Crowd Funding. More than just a conversation

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Trying to raise money for your idea? Crowd funding might be the answer. Not just as an alternative to the traditional investment mechanism. But as part of a bigger plan in the process of liberating your idea. A plan that enhances the social-bond between people. And, that may actually make the difference between a successful project or not. 

Back to Basics

What is Crowd Funding?

We have probably all heard about it by now; Crowd Funding. In case you haven’t, crowd funding is a mechanism that allows you to fund a project through contributions. Typically, you place your project on some type of internet crowd funding platform. This platform provides the means to expose and find contributors for your project. But that’s a very simplified explanation of this mechanism.

You have created something interesting, useful or just plain cool. People may like what you are doing and want to contribute to it in some way. Their incentive may be as simple as that. Their support may be by sharing it with others, spreading the word. But some may even go as far as sending you money to help finance your project.

It should be obvious that crowd funding is not something new. It’s been around for as long as we can remember.

What is new is what the internet brings to this mechanism. More specifically the web of digital connections that links most all of us together. Social media in particular. Our global village. Being connected within such a vast inter connected network resembles some form of pseudo-consciousness. A mass awareness. And, when stimulated in the right way things can go viral in this global village of ours.

“Hello World?” The world might just say “Hi” back and even support what you are doing in a very big way. Within that process crowd funding bypasses some of the traditional funding and development mechanisms. What’s more, it puts you and your idea in direct contact with the most important part of your project; your backers, your fan-base, your audience. It’s a dream scenario for any creator.

“While the ownership of the idea may be in the hands of the artist its the interaction between the artist and a community which can make something truly unique”[B.J. Rao]

Yet, to many, the crowd funding idea and workings may be a bit confusing. The reason for this is that it’s not exactly an investment mechanism. At least not in the traditional sense. In addition, the reason why certain projects find funding and others do not may not be immediately apparent as would seem.

Crowd Funding vs Venture Capital

You probably know the situation. You have got a great idea, an inspiration. You have worked it out and its merit is clear. A new product or solution and even a new business or industry could unfold from it. Or, maybe you just want to get something organized that makes change in the world. The objective now is gaining the means to do that, sharing it. Liberate that idea. Yet, in most cases you’ll be needing investment, people and money. Those that participate get a stake in the business somehow.

Securing investment through traditional means can be a daunting undertaking. It’s no walk in the park. The process of finding, communicating and convincing investors about investing in your idea can be very challenging. Finding the right investor at the right time tends to be a hit and miss tactic. Most of the time you may miss and your time is precious. Investors are looking for ideas that are tangible, workable and make sense to them. Its got to be a sure thing in the mind of the investor. You need to build that business plan and build that perception. Hammer in a vision that they can relate to and understand. And, that can take time, a lot of time.

In 2005 I introduced the first ultra-low cost 3D scanner after a year and a half of development. My vision was simple; capture and consolidate the upcoming 3D market. More importantly, build a community. Achieve this by providing a wider audience access to these technologies by reducing their cost and complexity. Provide just about anyone with the means to capture 3D content, visualize it and even print it. My idea was to make the start, build the perception and bring people together. Empowering others was at the center of what I was doing. Build a conversation.

Yet, convincing potential investors in early 2000 that 3D scanning/printing would have revolutionary effect on the market in 3-5 years was a futile task. “It’s too niche” was the response that I received. It did not matter how I explained it nor did it matter what type of tangible technology I placed on the table. I felt like Jobs trying to get funding for the personal computer.

That was my story and I am sure that many out there can relate to this situation. It became clear that getting your idea off the launch pad would require some other approach. Finding investors is simply too futile a path to follow for most new start-ups.

But why try to convince just a few investors at a time? Crowd funding can bypass this and put you and your project/product in direct contact with a very large audience. You get to test your idea and its value on the market. If it works, well, sky is the limit. And, many have proved that it can be an effective way to find incredible levels of funding in a very short amount of time.

We are not talking about just thousands, we are talking about finding hundreds of thousands and even millions of dollars in support.

