LINCOLN PARK — A tech startup that will allow loyal customers and friends of neighborhood businesses to invest in the local enterprises has decided to launch in Chicago.
Bolstr, a crowd funding platform that allows small businesses to sidestep bank loans, is launching in Lincoln Park, Lakeview, Bucktown and Wicker Park, and hopes to expand nationwide.
So far, a hot dog restaurant has used Bolstr to raise $6,500 to open a food truck to take to festivals; a commercial artisan bakery used Bolster to fund the opening of a retail location; and a Wicker Park-based jewelry shop raised $2,000 to import inventory from overseas.
Small businesses are having a hard time taking out loans for capital less than $100,000, according to Bolstr co-founder Larry Baker. With the new platform, not only will they be able to raise that money, but they will attach themselves to their customers.
With Bolstr, investors typically agree to fund a business in exchange for a percentage of top line revenue until they reach a certain return on the investment.
"Instead of going to Starbucks, maybe it's like, hey we invested in the local coffee shop," Baker said. "I'm going to walk the extra two blocks because I know the business owner and I invested in the business."
The ability to connect with customers is another benefit of using Bolstr.
"People are going to be so much more loyal to the business because of the financial stake they have in it," Baker said.
In the case of the hot dog shop, the business owner had the capital to purchase the food truck, but chose to let about 100 investors in on the deal. He's going to paint each of their names on the truck.
"He saw a benefit of having a ton of people from Chicago commit to helping him raise the money for that," Baker said. "They are now going to be your biggest supporters."
Bolstr chose not to release the names of investor companies because the platform is still in its infancy. But a Forbes.com columnist, writing about the company, called it "one of the best crowd funding platforms I’ve seen."
The decision to launch the platform in Chicago was a no-brainer, Baker said.
Baker, a native of Maine, and co-founder Charlie Tribbett, who grew up in Chicago, saw the city's distinctly loyal neighborhoods as the perfect jumping off point for the company.
"Chicago, in general, has its really unique neighborhoods that have their own characteristics," Baker said. "We were able to tap into that and allow these people to support their local businesses in a deeper way."
Until further stages of the U.S. Jumpstart Our Business Startups Act go into effect, only people who have a prior relationship with a business owner can become an investor, but that could change in about a year to open it up to all investors.
"It’s instead of going downtown to the black tie event and putting $10,000 on the silent auction, put it on Bolstr and invest local," Baker said.
The service is free for now, but Bolstr will implement a pay model later, possibly taking a small portion of the revenue or a fee.