Okay, thanks for opening this page. This is a discussion aimed at the creation of a new entity and also with the purpose of recruiting the best minds at pertaining my goal which i hope would become a collective goal for some six persons i hope to get off this forum.

Please don't be scared off by the long notes, you can browse through to get the point of everything.

Thanks again and lets make magic happen shall we.

Now i know you are curious, its okay, i am going to take this slowly, firstly i am not employing anyone, i mean the outcome of this open discussion would result in a partnership, but that would only happen when i am certain the person is brilliant and motivated enough to walk what MIGHT turn out to be a profitable walk in this journey of entrepreneurship.

Firstly, my ground rule.
Talk that does not align with this discussion would be ignored.

Now, i heard of this company in forbes. I want you to read through, and see what they do, below is an excerpt.


Why Kickstarter and TEDx are the Future of Business


Until recently, if you wanted to make an impact, the only option was to sign on with an organization. It simply wasn’t possible to raise capital, manufacture a product, or organize a mass action without institutional backing. But in the last half-decade, all that’s changed, says Nilofer Merchant, author of 11 Rules for Creating Value in the Social Era, which was just named one of the Best Business Books of 2012 by Fast Company. “Today, individuals can create value and we have the platforms that allow that to happen,” she says.

Whether it’s Kickstarter and its crowdfunding model or the “independently organized and curated” events of TEDx, Merchant believes a new ethos is reshaping business. The old bromides – “the 800 lb. gorilla way, that size matters, you rule over others, and people are subservient to organizations” – no longer work. Instead, she says, “I think the 21st century is about working with others. There’s a notion that individuals can come together and create value, create scale. Each of us as an individual recognizes the value we bring: I’m not a cog in a machine; I bring creativity and vision. It’s a different way of thinking about ‘what is thriving?’ or ‘what is value’?”


The decline of large, bureaucratic organizations (and the rise of better options) means that inventors don’t have to work for 3M or IBM; they can create their own product via Quirky. Same goes for crafters, who can reach millions on Etsy, or filmmakers, who can bypass the studios in favor of Kickstarter, retaining creative control in the process. But whether or not you’re a creative professional, says Merchant, the same dynamics are beginning to penetrate the entire workforce. “Close to 50% of the U.S. workforce isn’t working at a traditional job. They’re figuring out how to have a ‘portfolio life,’ with more flexibility to be with their family and do the work they want to do.”

“At an individual level, it’s an exciting time to be alive,” she says. “If you and I no longer need to work for an organization in order to create value, we can look within ourselves and say, ‘what can I contribute?’” Suddenly we get a chance to look at our own calling without seeking permission from someone else. I think human beings have an amazing wealth of creativity within us, but we largely haven’t given ourselves permission because the economics didn’t work. For individuals, that creates boundless opportunity.”

Some innovative new organizations (including those mentioned above) have sprung up to harness this opportunity. Merchant also cites Singularity University, which eschews the traditional higher ed trappings (including tenured faculty) and instead leverages a small staff to create an entire curriculum using “curators” and outside instructors, allowing for maximum flexibility. Says Merchant, “At the end of every semester, they aren’t committed to using those professors. They ask, ‘what do we need now?’ And they find the next group of curators. It’s acting more like an organism might, where change is built into the system.” This evolution, she says, only makes sense. In the past, “once you had a sustainable advantage, the goal was to protect it and you’d hold it for 30 years. But today, that arc is more like five years, so you have to build change into your organizational construct.”

The challenge is different for established players, who now have to ask, “How do you take advantage of all this creativity and talent? How do you start to create value with those people, rather than the way we’ve traditionally thought about it?” She praises IBM as “a behemoth that’s adapting” to the social era, launching creative new initiatives such as the Smarter Planet project. “It’s basically them asking a series of questions: who’d like to come co-create with us? Instead of assuming you have to know everything before you go into a situation, which is a very 20th century architecture, it’s about being curious.”


(Merchant’s chart explaining the Social Era)

Some have raised questions about monetization in the Social Era. Sure, someone might self-publish the next 50 Shades of Grey. But what about the widespread economic displacement that comes with such a tremendous shift in how we do business? Merchant remains bullish, but says it will take creativity (indeed, she herself spends significant time writing, but earns most of her money through a separate channel, public speaking). “There might be re-leveling and displacement,” she says, “but there are also new models being created. Kickstarter has allowed people to get financing; Quirky is allowing inventors to make money at a much better scale than in the past. It’ll take more time to become clear, because we’re in the very early innings of a big game.”

