of comments, Bunch of Grapes has a deep base of support that wants to see it survive.  How does a loyal consumer base translate into better revenue?  Equity Crowdfunding.
Perusing through the comments sections of the MVTimes article covering the move, there were a number of different supporters that questioned the book store’s business model.  While they support this flagship store of Tisbury’s main street, they don’t necessarily agree with how it’s presently being operated.

Equity Crowdfunding could save the store from eventual closure.

There has been a lot of coverage about how equity crowdfunding could help startups.  However, startups will not be the only beneficiaries of the recently signed Jobs Act.  Small Business will also benefit from this new way of raising capital.  They can increase working capital without increasing fixed term debt.

Bunch of Grapes has an active fan base.  Many people shop there because they want the store to survive.  I count myself among them.   The downsizing of the store signifies the need for the store to re-think its business model.

Once equity crowdfunding is allowed (expected early 2013), the owner could create an equity crowdfunding transaction where in exchange for equity, her fan base could provide capital.  Part of the process would include the owner publishing a business model online using a crowdfunding platform.   The contents of that document would disclose how she would use the capital to improve operations.

Over the course of her equity offering (let’s say 90 day period) she could field questions in an online forum about assumption she made in her model.  Foreseeably, there would be individuals that might have suggestions on how she could improve her business.

Islanders who know how important Bunch of Grapes is to the Tisbury businesses district might consider buying equity because they want to see the bookstore survive.  In turn, the owner would get debt free capital that would help her stabilize her operation.

The underlining assumption in the purchase of equity is that it will be worth more tomorrow than what it is today.  The owner would need to prove how this capital could improve her operation, stabilize her business. and help it grow.

The entire process opens a dialogue between business owner and investor/consumer.  The owner thinks through her business model and the community validates her assumption through buying equity.

If the Bookstore raises its goal, it survives.  Islanders keep their coveted bookstore.  The owner now has a base of equity owners who will shop at the book store to help their equity investment increase in value.

While startups will defiantly play a huge role in validating equity crowdfunding, they won’t be the only beneficiaries.  Main Street America stands to benefit from this new form of “local vesting.”

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