CROWDFUNDING AND

CROWDSOURCING

How the power of the crowd is driving the future of business

WHAT IS CROWDFUNDING?• DEFINED – Collective effort of individuals

who network and pool their money, usually via the Internet to support a wide variety of activities including disaster relief, political campaigns, startup company funding, free software development, scientific research and civic projects.

• WHO’S INVOLVED?

• The Initiator – people who propose the ideas to be funded

• The Crowd - people who support the proposal

• The Platform – the organization who brings together the project initiator and the crowd

• HISTORY – Is it a new idea? NO! In 1884 when funding ran out for the Statue of Liberty’s pedestal, Joseph Pulitzer raised over $100,000 in 6 months. More than 125,000 people contributed to the Cause with most donations being $1 or less.

• INDUSTRY OF ITS OWN – and growing• 2010 – Crowdfunding Websites raised

$.89 Billion from members of the public• 2011 - $1.47 Billion• 2012 - $2.66 Billion• Projected to grow to $5.1 Billion in

2013

WHAT IS CROWDFUNDING?

• ROLE OF THE CROWD• Each individual acts as an agent of the

offering, selecting and promoting the projects in which they believe.

• Can be Donor

• Can be Shareholders

• CROWDFUNDER PERSONALITY• Tend to be innovation oriented• Seeks out new modes of interacting with firms

and other consumers• Social identification and desire to be part of an

initiative• Desire to be first to market with associated payoff

WHAT IS CROWDFUNDING?

• BENEFITS• Profile – Compelling project can raise a

producer’s profile and boost their reputation.• Marketing – Initiators can show there is an

audience and market for the project; viral spread• Audience Engagement – Constant Feedback loop• Taps Wisdom of the Crowd to fund something

when Conventional Wisdom will not.

• RISKS• Reputation – Failure to meet

campaign goals or to generate interest results in public failure.

• Intellectual Property protection - Idea theft and Plagiarism

• Donor Exhaustion – will it last?• Regulation

WHAT IS CROWDFUNDING?

• PLATFORMS• As of 2012 there were over 450 crowdfunding

platforms• Platforms serve as “network orchestrators”• Replace traditional intermediaries such as record

companies or venture capitalists. Focus on inclusion of investors

• WHO’S WHO?• Kickstarter – Largest funding

platform for creative projects. Treats funds as donations. 5% Fee, $649M raised since 2009, Launched 42,000 projects

• Fundrise - Investment platform that lets you invest directly in local real estate

• Rockethub - Now partnering with A&E for broader exposure, leader in crowdfunding education

WHAT IS CROWDFUNDING?

WHAT IS CROWDFUNDING?

• DEFINED – The practice of obtaining needed services, ideas, or content by soliciting contributions from a large group of people and especially an online community rather than from traditional employees or suppliers. • Coined by Wired Magazine Editors in 2005

• WHO’S INVOLVED?• The Company– The group that puts

out an open call to the crowd to problem solve

• The Crowd - Solver in the form of peer production or sole individuals who respond with ideas

• Reward for Best Ideas – Can be recognition or collateral

WHAT IS CROWDSOURCING?

WHAT IS CROWDSOURCING?

• WHO’S DONE IT?• Public and semi-public databases of DNA testing were

created using peer production crowdsourcing techniques• Apple rumored to be looking to use crowdsourcing to

make Siri provide smarter, human-powered answers in the future.

• ChaCha – human powered answers to any question, anytime, anywhere, for free.

• Arcbazar – Crowdsourcing Architectural design. Controversial in the Architectural world (DWELL ~ “the worst thing to happen to architecture since the internet started”)

• NEXT EVOLUTION• OneSpark – World’s Crowdfunding Festival• 5 day Festival for Creators, 150,000 attendees (April 9-

13 2014)• “One Spark is built on the belief that game-changers

emerge from dorm rooms, garages, and small studios. One Spark is the community behind great ideas. It’s the chance to submit and decide on the next big thing. It’s the opportunity to get involved, be inspired, connect and collaborate.”

• Prize Money, Capital Investment and Direct Contributions

WHAT IS CROWDSOURCING?

• One Spark Success Stories• 20 Murals in a Year – Artist gets fund for painting

downtown’s blank spaces.• Kona School – Paradigm shift for the future of

Education with blended learning environment• Fresh – Retail concept that combines healthy

food and fitness into one fun and approachable location. Construction starts in late 2013 and doors open in Spring 2014.

WHAT IS CROWDSOURCING?