How is your business adapting to – and capitalizing on – the rise of the Social Era?

Dorie Clark is CEO of Clark Strategic Communications and the author of the forthcoming Reinventing You: Define Your Brand, Imagine Your Future (Harvard Business Review Press, 2013). She is a strategy consultant who has worked with clients including Google, Yale University, and the Ford Foundation. Listen to her podcasts or follow her on Twitter.

Am not a motivational speaker, but i am of the idea and opinion that we can use the kickstarter model to fund a lot of businesses in Nigeria and Africa as a whole.
So towards this i have an idea and a little capital to make that idea see the light of day, but firstly i want us to discuss the kickstarter model.

Here is some information about kickstarter from wikipedia.

Kickstarter is an American-based private for-profit company founded in 2009 that provides tools to raise funds for creative projects via crowd funding through its website.[1]
Kickstarter has funded a diverse array of endeavors,[2] such as films, music, stage shows, comics, journalism, video games, and food-related projects.[3] People cannot invest in Kickstarter projects to make money. They can only back projects in exchange for a tangible reward or one-of-a-kind experience, like a personal note of thanks, custom T-shirts, dinner with an author, or initial production run of a new product.

History [edit]

Kickstarter launched on April 28, 2009 by Perry Chen, Yancey Strickler, and Charles Adler.[5] The New York Times called Kickstarter "the people's NEA".[6] Time named it one of the "Best Inventions of 2010"[7] and "Best Websites of 2011".[8] Kickstarter reportedly raised $10 million funding from backers including NYC-based venture firm Union Square Ventures and angel investors such as Jack Dorsey, Zach Klein and Caterina Fake.[9] The company is based in Manhattan's Lower East Side.[10]
Andy Baio served as the site's CTO until November 2010, when he joined Expert Labs.[11] Lance Ivy has been Lead Developer since the website launched.[12] On February 14, 2013, Kickstarter released an iOS app called Kickstarter for iPhone.[13] The app is aimed at users who create and back projects and is the first time Kickstarter has had an official mobile presence.[14]
Model [edit]

Kickstarter is one of a number of crowd funding platforms for gathering money from the public, which circumvents traditional avenues of investment.[15][16] Project creators choose a deadline and a minimum funding goal. If the goal is not met by the deadline, no funds are collected, a provision point mechanism.[17] Money pledged by donors is collected using Amazon Payments.[18] The platform is open to backers from anywhere in the world and to creators from the US or the UK.[19]
Kickstarter takes 5% of the funds raised.[20] Amazon charges an additional 3–5%.[21] Unlike many forums for fundraising or investment, Kickstarter claims no ownership over the projects and the work they produce. The web pages of projects launched on the site are permanently archived and accessible to the public. After funding is completed, projects and uploaded media cannot be edited or removed from the site.[22]
There is no guarantee that people that post projects on Kickstarter will deliver on their projects, use the money to implement their projects, or that the completed projects will meet backers' expectations. Contributors have no way of receiving confirmation unless they directly ask the original owners and Kickstarter itself has been accused of providing little quality control.[23][24][25] Kickstarter advises sponsors to use their own judgment on supporting a project. They also warn project leaders that they could be liable for legal damages from sponsors for failure to deliver on promises.[26] Projects can also fail even after a successful fund raise when creators underestimate the total costs required or technical difficulties to be overcome.