Yet, what’s confusing to many is that those people who contribute to a project typically do not get a stake in the business! You are not buying into the business. There is no traditional ROI (Return on Investment) in the form of cash. To the contributors the investment is in making the project happen. Being part of the solution. They are making a statement. Typically the project creators will reward their contributors with the actual product or souvenirs or some other type of recognition for their support.

It should be stated that the reason for this construct has, for a greater part, to do with legislation. Yet, President Obama has recently made changes to this legislation and we can expect things to change.

This new legislation would make it much less difficult for entrepreneurs to find funding through crowd funding. More specifically it would make it less difficult for most anybody to invest in a business or product. Buy into an idea. IPO at the idea stage. This is part of the JOBS act. But that’s another story.

It would all seem that crowd funding will displace the traditional means to finding investment. Actually this is not entirely true. For one thing, crowd-funding is not for everyone nor is it for every idea or creation.

Crowd funding should not be seen as a replacement for the investment mechanism. Rather, it can, in some cases and for some people, actually supplement the process.

A successful crowd funded project can serve as a stepping-stone, a prelude to achieving greater chances for finding investment. Crowd funding allows you to prove yourself and your idea to others. It can be a powerful means to build perception about you, your team and capacity to create.

Good Conversation can be Worth Millions

Marketing = communication. It’s conveying a message. But just illustrating the merit of your product and/or service is in many cases not enough. Marketing used to be, more or less, a one way street. Not so today.

Air time on TV or radio, an ad in the newspaper or magazine? Once effective ways to deliver your message. But that mechanism is breaking down. Today, marketing is an interactive process, a two way street between you and your audience.

The most important relation for most any business is its relation with its customers. A great idea? That’s great. Yet, its the interaction and relation between you and your customers that can make for great solutions, products and business.

“They say it takes a community to raise a child. Nurturing an idea to successful product is much the same” [B.J. Rao]

We have seen how important it is for many businesses to start a conversation about what they do. More specifically “why” they do what they do. And, build a community that surrounds that.

Most all of us are connected one click away. Our connections mean that we can seed a conversation which can grow very rapidly. Something that propagates your message like never before. Products and services that people will talk about. These have the greatest potential for spreading the word and delivering the message.

Crowd funding works in a similar manner. Crowd funding projects are also referred to as “conversation projects”. The idea is that they are special enough to talk about. The question is, will the conversation spread and will it spread fast enough for you to find support.

But a good conversation is not just about your product or project. Letting your product or project speak for itself is not enough. It’s in many ways about your story. Does your story make for good conversation?

Sure, many crowd-funded projects have become successful because they clearly fill in some need and/or solve some problem. Yet many others seem to be equally or more successful for their conversation merit alone and the story that seeded it. Reviewing the many successful projects out there will reveal this. At the same time there have been many really good projects which did not succeed  They could not find support. They could not seed enough conversation.

But what makes for good conversation material? More specifically what makes for good conversation products or projects? There are a plurality of answers and these may depend on a multitude of situations. But probably the best way to answer this is how your story will empower others. More specifically, how will your story, product and/or project leverage and even empower the social bonding between others.

“A great conversation is that which contributes to enhancing our social bonding” [B.J. Rao]

About

Personal: Multi-cultural background. Professional: Technology and Business. Activities and Interests: Business, Philosophy, Culture, Technology, Projects, Passions

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2 comments on “Crowd Funding. More than just a conversation
  1. It was always my understanding that with crowd funding – the logic is the tipping point requirement – or the money sits until you meet (or exceed) your requested funding goal – by the stated end date.

    In other words – yes – your are not a store front – but an offer to make ideas move forward, and if successful – then the project starts the next phase of development with the backers support and money – after which – they get the token or valuable rewards offered. Some or more may actually get the finished idea, and others will get recognition.

    It is of course – just a point of information – and still needs marketing or a runaway viral event to make it flow – some times getting the tools together to deliver that level of punch – needs to be built first.

  2. B. J. Rao says:

    That is correct. The idea here is to focus on building that “runaway viral event” first. Your project should start a conversation. Its reach will depend on how well it contributes to providing social reward to others who spread the word.

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