Don’t know enough about crowdfunding? Why don’t you read Alex’s piece on ‘what is crowdfunding?’ first
So why should I care about crowdfunding?
- The crowd can get behind an idea
Unlike traditional sources of finance that are primarily looking for a financial reward, crowdfunders are typically contributing towards a campaign because they believe in the purpose of the project. They want to be a part of the campaign and to make the project happen. A great example of this was Solar Roadways. Solar Roadways managed to raise over $2million because the general public thought that this was a brilliant idea that needed to exist in the world. Backers got little more than thank yous, hats and bags.
- Benefit to the economy
Small businesses are the engine of the British economy. According to John Longworth from the Guardian, “Small businesses make up 99% of the 5.2m businesses in the UK, yet rarely receive the public’s attention or praise. Not only do they deliver jobs, growth and prosperity for millions of people across the UK, they have also played a fundamental role in driving our economy out of the recession.” Crowdfunding gives the general public access to these small businesses, and is quickly becoming their preferred funding source.
- Staying away from the banks
As this article in the New Economy states, “Crowdfunding is threatening to supplant the banking industry’s status as the go-to source of finance for small businesses.” In one sense this is not too big an issue for the banks, who probably see these opportunities as too high risk to lend money to anyway, but I expect they are keeping a close eye on the crowdfunding sector. For the time being though, crowdfunding represents a way to raise money from friends, family and the market at large, validating ideas and raising funds on better terms for the enterprise.
I have to be a bit careful here, because I could and probably will write a whole article on this topic alone. There are advantages and disadvantages to disintermediation (where intermediaries like banks and fund managers are bypassed as savers decide where to put their own money). “The digital landscape has created new bank managers; the public” writes CapGemini’s Patsy Neville. In this environment of low trust in the banks and high bonuses for bankers who seem to be reaping more rewards for managing money than those for whom they are managing money, is there something to be said for taking a little more responsibility over your own money? To be continued…
In essence, there are quite a few reasons introduced here to explain why you should care about crowdfunding. As an entrepreneur or business owner its an increasingly attractive form of generating sales or raising finance. As a contributor you can make great ideas come to life, take responsibility over your own finances, and for the time being, crowdfunding can provide an alternative to the banks.
Photo credit: David