Projects [edit]
On June 21, 2012, Kickstarter began publishing statistics on its projects.[28] As of October 10, 2012, there were 73,620 launched projects (3,426 in progress), with a success rate of 43.85%. The total number of dollars pledged was $381 million.[29]
The business has grown quickly in its early years. In the year 2010, Kickstarter had 3,910 successful projects, $27,638,318 pledged, and a project success rate of 43%. In 2011, the corresponding figures were 11,836, $99,344,381 and 46%.[30]
February 9, 2012 saw a number of milestones set by Kickstarter. A dock made for the iPhone designed by Casey Hopkins became the first Kickstarter project to break a million dollars pledged. A few hours later, a project by computer game developers Double Fine Productions to fund a new adventure game reached the same figure, having been launched less than 24 hours earlier, and finished with over $3 million pledged.[31] This was also the first time Kickstarter raised over a million dollars in pledges in a single day.[32] On May 18, 2012, The Pebble E-Paper Watch raised $10,266,845 to become the most funded project in Kickstarter history.[33]
In July 2012, Wharton professor Ethan Mollick and Jeanne Pi conducted research into what contributes to a project’s success or failure on Kickstarter. Some key findings from the analysis were that increasing goal size is negatively associated with success, projects that are featured[clarification needed] have a 89% chance of being successful, compared to 30% without, and that for an average $10,000 project, a 30-day project has a 35% chance of success, while a 60-day project has a 29% chance of success, all other things being constant.[34]
The ten largest Kickstarter projects by funds raised are listed below. Among successful projects, most raise between $1,000 and $9,999. These dollar amounts drop to less than half in the Design, Games, and Technology categories. However, the median amount raised for the latter two categories remains in the four-figure range. There is substantial variation in the success rate of projects falling under different categories. Over two thirds of completed dance projects have been successful. In contrast, fewer than 30% of completed fashion projects have reached their goal. Most failing projects fail to achieve 20% of their goals and this trend applies across all categories. Indeed over 80% of projects that pass the 20% mark reach their goal.[

Categories [edit]
Creators categorize their projects into one of 13 categories and 36 subcategories.[35] They are: Art, Comics, Dance, Design, Fashion, Film and Video, Food, Games, Music, Photography, Publishing, Technology and Theater. Of these categories, Film & Video and Music are the largest categories and have raised the most amount of money. These two categories alone account for more than half of Kickstarter projects. These categories, along with Games, account for over half the money raised.[29]
Guidelines [edit]
To maintain its focus as a funding platform for creative projects, Kickstarter has outlined three guidelines for all project creators to follow: creators can fund projects only; projects must fit within one of the site's 13 creative categories; and creators must abide by the site's prohibited uses, including charity and awareness campaigns. Kickstarter has additional requirements for hardware and product design projects. These include[36][37]
Banning the use of photorealistic renderings and simulations demonstrating a product
Limiting awards to single items or a "sensible set" of items relevant to the project (e.g., multiple light bulbs for a house)
Requiring a physical prototype
Requiring a manufacturing plan
The guidelines are designed to reinforce Kickstarter’s position that people are backing projects, not placing orders for a product. To underscore the notion that Kickstarter is a place in which creators and audiences make things together, creators across all categories are asked to describe the risks and challenges a project faces in producing it. This educates the public about the project goals and encourages contributions to the community.[38]

Project cancellations [edit]
Both Kickstarter and project creators have cancelled projects that appeared to have been fraudulent. Questions were raised about the projects in internet communities related to the fields of the projects. The concerns raised were: apparent copying of graphics from other sources; unrealistic performance or price claims; and failure of project sponsors to deliver on prior Kickstarter projects.
A small list of cancelled projects include:
Eye3 camera drone helicopter for unrealistic performance promises, photos copied from other commercial products, and failure of creators to deliver on an earlier Kickstarter project.[78]
Mythic: The Story of Gods and Men adventure game for copying graphics from other games and unrealistic performance promises; the creator had raised $4,739 on an $80,000 goal before canceling the project.[79]
Tech-Sync Power System for failing to provide photos of the prototype and sudden departure of project creator.[80]
Tentacle Bento, a card game intended to satirize Japanese school girl tentacle rape comics, after being criticized in the online media for having inappropriate content.[81]
In addition, over 15 projects have been completely removed in lieu of public cancellation.[82] Kickstarter appears to reserve project removal for egregious claims of copyright or other severe breaches of policy.[

Scams and other controversies [edit]

In May 2011, a New York University film student, Matias Shimada, raised $1,726 to make a film, but plagiarized another film instead. He later publicly apologized.[85][86]
In 2012, Amanda Palmer raised $1.2 million on Kickstarter. She wrote about how she used the money, however several other musicians reviewed these expenses and said they were extravagant and possibly fraudulent. She was further criticized for attempting to have musicians play with her for free on tour, after raising such a large sum.[87]
In April 2013, film maker Zach Braff used a Kickstarter campaign to fund the follow up to his 2004 film Garden State and raised $2,000,000 in three days, citing the success of Rob Thomas' Veronica Mars Kickstarter as his inspiration. Some have criticized Braff for using the site, saying celebrity use of the site will draw attention away from film makers and other creatives who don't have celebrity name recognition[88], a criticism that had been previously made in regards to big figures in the gaming industry using Kickstarter (such as Richard Garriott, who created a successful $1+ million Kickstarter despite his large personal fortune[89]). Kickstarter itself however has disputed these arguments by claiming that according to their metrics, big name projects tend to attract new visitors to the site who in turn pledge to other lesser known projects

Okay, I like the company, but i dont agree with some of its policies and i think it could be more successful and have a higher success rate if they took a more closed approach to their funding.

I want us to firstly discuss the Kickstarter model, what do you think about it, and how do you think you can better it?

Dont be shy, drop a comment, there is no such thing as a bad idea. Actually, there is, LOL.

U are thinking what am thinking, also check out indiegogo. **reverts to lurking mode**

Great. So let us discuss the possibility of an apple style closed system that brings together verifiable businesses with proffesionals and veterans in said businesses as authenticators and board members of businesses pertaining to their expertise.

I think there are alot of people with the resources but there is also a very huge fear of being scammed, a fact that happens alot in this country. Take my Dad for instance, he has monies to invest but he would rather keep his monies in the bank, safe, but it does not provide employment or stimulate the economy or grow.

I have an idea, and i need people to brainstorm with.

Let us discuss.

I'm gbenga. Why can't we arrange for a meeting on how to implement this effectively. I have similar idea that if implemented could become a mega-billion biz here in naija. Thanks.

Thank u very much for posting this eye-opening piece. Expect my further comments in a moment still digesting the piece.Thanks once again.

Thanks guys, i am so happy to find like minds. please keep the comments coming in. And yeah, i believe that crowd funding properly executed can create massive employment and significantly reduce the rate of unemployement and also can be immensely profitable.

Please keep the comments coming in....

Gazzy88: I'm gbenga. Why can't we arrange for a meeting on how to implement this effectively. I have similar idea that if implemented could become a mega-billion biz here in naija. Thanks.

I believe that very strongly Gbenga, and yes, the result of this discuss would be an eventual meet towards a partnership that can kickstart an african model of a crowd funding company.

There are alot of genuine business prospects out there that would not see the light of day because of a lack of funding, alack of structure, and a genuine disinterest of our financial instituitions in supporting startups.

I read a book once, that Africa has received more than 100 billion USD in aid over the past decade, i wonder what these monies is used for, definitely not for you and i. Perhaps Dangote could take a bite out of that, but you and i cant.

You see the thing is simple, we have the power to transform our country, our continent. Africa has its top 10 percent have a combine networth of one trillion USD.

Why cant we be the next china, why cant we have proper businesses that churn our goods that can be consumed locally and even exported?

I am sure several people have had this thought, but i want more than that, i want action, and i hope to find more people who share my passion.

Exactly! What led me here was the fact that I was looking for where startups were funded, and here you are inspiring me to ask, 'why can't we create one?' Am definitely interested. Ready when you are.

So much theory? So much 'texts'? What is the way forward?

Awesome, love the eagerness.

I have a plan i believe can put all the theory to light.

Firstly, i need some confirmation as regards the SEC's view of crowdfunding and what licenses it would require.

Next i would need to have a couple of professionals in the field of law, graphic design and web design, Architecture, accounting and Project management.

Then the next step would be to set up a meet.

And most importantly persons with a passion for meeting set goals.

I believe strongly that this can be done. Please, if you follow in my passion write your email here and i would mail you.



LETS DO THIS!

Another case study...

culled from Forbes. http://www.forbes.com/sites/peterdetwiler/2013/04/10/update-on-mosaic-and-solar-crowd-funding/


In January, Mosaic launched its first return-on-investment solar projects, selling out three projects, worth $300,000 within 24 hours. Mosaic is a company whose website allows ordinary individuals to crowd-fund solar projects, for investments of as little as $25. The projects in the current portfolio pay 4.5% to the investor, over periods generally ranging around 9 or 10 years.

I invested a small sum of money in January on a California project just to see how it works. I followed up in February with an investment on another project in New Jersey. I check Mosaic’s site frequently to see when it has new projects, and I’m curious to see how this venture will fare. Until now, the renewable energy revolution has been more the province of large banks and financing institutions. Mosaic – with its minimum $25 investment – is committed to making this more democratic.

I was therefore somewhat disappointed to see little in the way of new projects for the past few months (with the exception of a large 487 kW project at the New Jersey Wildwoods Convention Center which was open to accredited investors only). A large part of this delay in new projects has to do with securities rules that have long limited crowd-funding. This week, though, Mosaic announced that securities regulators in California recently approved it to offer $100 Million worth of solar investments to residents of that state. Mosaic jumped out of the gates immediately after this approval, with a 114 kW, $157,750 solar project on the Ronald McDonald House in San Diego. The investment offered a 4.5% return to investors over a 117 month term, and it was fully subscribed by 171 investors within 6 hours. Clearly, there is more money waiting for additional projects.

While lining up new projects and awaiting regulatory approvals, Mosaic has partnered with Standard and Poors, DuPont, and Distributed Sun to form a group called truSolar. TruSolar is working to standardize risk assessment and develop scores for each solar project that would be similar to a credit rating, thereby streamlining the entire development and financing process.

So now the question is how this venture will fare in the long run. How many projects can Mosaic bring through the pipeline and how much money is potentially waiting in the wings? When I had spoken to the company earlier in the year, one executive indicated they were discussing the concept of certificates that could be presented to individuals as gifts – kind of like a US Savings Bond, with the name of the individual project and the rate of return. So you could conceivably give your child a piece of a solar project for birthdays or holidays. A concept like that might take off. At this point, it’s still too early to say how powerful the Mosaic concept will be over time, or how it could morph into supporting other types of socially desirable investments. But in today’s world, where banks pay interest of 1%, 10-year Treasuries yield about 1.9%, where crowd-funding is becoming generally accepted, and where solar costs are falling as the technologies improve and installation costs decline, I wouldn’t bet against Mosaic.

Another write up culled from Forbes.
http://www.forbes.com/sites/reuvencohen/2013/01/25/crowd-funding-for-aspiring-real-estate-moguls/

The market for crowd funding is hot. Thanks in part to the JOBS Act; recent U.S. government legislation that allows for a wider pool of small investors with fewer restrictions combined with the success of companies like Kickstarter. A variety of industry specific crowd funding startups are emerging to take advantage of the opportunities for community organized fund raising.

By far the largest player in the crowd funding space is Kickstarter. Since its launch in 2009, more than two million people have pledged greater than $300 million to projects by individual groups of creators. Kickstarter specifically focuses on “creative projects” from the worlds of music, film, art, technology, design, games, fashion, food, and publishing. A prime example is Pebble, an infinitely customizable e-paper watch that has raised more then $10 million using Kickstarter’s crowd funding marketplace.
CapitalOneSpark​Voice: Kick-Start Your Business With Crowdfunding Capital One Guest Capital One Guest @Capital One Spark

Unlike Kickstarter that focuses solely on creative projects, a new group of up-start companies are attempting to fill the void in funding opportunities within niche market segments. FundersClub allows accredited investors to make early stage investments in curated startups recently raised a $6 million VC round. Another is CircleUp, which is tackling crowd funding for retail companies has recently raised $1.5 million in their angel round and claims to have funded five food companies to date.

Yet another emerging sector for crowd funders is that of commercial real estate with several companies attempting to fill the void. I recently had the chance to catch-up with the Jilliene Helman Founder and CEO of Seattle based RealtyMogul.com. She describes the service as “insider access to pre-vetted real estate investments.”

The concept of Realty Mogul is fairly straightforward. Users of the service pool money with like-minded investors to make commercial real estate investments that are otherwise difficult to access. Investors can invest as little as $5,000 for a slice of an investment. Each real estate investment is tied to a real estate company that deals with the hassles of “toilets, tenants and trash.”

Helman notes that a lot of the investments are in the so-called “rehabilitation” of real estate properties. Anyone who’s ever watched one of the fix-and-flip “reality” TV shows will recognize the concept. Essentially Realty Mogul provides the ability to bring together investors who are interested in short term real estate investments without the risk of doing the actual renovations. The funds raised go to professional contractors and real estate development firms who are financed from the crowd funds raised with average returns anywhere from 5-20%.

