There are many aspects of the current election cycle that should be of interest to burgeoning entrepreneurs, but none are more relevant than the tactics politicians use to raise large sums of money for campaigns.
Small dollar individual donations
According to the Federal Election Commission and U.S. campaign finance law, an individual can give a maximum of $2,700 to a candidate’s campaign for federal election, but as OpenSecrets.org points out, more than 90 percent of U.S. citizens have never contributed to a politician’s campaign. Typically, the vast majority of campaign funding does not come from small dollar individual donors, however, the 2016 election cycle has upset traditional thinking regarding that type of funding. The FEC states that Democratic presidential candidate Bernie Sanders has raised more than $74 million so far his campaign, with only a small percent of his donors giving the maximum amount. Entrepreneurs can emulate Sanders’s success by using social media and crowdfunding platforms to secure both a sizable amount of seed funding and definitive proof that the market has an interest in the entrepreneurs’ products or services.
Large dollar individual donors/super PACs
Large dollar individual contributors and super political action committees (super PACs) account for most of the funding spent in federal elections. As there are no limits on how much money super PACs can receive, wealthy individuals, corporations and organizations, like labor unions, contribute considerable amounts of money to support congressional and presidential candidates. For example, according to the New York Times, in the current cycle, billionaire George Soros donated $6 million to a super PAC that supports Democratic presidential front-runner Hillary Clinton. In the business world, these types of contributions are comparable to funds secured through venture capital financing. Candidates typically see a spike in financial support after a solid performance in a debate. Likewise, entrepreneurs should examine how Oculus VR was able to secure $75 million in venture capital funding shortly after becoming a social media and crowdfunding sensation.
Although a relatively rare type of campaign funding, some candidates for federal office fund their own political campaigns. In the past, this funding method has typically been employed by candidates who have not established themselves on the national stage, but dark horse Republican presidential candidate Donald Trump has found incredible success in this cycle by funding his own campaign. While most entrepreneurs and small business owners will not come to market with billions of dollars already in the bank, recent disruptions in the financial sector have opened up new ways to access capital. Whether it’s through the liquidation of your assets or securing a loan through an online financing company, seed money is available for those who wish to pursue it.
This article was written by Mario McKellop for Small Business Pulse