Forget about the times when crowdfunding was mostly about projects launched and sponsored by private individuals. Nowadays dozens of Fortune 100 companies are out there to tap into the power of their client base, collecting new ideas in exchange for hefty rewards.
Richard Swart runs a research program at UC Berkeley which studies the synergy between innovation and social funding mechanisms.
Swart says several years ago Kimberly Clark, the manufacturer of Huggies diapers, started giving $15,000 grants to customer moms who helped improving their products. The campaign was a massive success.
“What that means is: you as the customers, you as backers, you as the crowd, have the power to talk to the boardroom, to push your innovative ideas up the way they’ve been never listened to before.”
Another major trend is the forming of a separate crowdfunding marketing industry.
“Rise and shine, crowdfunders!” — is the motto of Los-Angeles-based ‘Agency 2.0’. According to the company’s website, its services include copywriting, social media, PR and legal support – things that are crucial for successful online fundraising. Campaign promos on Agency 2.0’s Youtube page are a string of flashy videos, some of them featuring Hollywood celebrities like “Breaking Bad” star Aaron Paul and comic Will Ferrell. Ferrell’s support helped to raise $118,000 to provide scholarships for cancer survivors and help families who have kids with cancer pay their utility bills. Even though the project did not meet the original financial goal, it served its charity purpose.
But what’s in store for crowdfunding devotees who seek profit? Well, there is peer-to-peer lending, which is also gaining popularity in the world of alternative finance.
Using online platforms, a group of investors give money to borrowers, — mostly individuals who are unable to get loans from conventional banks. Unlike crowdfunding, peer-to-peer lending is a for-profit business, where investors expect their money back with interest.
However, unlike regular banks, peer-to-peer lending startups don’t have expensive offices and regional branches, which makes their loans cheaper.
Eugene Green is the head of business and communications at Wish Finance – a peer-to-peer finance company operating in Southeast Asia. I asked him what it takes to get a peer-to-peer-approved loan.
“You don’t have to shoot a video or have a business plan for this, but you have to be aan appropriate borrower. And that’s why they make scoring, they collect information on social networks to show the investor that you can trust this borrower. So you don’t have to show an investment plan, but you should still impress in other ways.”
A Cambridge study revealed that there has been a steady growth of crowdfunding and peer-to-peer lending across Europe in recent years. Research shows that based on the average growth rates between 2012 and 2014, the European online alternative finance market is likely to exceed €1,300 mln. in 2015.
So whether you’re planning to release a music album and send a few copies to your fans or you want to get an affordable loan without visiting your local bank, with all the various forms of alternative finance out there, your chance might be just a click away.