How Crowdfunding will Change the Business World

By Eric Michaels,

Financing a project through online contributions, also known as crowdfunding, was initially met with skepticism and its detractors were repeatedly stunned by every success. Now, however, it has proven to be far more than a fad and everything from major motion pictures, to personal vacations has been successfully crowdfunded. When it comes to the business world, the implications are just as big. Here’s how crowdfunding could change the way business gets done.

Photo courtesy of Shutterstock.

Photo courtesy of Shutterstock.

A shift in financing power

“In the ’90s, you would raise $5 million or $10 million in an IPO, but those days are gone, and that has created this black hole for companies,” said Mark Cuban, the billionaire owner of the Dallas Mavericks, in a 2013 interview with the Washington Post. The low level of investment disappeared for start-ups, creating a business food chain that lost a good deal of innovation once dominated by small, hungry companies.

Reeling in contributions to a crowdfunded project may be easier when you allow people to join in the creation process.

Making funding available by simply promoting a project online was unthinkable, even during the period Cuban discussed. Instead of smaller companies finding a way to compete with larger corporations on the basis of their new ideas, start-ups were often swallowed by the bigger fish in the business world. Crowdfunding radically shifted that power dynamic, and now, instead of a start-up failing in its search for angel investors or other sources of capital, the company has the opportunity to find life with a campaign through Kickstarter, Indiegogo or other popular crowdfunding sites.

Empowering entrepreneurs

For entrepreneurs that have been frustrated by a lack of funding in the past, the idea of raising money online may sound too good to be true. In fact, the only requirements for a solid crowdfunded campaign are a quality idea and the ability to generate publicity through the power of social networks and elsewhere online. This shift in funding potential stands to empower entrepreneurs in ways that haven’t been possible for decades and, in many cases, doesn’t require compensation because the crowdfunding paradigm typically specifies that contributed monies do not have to be paid back.

Additionally, it’s not difficult to convince people of the worthiness of a good idea. Filmmaker Zach Braff, who managed to raise over $3 million with a crowdfunded campaign for his movie Wish I Was Here, perfectly illustrates the power of this business model. In a film industry awash in sequels, sci-fi blockbusters and comic book movies, independent filmmakers are having trouble making and distributing small-scale movies. In Braff’s case, the public recognized the value of his small movie with heart and contributed in kind. Braff made his film and eventually found distribution, which, if even only for a brief moment, upended Hollywood’s control over how modern films are financed.

Entrepreneurs with a product or service poised to challenge an industry’s status quo can appeal to the public in the same way and redefine how small businesses are financed. Small contributions from thousands (or millions) of people can change the direction of an industry if the ideas are worthy and the fundraising campaigns on Kickstarter and other sites are successfully managed. The result? . . . Mark Cuban may no longer need to lament the loss of the dynamic wherein a scrappy small company challenges an industry Goliath.

Crowdfunding and monetizing creation

Reeling in contributions to a crowdfunded project may be easier when you allow people to join in the creation process. For example, a business making something unique can invite prominent contributors into the factory to see how the product gets made and meet the people running the show. By monetizing the creation process itself, businesses have a way of garnering support.

Compared to the traditional way of raising capital, which typically is by promising returns to investors, crowdfunding offers much more leeway. This difference gives entrepreneurs thinking way outside the box the opportunity to pursue risky projects. In turn, the amount of innovation for financial backing increases, which in turn puts more established companies on their heels. Consumers who are contributing to these funds benefit when the product makes it to market. By investing, they not only receive the rewards of being “first-in”, but as a bonus, they also get to brag to their friends and colleagues about how they astutely recognized and help bankroll a hot new enterprise.

The bottom line: with the rise of crowdfunding, entrepreneurs looking for start-up capital now have more options than ever. Funding your idea may be only a few clicks away.

How crowdfunding will change the business world http://ow.ly/F39Xl

Tags: , , , ,

HEADLINE NEWS

This RSS feed URL is deprecated, please update. New URLs can be found in the footers at https://news.google.com/news [...]

NPRAfter Outcry, Crowdfunding Site Patreon Backs Off Plan To Raise ...NPRThe popular crowdfunding service Patreon has backed off plans to change its payment structure, after widespread, vocal and passionate opposition from creators and their fans. Last week, the site announced it woul [...]

ForbesCrowdfunding Do's And Dont's From iFundWomen's Karen CahnForbesDuring our conversation, she was transparent in sharing that her first software company, VProud, failed because she “did everything backwards” and spent too much time trying to perfect the product. “Pe [...]

TechCrunchHow hate speech crowdfunding outfit Hatreon crept back online ...TechCrunchIf you want to make a living creating white supremacist content, you're probably not going to do it via sites like Kickstarter and Patreon, which prohibit hate speech. Fortunately there's Ha [...]

EntrepreneurWhy Some Small Business Owners Are Turning to Crowdfunding to Save Their CompanyEntrepreneurMany owners of beloved local businesses, especially in pricier cities, have been forced to swallow their pride and appeal to their customers in times of crisis -- a process streamli [...]

Times of IndiaPT Usha takes to crowdfunding to run schoolTimes of IndiaCHENNAI: Legendary athlete PT Usha, called 'Payyoli Express' by her fans, has taken to crowdfunding and raised Rs 20 lakh to train budding girl sprinters and runners at her school in the hope of turning t [...]

Crowdfund InsiderNew Investment Crowdfunding Platform Launches in North Carolina as Full Stack Platform Including Intrastate NC ...Crowdfund InsiderUnder NC PACES, or “North Carolina Providing Access to Capital for Entrepreneurs and Small business Act,” crowdfunding legislation, issue [...]

ChronicleLiveNo need for banks as North East businesses turn to crowdfundingChronicleLiveCrowdfunding has developed a reputation for helping weird and wonderful projects become a reality. But while creative projects have utilised crowdfunding for some time, more and more North East bu [...]

Crowdfunding For French CastlesNPRYou too can own a French chateau, in part, anyway. Romain Delaume, CEO of Dartagnans, tells NPR's Scott Simon about a crowdfunding effort underway to preserve La Mothe-Chandeniers. SCOTT SIMON, HOST: What if I told you that for about $60, you cou [...]

TechCrunchFormer Gawker employees are crowdfunding an effort to buy Gawker.comTechCrunchWhile Univision acquired most of Gawker Media's sites last year (and renamed them as the Gizmodo Media Group), the deal didn't include Gawker itself. In fact, BuzzFeed reported last month [...]

CFB Finance

Marketwired

  • Crowdfunding
  • Crowdfund
  • Peer to Peer Lending
  • FinTech
  • Reg A+
  • Reg CF
  • Crowdfunding USA

Press Release

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |