Thursday 5 January 2012

Some thoughts

I've been looking at Crowdfunding resources online over the last few days and I have a few thoughts in my head in response to some articles that I wanted to just get written down before they get lost for good. The thoughts below aren't fully realised - the purpose of writing them down at this stage is just so that I open them up as ideas for later consideration and so that they exist in written form so I don't forget them. Once you've had a read please feel free to comment.

Following an excellent and informative lecture/seminar/presentation from the co-founder of the crowdfunding platform/portal IndieGoGo, Slava Rubin, at the SheffDocFest Convergence Catalyst conference (phew) in December I stumbled upon a similar presentation by other co-founder Danae Ringelmann on Youtube:

Whilst the presentation is excellent in itself (and I advise anyone interested in CF to watch it) some questions arose about points made in the latter part of the video. (Watch from 16:58 for about a minute). The title of the presentation is 'Levelling the Playing Field, One Dollar at a Time'; however, in the section I've highlighted Danae says that the future of crowdfunding will see a shift towards brands and organisations away from individuals. Whilst the full implications of that could be the subject of a thesis in itself some immediate concerns were enough to raise an eyebrow. When big business inevitably senses that they can capitalise from moving in to this form of financing what happens to the little guy? In a world where Coca-Cola or Nike (or any other multi-national) are running crowdfunding campaigns with healthy marketing budgets (which Joe Bloggs can't compete with) what happens to the 'democratisation' process that this system first provided.

Whilst I accept that the example of the prosthetic limb company used by Danae still has social purpose I wonder what is to stop companies running 'fund us and we'll make this' campaigns. Nothing I suppose and in truth the market will decide; you pay your money you take your choice. In that way I suppose it remains democratic but when CF really takes off and individual campaigns encounter fierce competition will the bigger players be able to muscle their way to the finish line to the detriment of everyone else? And if so where does that leave you and me? Back to square one? Hmmmm.....

Leading on from that I've been recently trying to understand the legal situation that prevents crowdfunding as a form of 'investment' for profit especially (or perhaps exclusively) in the US. In terms that I'm comfortable with (but may be so simplistic as to be flawed) it appears that in the States only accreditted individuals can invest in startup businesses. This is ostensibly to protect your average man in the street from making a bad investment in something he doesn't properly understand. However, it also shields Venture Capitalists from having to compete with dozens of small investors when the startup goes into profit. That leaves entrepreneurs looking to utilise CF in a position where all they can offer to potential financiers is non-profit perks such as a credit on website or units of their end product. Whilst legislation is ongoing in the US to alter this system it remains to be seen how the situation will improve to the benefit of all parties. I would be interested in knowing whether the same situation exists in the UK and other countries. I guess I'll have to talk to a business and/or legal expert to find out. Legislation that either helps or hinders crowdfunding is obviously a subject that is ripe for investigation. Whether that legislation governs investment or something else such as IP it is certain that it will play its role in the viability of CF as a potential mainstream funding model. Watch this space!

Another issue that had me scratching my bonce recently was this news item:

Since starting this project one of my main concerns about CF is its ability to provide a sustainable base for creatives. That is, can a filmmaker/artist/musician or whoever return to CF time and again to fund their projects and to essentially pay them a living wage. If a campaign that has such an obvious, tech-savvy audience such the Occupiers can stall then surely it can happen to anyone regardless of how smart their funding campaign is.

I've heard (and read) that successful campaigns will raise 40% of their target from friends and family in the first instance. Surely on $100,000 campaigns you'll need friends with deep pockets or a lot of them. Whilst I'm certain that the 40% figure is born out by data (and the CF platforms have a lot of it), I'm less convinced that friends and family can be relied upon time after time to stump up cash to get projects off the ground. Which is why you'd need a firm understanding of who and where you market is. This makes it all the more surprising (and slightly demoralising) to see the linked project falling so short even inspite of the obvious barriers such as Christmas and competiting interests.

Some things for me to think about I suppose. I think I'd better go away and look for the answers. 

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