Crowd Funding – Financing the 21st Century

I know it has been around for a few years in its present form now (and there are examples back in the 50’s) but I have started to consider crowd funding as a realistic and practical form of raising finance at a time when traditional bank based facilities are harder to come by.

What is Crowd Funding? Definition via Wikipedia

Crowd funding or crowdfunding (alternately crowd financingequity crowdfunding, or hyper funding) describes the collective effort of individuals who network and pool their money, usually via the Internet, to support efforts initiated by other people or organizations.[1][2] Crowd funding is used in support of a wide variety of activities, including disaster reliefcitizen journalism, support of artists by fans, political campaigns, startup company funding,[3] movie[4] or free software development, inventions development and scientific research.[5]

Creating and adopting new Innovations, Entrepreneurialism and Start-Ups are becoming much more feasible alternatives than committing your life to the corporate 9-5 career but sadly triple dip recessions and insurmountable pressures on banks to improve their balance sheets has meant that convincing a bank manager to part with a few pennies is not as easy as it once one. (As a side note, here is a link to an article I wrote on submitting a business plan to a bank)

From my perspective, the attractiveness of crowd funding is 3 fold:

  • You get otherwise un-achievable exposure to your proposal. The internet allows people from all over the world to consider your idea and assuming its a good one can attract a much larger pool of people to help you achieve success.
  • The risk is spread across how ever many individuals or VC’s you can get to sign up, generally meaning that you as a business can maintain control over the project .
  • There are a lot of people out there willing to part with their own money much more readily than a bank, think you have a good idea but are afraid or don’t have the knowledge to implement what you are doing.

I personally am a fan of the third point; I love the idea of being able to be part of something from the growth stage, probably why I am in commercial finance myself and enjoy working with start-ups and high growth potential clients.  Using traditional means of investing, IE purchasing shares assures you of a potential return, be it dividends or increase in share value, but limits the emotional connection that you might get from crowd funding an idea.

crowdfundinginfographic

The first experience of crowd-funding that I directly came across was a brewery in the north of Scotland called Brewdog.  2 young dynamic individuals who had a passion for beer and growing a business unlike the market dominating multinationals. They used crowd-funding to help finance their expansion plans with a new brewing and bottling site and to support their overseas sales. In return people were given nominal shares, invites to Brewdog events and personalised beers amongst other things. More than anything it allowed anyone and everyone to feel part of the Brewdog culture and family, supported by some great social media marketing, communications and branding.

I can see a number of intelligent, creative and dynamic individuals coming out of universities and colleges all across the globe in the coming years and thinking of crowd-funding first and bank funding second and I for one am in support of that.

What is your impression of crowd-funding and have you heard of any stand out successes that you wish you had supported?

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