A question I am often asked by management about to crowdfund their project is “Where do we start?” The answer is always the same – audit both your competition and the platforms available to you.
Once you have completed an audit management can start planning the campaign in much more elaborate detail. But the audit should, no, MUST come first for the planning to have any credibility. An audit can be focused on almost any area and which areas management focus on first is entirely optional.
An audit does not have to be a lengthy opaque exercise it can be a simple matrix that records the bare essentials. There are, however, key basic areas I would expect campaign management to consider in an external audit, these are:
- Similar campaigns
- Similar products
- Success/failure ratios
Eric Ries published The Lean Campaign in 2011. There was nothing really new about this book – its underlying methodology was rooted in Action Research.
But this got us thinking – what if we took this concept and applied it to crowdfunding. This is a new application of the concept and one born from the frustration of the lack of space to test a crowdfunding campaign before you go live and ask for the money.
In entrepreneurship the Lean Startup [sic] movement was (re)started by Eric Reis in the USA. But the principle goes back to the late 19th Century and the first recorded use of action research methodologies in the field of education.
At its most basic form action research means working alongside the subjects you are analysing. Rather than being an objective observer, as is often the case in the natural sciences, the action researcher can make suggestions that may lead to action on behalf of the agent being analysed. Then one steps back, thinks (reflects) about the results and the process generally starts all over again with this new knowledge in hand.
This post I would like to introduce someone else’s view on equity crowdfunding. At a recent talk I was giving to a Hampshire business network there was some criticism from both panel and floor about equity crowdfunding.
At the end of the evening I was approached by Bruce (not his real name), a handsome young man who made me reflect somewhat differently on the evening and the conversation that had flowed.
Bruce is an investor with Crowdcube – one of the leading equity crowdfunding (crowdinvesting) platforms in the UK. His story was so compelling I asked if he could email it to me for use here in the blog. To my delight he agreed and so below is a summary of that conversation/email.
For Bruce it all started back in July 2012 when he was working in Central London. On his way home he read in the London Evening Standard the headline ‘Forget banks, I raised £75,000 for my business dream via the internet‘. Read More
In recent months there have been a number of questions raised about crowdfundings reward model and its application to fund certain projects. This has been brought in to sharp focus with the shooting of Michael Brown by Police Officer Darren Wilson in Ferguson, Missouri on 9 August 2014.
The consequences of the shooting and the circumstances surrounding it are well documented, so I won’t dwell on this here, what I wanted to show was how crowdfunding is adding fuel to the controversial fires over this issue.
The crowdfunding reward model is by far the most popular, and by default it’s often the model referred to when people talk about crowdfunding. Controversy emerged when big stars in the USA started using reward model crowdfunding platforms to fund projects that could produce a commercially successful outcome for the celebrity.
Crowdfunding eliminates the risk for the celebrity as they are not using their own money for an unpredictable product that could fail. They are also tapping into a huge fan base that gives them an unfair advantage over campaigns that are starting from a position with much less of an audience. A stars fan base may simply accept their endorsement of a certain position and thus back them without really considering how they will benefit from funding the project.
In the last entry we looked at the interest model and this post I wanted to go a little deeper on this model and show readers the two sides to it; the lenders side and the borrower’s side.
First though I have a confession to make. Even though I deal in crowdfunding I have rarely invested in equity (crowdinvesting) – my confession is my bias toward the interest model (crowdlending).
You see I am a simple guy with simple tastes – I like things straightforward and I like to understand the risks I am taking when I personally invest money. That is not to say I do not take any risks – but these risks are calculated. I get it wrong on occasions too. But the crowdlending model is an opportunity to help businesses with a solution that is simple and transparent.
In other words, I tend to get it quicker than in the crowdinvesting model.
In this post we continue our brief look at the models in crowdfunding and have moved along the DREIM acronym (Donation, Reward, Equity, Interest and Mixed) to ‘I’ which stands for interest. Some people prefer the term ‘crowdlending’ to specify this particular model.
This is by far the most straightforward of all the models. What we are really talking about here is the possibility of the public (the crowd) lending money to companies – in other words – debt!
Simple as it sounds there are still characteristics in this model that need to be considered. Not least of these is the issue of the types of question a company might get asked from the crowd. These can range from questions about finance to personal questions of the nature you would really not expect in a business context.
To give you an example our team were working on a raise with a large platform here in the UK for a company (with all male Directors) that had a significant turn-over but needed to raise some working capital. All was going well until a question got asked that at first seemed really inappropriate for the campaign. The question was “How strong is your relationship with your spouse?”