When Purchasing Becomes Investing

V.3, N.23

For many businesses looking for local capital, the fees, disclosures, and legal hassles of regulation crowdfunding are simply not worth it. But there’s another approach that tiptoes around securities laws, commonly called pre-selling. Our interview this week is with Ross Chanowski, founder and CEO of NuMarket, who has been successfully introducing pre-selling to hundreds of small businesses across the country.

During the COVID-19 pandemic, I recommended to my blog readers that they each adopt their favorite small business to help it survive those awful years. My wife and I “adopted” Busboys and Poets in Washington, DC. We wrote the owner, Andy Shallal, a $1,000 check and told him to use the funds for whatever he needed and just give us $1,000 in gift cards. He was so pleased that he gave us $1,200 in gift cards (which we are still working our way through). That is, we got a 20% return on our investment.

NuMarket takes this simple idea and puts it on steroids. In my mind, one advantage of pre-selling is that businesses can test their customers’ willingness to support them. If a business succeeds with a $50,000 pre-selling campaign, it has more confidence that a $250,000 crowdfunding campaign will work. Moreover, banks will then have more confidence to make a formal loan to the business.

Also, in this issue, you will find our updated list of local investment offerings.

- Michael Shuman, Publisher

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