Annabelle Lessner knows it takes dough to make dough.
So, if the 13-year-old baking entrepreneur is to launch a utensil company she’ll need seed money. Banks aren’t likely to back a minor – even if the teen does have a clever consumer product idea.
Annabelle, however, found a believer in businessman Mark Hagar, who invested an undisclosed amount to help finance the prototype for YummyKone, a silicone device that holds ice cream cone cupcakes in place in the oven.
It’s a good novelty item and I think it has a pretty good chance of getting funded, Hagar said. It does solve a problem in the kitchen because if you’re trying to make cupcakes inside a cone they do keep falling over.
Hagar is president of FirstBreakFunding.com, an online fundraising website where people who deem a product, concept or cause worth the risk make donations. In return, donors may receive various gifts or product samples. The financing method is called crowdfunding.
First Break Funding was launched in March. Hagar is a local investor with a proven track record with the Northeast Indiana Small Business Development Center, said Jane Rich, regional director of the organization. Hagar is owner or part-owner of multiple companies, including Specialized Printed Products, eMAGC.com and Geyer Instructional Products.
Hagar said the Lessners must pay him 8 percent of the money they raise, which includes credit card processing fees.
The daughter-dad team has until May 25 to raise up to $2,500. The money will be used to do produce a limited number of the YummyKones to hawk to other donors with the hope of growing the startup.
So far, they’ve raised about $400. They started about a month ago. If the pair don’t reach the fund-raising goal, donors get their money back.
Annabelle said she got the idea for YummyKone last year after trying to bake cupcakes for classmates at Woodside Middle School. The seventh-grader told her father, Eric, about her situation, and the two set out to resolve it.
We worked together on this, Annabelle said. It was fun.
They appealed to the Northeast Indiana Small Business Development Center and officials there assisted them with a business plan, company structure and marketing advice. They also recommended Hagar.
We have three clients that are considering this type of funding, Rich said. It’s not for every product, but it seems it would work well with consumer-oriented products. Investors are usually looking for advanced manufacturing or high-tech companies, so crowdfunding is a great seed-funding alternative.
Kendall Almerico agrees. The Tampa, Fla., businessman is viewed in some circles as an authority on crowdfunding. He has touted the benefits of the money-maker and recently launched ClickStartMe.com, another online crowdfunding website.
It makes it easier to collect donations, Almerico said. There are people with great ideas but get turned down by the very people that caused the financial crisis.
Almerico said banks and other lending institutions are holding the economy back by being tightfisted toward up-and-coming companies that would create jobs.
According to crowdsourcing.org, crowdfunding platforms raised $2.7 billion in 2012, an 81 percent increase from a year earlier. The industry likely will grow to $5.1 billion this year.
It’s almost impossible for a small business to get conventional financing in today’s world without some type of collateral, Almerico said. This is why in 2014 it could grow into a $15 billion industry when people are allowed to buy equity in companies.
The Jumpstart Our Business Startups or JOBS Act will permit a person to buy a stake in a company through crowdfunding. The legislation would eliminate the long process of filing registration documents with the Securities and Exchange Commission. The law considerably streamlines the paperwork required by companies.
Annabelle said she would love for investors to back her product, but has no intentions to sell out.
I would like for it to stay in our family, she said. It’s something me and my Dad did, and I’d like to keep it that way.
Eric Lessner feels the same.
I don’t know if I would have kept up with this if it had not been for Annabelle, he said. She was excited about it, so I wanted to see it through with her.