Realty Mogul isn’t alone in seeing the opportunity to apply crowd funding to the real estate space with startups like Fundrise.com, Collaperty.com and New York-based Prodigy Network also putting its own spin on the concept. In Colombia, Prodigy has recently crowd funded a building called BD Bacatá that will be the nation’s tallest. About 3,100 investors kicked in $171.8 million (COP308 billion) of the $239 million needed to build the 66-story skyscraper in downtown Bogotá. Investors can also buy and sell shares through a resale program, which functions like a secondary market. Other companies like Fundrise provides “shares” of various real estate investment for as little as $100.

Helmen is unfazed saying that she believes the market to be a massive opportunity with more than enough room for several players. According to IBISWorld, the global real estate market is estimated at more than $5.2 trillion. Without question it’s a huge opportunity for those able to tap into it. More-over with an average annual rate of just 2.8% in 2012 many commercial real estate investors may begin to look for ways to reduce their risk factors while maximizing their yields. Crowd funding appears to be on the cusp of solving both problems.

Realty Mogul is in the midst of closing its first round of outside venture funding and is currently part of the TechStars accelerator program. It’s definitely an interesting space to watch.

Another write up from Forbes.
http://www.forbes.com/sites/karstenstrauss/2012/06/27/crowd-funding-your-next-project/

Entrepreneur and author, Seth Godin, has recently raised about $237,000 through Kickstarter to fund his latest book ideas, including the title, “The Icarus Deception.” According to a recent Wall Street Journal article, Godin presented several projects to crowd investors to gauge public interest in them. Is this the future of publishing, and perhaps product development as well? Sure, crowd funding is a boon for small companies, which tend to bring in higher returns than larger ones over time , but are we approaching an age when the general, micro-investing public – empowered by the 2012 Crowdfund Act – must sign off on a new idea before it goes to development and eventual launch? For good or ill, entrepreneurs are taking advantage of small-sum investors.

Amazon Studios

Amazon Studios, the film and TV development arm of e-commerce giant Amazon, used crowd-feedback to choose plots for upcoming digital comic book series. The company intends to use comics and animation to give the public a taste of plots that, if popular, could be developed into feature films. The first screenplay that the company will unveil will be Jay Levy’s Blackburn Burrow, a story set in pre-Civil War America where “supernatural horrors are infesting a small Appalachian town in Northern Georgia.” Sounds fascinating.

Iron Sky

Finnish director Timo Vuorensola’s recent contribution to film, Iron Sky, premiered at SXSW this past March. In addition to its unique plot – Nazis returning to earth in 2018 after having lived in exile on the moon since 1945 – the film is also highlighted by the fact that it was partially funded through a website set up by the production company . Additionally, certain aspects of the film, like character names, music and design, were through feedback generated on the site.



The Weatherman

About 150 people donated to help Australian filmmakers Lucas Crandles and Tim Nash raise over $70,000 to a new comedy series called The Weatherman. The first crowd-funded series ever , the show stars actor Robert Grubb, an actor known for his work on another series, The Flying Doctors. Crandles and Nash, who run Dark Heart Productions, posted their idea on Mobcaster.com and got traction quickly. The ‘mob’ mentality of this type of funding allowed the two to get input from a diverse group of fans. “We’ve been getting a lot of good feedback, which is helping tell us what to look at in the full season,” Crandles said. “Normally you would make a pilot, sell it, and then the network would come on board. We are going to make the whole series and then they will look at it and decide if they want to buy it.”



Kinetic Creatures

Toy developers, Lucas Ainsworth and Alyssa Hamel raised over $32,000 in Kickstarter funding to get their startup, Kinetic Creatures, off the ground. The company creates cardboard animals that can walk through manual manipulation or battery-operated gears. Hamel, a teacher, used her 8th grade class as a focus group, showing them a prototype of one of the animals and taking in the kids’ feedback.

REMYXX Recyclable Sneakers

The investing public has given the nod to REMYXX, a startup that’s developed sneakers that are 100% recyclable. The company – featured on the TV show Shark Tank – has surpassed its funding goal of $39,697, which is apparently unique in that footwear products have tended to be unsuccessful on Kickstarter. “I saw the need for an eco-friendly, 100% recyclable shoe, and I went for it,” said REMYXX Creator Gary Gagnon.

Forbes.
http://www.forbes.com/sites/martinzwilling/2012/08/24/will-the-real-crowd-funding-model-please-stand-up/

Will the Real Crowd Funding Model Please Stand Up?

