There is that urban myth about a programmer who wrote a program for a bank, where for every transaction done, a deposit of one cent, I think it was US cents, into his own account˳ Eventually he had millions but unfortunately for him he was caught and imprisoned˳ I am not sure if the story is true or not but the point of the story is that he used minimal amounts on a large scale to make millions in a very short time period˳
The other day, through random surf around on the Internet, I discovered that there is a growing online trend, the concept of crowd-funding˳ Perhaps it is not such a new concept as politicians have been doing it for years to raise funds, even charities or entrepreneurs do it˳ However what is new, at least for me, is that it derives from crowd-sourcing or user generated content, which involves allowing work, or in this case investing, to be outsourced to the masses or particular groups of individuals therefore making crowd-funding one part social network and one part capital accumulation or fund raising˳ What makes this even more interesting is that it is being used as a business model˳
Essentially the model includes many micropayments, done via supporters, or as some entities call them micro-investors, who all donate or invest a small amount into a concept or product which will eventually, pay off if enough people provide the determined amount˳ If the determined amount is not reached there is no payoff to anyone which can make it a bit of a gamble˳ Should the amount be reached all the investors are rewarded in some manner, either in a cut of the total future sales or provided with goods or services exceeding their initial payment˳ Crowd-funding entities seek to harness the enthusiasm as well as the cash of strangers, usually from the Internet, by promising them a cut of the returns (the incentive) which, in my opinion, is similar to concepts found in gambling where a higher risk equals a higher payoff usually˳
Although this concept is not particularly new it only seems to be appearing around the web now and is starting to become quite mainstream and socially acceptable˳ This business model appears to be growing and soon we will see a lot more businesses adopting this model, especially due three main factors:
- The World Wide Web has become a global phenomenon connecting more and more people on a daily basis; the perfect medium for communication across the globe˳
- Increasing trust and convenience of moving services online˳ For example people are less worried about entering their credit cards online or people prefer to check their accounts online, etc…
- Global recession; Due to the financial recession of 2008 it is more likely to be a more cautious behaviour towards to new investments or payments˳ This might contradict my previous factor however it doesn’t necessarily as it could encourage people to diversify their investments across many portfolios which lends itself well to crowd-funding˳
In conclusion, crowd-funding might still be in its enfant stage, it is set to grow especially as it is a simpler and potentially faster method for raising awareness or money˳ I don’t expect it to become a global phenomenon overnight as it is not ideal for every business or initiative; however it will slowly become more and more widespread, especially with more tech-savvy users˳
Currently it is primarily based on fund raising but it could evolve to include more than monetary gain, such as opinions or exchanges for other services˳ Which ever the case, it is definitely focused on the commercial usage of communities where each individual can become a participant and part owner of ideas, goods or services˳
Some illustrative examples websites worth taking a look at:
Crowd-funding can be applied to any industry; as long as there is a community and a need there will be all sorts of crowd-funding initiatives appearing˳ Take a look at the following examples to see what I am referring to˳
Quirky
Probably my favourite crowd-funding website, aimed at Inventors and Product Designers who get their chance to market their products via the ‘social product development tool’ which essentially is a community of users who vote, discuss and critic any ideas submitted˳ All submitters need to contribute $99 but in return they get great opportunities, ideas, reviews or even threats˳
This might not appear to be the traditional crowd-funding website but the community support appears to be very good which allows an inventor to learn about the market’s requirements quickly as well as exposing their ideas to a large audience˳ Additionally, Quirky claim to provide an easy transition from any successful idea into manufacturing which might hamper a lot of designers˳
Sellaband
Sellaband is a ‘fan funded music’ website, which is based in Amsterdam, Holland and Munich, Germany˳ It has been operating since 2006˳ The website allows music lovers to connect with unsigned artists looking to record albums˳ It allows another way to bypass the record labels, which is great news for indie label lovers˳
Musicians have profiles with biographies and songs˳ The musician is required to sell 5,000 shares, at each, where they are allowed to enter recording studios˳
If you have invested in a band who succeeds at obtaining a record detail all investors will be recorded with either free band merchandise, music or even a split of the future revenue˳
Cofundos
Cofundos is provided by the University of Leipzig, Germany˳ It provides users to submit software requirements and ideas, which are sustained with bids˳ Developers are then invited to read these requirements and if they decide the idea and requirements are feasible they request to perform the work, bid˳ Once all list of developers are realised the community who initiated the idea or requirements decide on developer who will perform the work˳
Once the developer has completed the project the submitters will determine, via a majority, if they successful and that the end product achieve the original goals˳ If this is the case the developer receives the pot of money˳
It may seem quite lengthy and strict but I would imagine this is to protect the bidders from receiving their goals˳ Software houses might consider this model moving forward in attracting the correct talents and reduce time to market on new projects˳
indiegogo
Founded in 2008, IndieGoGo is more a generic fund raising website aimed to utilise their existing community to help people with any project, which can be anything such as a cause, a film or really anything to reach their threshold by a defined particular timeframe˳ IndieGoGo charge for 4% of the total raised amount if you reach your threshold or 9% if the threshold is not reached˳
Each project or initiative has their own rules and policies where some don’t even necessarily reward their contributors˳ This appears to be the more generic crowd-funding website that I have seen yet but definitely has the widest range of initiatives˳
Source by https://ezinearticles˳com/?How-Crowd-Funding-Is-Changing-Online-Business&id=5716280
