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News Article

Crowdfunding: an Alternative for Companies to Bear COVID-19

By Andrea Villar | Tue, 05/12/2020 - 05:00

The COVID-19 pandemic has unleashed crises never before seen in different industries. One of the heaviest impacts was to the restaurant sector. While some continue to provide home deliveries to maintain their staff, others have closed permanently due to lack of income. There are others who have opted for a less conventional option: crowdfunding.

Stay-at-home orders throughout the country have caused a brutal drop in sales in the sector. According to data from the National Chamber of the Restaurant and Seasoned Food Industry (CANIRAC), eight out of 10 establishments have had no sales for more than 40 days. The organization estimates that by the time lockdown ends, the damage to the sector will be equivalent to 30 percent of the sector's GDP, which means around MX$100 billion (US$4.16 billion).

Faced with this bleak scenario, companies like El Japonez, Butcher & Sons, Churrería El Moro and El Bajío have turned to crowdfunding platforms such as Donadora to raise funds and thus able to cover the salary of their staff and other fixed expenses. Crowdfunding is a trend that is growing in different countries and is lately being driven by the crisis caused by COVID-19. In the US, the GoFundMe platform increased the number of COVID-19-related campaigns by 60 percent from March 20 to March 24, according to The New York Times. While at Indiegogo, daily funds raised grew 24 percent compared to the second half of March 2019, the company reported. According to Statista, the market value of crowdfunding will be US$28.8 billion by 2025.

Donadora, which was born in 2016 and was a helpful platform for those affected by the earthquake in September 2017, created the section #ActúoPorMéxicoCOVID19 that to date counts more than 300 listings from different sectors gathering donations for more than MX$15 million (US$620,000) from more than 15,000 donators.

This initiative not only supports the restaurant sector, said Donadora Coordinator Ingrid Urdapilleta. It also has campaigns that seek to economically support artisans, organ grinders and even mariachis from Garibaldi. One business that ended its funding in Donadora in late April was Cine Tonalá, which within 45 days raised MX$471,000 (US$19,600) with the help of 712 donors. Its goal was MX$1.8 million (US$74,900).

“All the campaigns in Donadora are projects that generate some positive impact, be it on the community, the environment or even on the well-being of someone who does not have the economic possibilities to treat an illness. Because of this, it is not necessary for the campaigns to reach 100 percent of its goal for us to deliver the money. However, the minimum collection is MX$5,000. If the minimum is not raised, the money is reimbursed directly to donors," said Ingrid Urdapilleta in an interview with Mexico Business News. Usually, Donadora charges a commission of 7 percent on the total collected. However, campaigns related to COVID-19 will charge a commission of only 4 percent of the total sum. 

By the end of 2019, 635,788 businesses in the country were dedicated to the restaurant and food sector, according to data from INEGI. Out of that number, 98 percent are MSMEs, while six out of 10 are family businesses. The sector gives direct employment to more than 2.1 million people in Mexico and indirectly employs 3.5 million people.

Andrea Villar Andrea Villar Journalist and Industry Analyst