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Stephanie´s Ramblings - Is Crowdfunding Getting Too Big For Its Britches?

posted on 9 September 2013 by Stephanie Bogue

In the Beginning:

It all starts with an idea, well, a really good one.  You think to yourself, I could turn this idea into a business.  You dream of being your own boss, you see the scope of what a great idea you have, and maybe you can even provide jobs for others.  You work on a business plan, organize it, review it………….then a look into your bank account reveals that you are not a millionaire, perhaps not even close.  Traditionally, you would go to the bank to take out a loan, tell your rich Uncle about an investment opportunity, and put everything you have (money and time) into turning your dream into reality.  Today, you have another option: crowdfunding.

I have to admit, this topic excites me.  In fact, I have personally seen a few ideas evolve into businesses or products through crowdfunding.  As the amount of money banks are willing to loan has dried up a bit since 2008, the average Joe is picking up the slack.  Where the bank loan left off, I saw a good friend get the donations he needed to buy brewery equipment to open his very own brewery through a kickstarter campaign.  I watched as a vegan restaurant did nearly the same thing through the same route for kitchen equipment.  In addition, I saw a local band fund a new album from their fans with a crowdfunding campaign.  Essentially, these campaigns all consisted of a high volume of small donations. For the most part, these individuals relied on their local community and their fan base for funding and social media for spreading the word about their good ideas and how to help.  I love the warm and fuzzies you get from donating and contributing to someone else´s life story.  It just feels good!  And, what is it like to be on the receiving end of all this love money?  I could imagine many feel that not only is this an investment in their business idea, but also themselves.  It is a close connection that evolves into a bigger respect for your future customers and the business you are running.  The people that donated are interested in watching your project unfold and rooting for its success while you, the business owner, feel a greater need to not only make your idea a success, but also to give back to all those who invested in the idea of you.   So, watch out world, this looks to be the comeback of small to medium businesses and the local community.  This was the grassroots idea of crowdfunding; however, it is quickly evolving. 

Now and the Future:

Now, the original donation based idea has taken a large step into the bigger business world.  Are you a start-up looking for angel investors, a product developer looking to invent the next big thing, a charity, or are apps your thing?  If you fall into any of these categories, then there is a crowdfunding site and campaign made specifically for you.  On this scale, the whole idea begins to change.  For example, instead of making a donation, you can become a shareholder.  So, as the idea evolves into a grander scheme, and the investments get bigger and bigger, so do the rules in Germany at least. 

My thoughts instantly go to Berlin, Germany, home of a huge start-up scene.  Is this a viable option here?  Are these Berlin or German start-ups using crowdfunding as a source of additional income where the bank loans fall short?  For now, I think the answer is not so much.  Apparently, the rules Germany has made for this bigger version of crowdfunding are pretty strict in comparison to the rest of Europe and the world.  If you want a crowdfunded investment of 100,000 Euros or more, bureaucracy and the rules might get in the way. (read more here -  http://europecrowdfunding.org/files/2013/06/20130610_Regulation_of_Crowdfunding_ECN_OC.pdf)

But is this a bad thing?  Crowdfunding was originally born as an idea to give a boost to small and medium businesses from anyone who felt a connection to your idea and story.  I, along with Germany, wonder if this is too much of a stretch.  It is perplexing.  SME´s are making a comeback and are a big contributor in getting the world´s unemployment rate down.  Wouldn´t this bigger and better version of crowdfunding help more small and medium businesses start and grow?  I guess the answer is yes and I guess the role of the crowdfunder just got a little more complex.  I, for one, will proceed with caution.  I can´t say that I like where the original idea is headed.  For me, there is a lot of charm and magic involved in the roots of crowdfunding and how it has worked to turn dreamers into business owners on a more local and personal level.  Can we still call this bigger, better version crowdfunding? Or is it something completely different? 

Stephanie BoguePermalinkKommentare 0
Tags: crowdfunding, marketing, online marketing, bvh BLOG
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