Introducing a new innovative product or idea can cost thousands of dollars & take up lots of time. Many people never follow through with their ideas because they didn’t have the money or the time so licensing was their next best bet. Licensing your idea means you give the right to another company or manufacturer to produce a product based on your idea.
I bet you’re already kicking yourself.
In today’s society however, you no longer have to give your idea to someone else to act on, globalisation & the internet is here to help. US startup company Pebble only required $100,000 to help fund the cost of starting their wrist watch company. To their surprise they managed sell their company idea for over $10 million.
The answer lies in crowd funding.
The definition of crowd funding from crowdsourcing.org is as follows:
Financial contributions from online investors, sponsors or donors to fund for-profit or non-profit initiatives or enterprises. Crowd funding is an approach to raising capital for new projects and businesses by soliciting contributions from a large number of stakeholders following three types of crowd funding models: (1) Donations, Philanthropy and Sponsorship where there is no expected financial return, (2) Lending and (3) Investment in exchange for equity, profit or revenue sharing.
Broadly, crowd funding encompasses schemes that seek to raise funds, typically for business proposals and ‘start up‘ companies, through donations from internet users.
Key indicators that crowd funding will take off during the year of 2013 include:
- JOBS Act 2012, USA – recognition of crowd funding as a possible way to fund start ups & small businesses, alongside lower regulatory compliance requirements;
- Inspires innovation – the lucrative market heightens the chance of having a successful business through sufficient funding;
- Search trends are increasing – see images from Google Trends below;
- Platforms available – there are many crowd funding platforms available, including a diversity in the purpose & type;
- Market size – analyst forecast of global crowd funding revenue (funds raised) to double in 2013 to $6 billion.
Some of the largest crowd funding websites such as Kickstarter and Australian owned Pozible have helped crowd fund many innovative & creative projects. Some projects include Pebble, Perth born Ninja Blocks and Australian music group Eskimo Joe will be recording a brand new album thanks to crowd funding.
Globalisation, the internet, social media & generation Y babies are the reason why crowd funding has taken off in the past few years. That and the opportunity to take a cut of the donations as the platform provider. With globalisation and the internet making the world a smaller place it’s become easier to transfer information. In 90% of cases you’re selling your idea to the masses since most startups or small businesses have no product yet. Once someone is convinced of your idea and they have pledged to donate, more likely than not they will also help promote the project. This is a simple rule of human behaviour – people who have committed to a cause or project will support and promote it as it’s now part of their identity. Through social media the new cause or project they are now a part of will spread, thus increasing the chances raising the required amount.
In a day and age where being an entrepreneur is desirable due to low start up costs & better technology, coupled with the knowledge of crowd funding possibilities, crowd platforms are far from being scarce and there is even a variety in what they do. For example there are the project & innovations based ones such as Kickstarter, Pozible for creativity, micro financing for third world country entrepreneurs can use Kiva, and there’s even a platform to connect & support aspiring musicians with their fans & a venue, GiggedIn.
It’s important to note that in Australia there are certain rulings around receiving finances from crowd funding sources. There are different types of crowd funding services including donations that are made:
- in good faith;
- for trade of goods once made;
- for equity in the business.
Furthermore there are models known as “All or nothing” where donations are only taken if the goal amount is reached or exceeded, or “Keep it all” where donations are taken regardless if the goal amount was reached.
Crowd funding is a fantastic way to foster innovation and creativity in people of all ages as the monetary barriers are all but knocked down. It’s also a great way to find out whether or not there are others who buy into your vision – believing in it yourself is one thing, having others follow you is another. As mentioned before if you can get supporters then you will most likely have a follower for life (as long as you deliver on what you promised). I’m a big fan of crowd funding myself as it gives me the opportunity to see ideas and projects that I would not have otherwise been exposed to. It’s also a source of inspiration to see others live out their dreams.
Have you supported a project that was after crowd funding before? If so what was it and how did the project go? If not, why not?