The new hot topic for entrepreneurs these days is crowd funding, which is anticipated to at least supplement, if not replace, the slow and mysterious process of current Angel and venture capital investors. The problem is that crowd funding means something different to everyone, and even I have been confused by the different ways the term gets used.

So I have set out here to outline and offer some practical advice on the many different models currently used with the term “crowd funding” and “crowd sourcing.” The newest model was passed into law recently via the JOBS Act, and won’t even be available until the end of this year or maybe mid-2013 in the USA, while waiting for the rules to be finalized:

Startup equity crowd funding. This new model will allow large numbers of “regular” people to invest small amounts each online to fund early startups. This is not a get-rich-quick vehicle for consumers. As a current Angel investor, I can attest that any investments in startups are more risky than the commodity markets, and you shouldn’t expect to see any return for five years. Proceed at your own peril.

Good-cause crowd funding. This model is a good thing, and has been around for years. Example sites include StartSomeGood and the Facebook Cause page. People can invest (donate) money to a project which has good moral/ethical value. No financial return should be anticipated, but contributors should enjoy the feeling of doing good.

Pre-order crowd funding. Here people make online pledges with their credit cards during a campaign, to pre-buy the product for later delivery, if it is ever built. Kickstarter is the big player in this space. It has had some notable successes for entrepreneurs (over $1M in funding), as well as non-starters. There is no concept of ROI other than product.

Rewards-based crowd funding. This is a variation on the two previous ones, where investors get the satisfaction of helping, and immediately get a pre-determined reward or perk of value, such as a t-shirt, or other recognition, but no equity or finished product. A good example site, and one of the earliest in this category, is IndieGoGo.

Debt-based crowd funding. In this model, sometimes called micro-financing or peer-to-peer (P2P) lending, you borrow money from a number of people online and pay them back after the project is finished. This has been popular in many countries for years via sites like LendingClub and Kiva. The allure is fat returns, but they come with a huge risk.

Ideas crowd sourcing. Technically, this model is not involved with funding at all, but “crowd sourcing” and “crowd funding” are often used interchangeably. Sites like GeniusCrowd get your ideas off the shelf, and give you the wisdom of the crowds. Of course, this might also lead to investors, partners, and licensing opportunities.

Software crowd sourcing. This is basically the Open Source concept, where sites like IdeaScale facilitate the outsourcing of application development to the Internet community in the form of an open call. Sometimes contributors may get compensated later, but usually the rewards are just kudos and intellectual satisfaction.

Don’t confuse any of the models with other popular funding sites for startups, like FundingUniverse and GoBigNetwork. These are primarily matchmaking sites between entrepreneurs and professional investors or banks. Often they do sponsor pitch contests with small cash prizes for funding, as well as other valuable services to support entrepreneurs.

So it’s easy to see that whether you are a new entrepreneur or a new potential investor, the Internet has opened several new options for the crowd to help you. These also open new concerns about lost intellectual property, Internet scams, and long-term return on investment. Crowd funding is exciting new territory, but I don’t see it replacing Angel and venture capital investors any time soon.

KUDOS
My dream for this year is to grow as an investor by co-operating mutually with other investors to finance small enterprises

I opened a thread in the first week of the year to actualize it, the thread was closed after Seun's intervention, I was restricted from posting in the business section for weeks

I thank God that the same idea has manifested through others on NL, I have also been opportuned to partner members & guests outside the forum

The major ingredient NL serves is expose this efforts to others to learn from, I hope those who continually oppose such ideas, are learning, or perpetually remain in the dark

Charcoal & Co I salute and commend u, count me in

The Land is Green

Oduz, I am very impressed, and I would love to work with you.

I fear nairaland is filled with skeptics and though some of the fear is warranted I think witch hunting creativity is not the way to go about it.

Thank you for your comment, I definitely count you in.

A few intelligent and far sighted threads have died untimely on this forum/

I hope this one thrives.

There are always fears of scam. This is understandable but if that fear drives every project thought, the banks for example would fold up.

This idea is of monumental dimensions and should be embraced by every problem solver in the area of start up project funding.

I operate in the area of Estate development and am aware of the immense benefit the sector is certainly going to derive from a successful implementation of this idea.

Ride on Charcoalblaq and count me in, if you please.