The power of crowdfunding

As part of On Purpose I’m working at JustGiving on Yimby, their new crowdfunding community. Crowdfunding in the US is a much more crowded marketplace but the UK has it’s fair share too. From rewards based creative sites like Kickstarter, Indiegogo, FundIt to social good and civic ones like Crowdfunder, Spacehive and Yimby, to equity based sites like Crowdcube and Seedrs. There are even niche platforms like StudentFunder. Here’s a pretty comprehensive list.

In 2012, crowdfunding portals helped small business owners and individuals raise about $2.7 billion.  According to Massolution (which tracks the market) that figure was set to double in 2013. Was the recession and the government’s budget cuts the catalyst for this rapid growth, or was there a movement to create more good in the world? I hope it’s the latter.

There are now several banks and big brands even getting behind crowdfunding. Seeds.nl is a crowdfunding pilot launched last year by the Dutch bank ABN AMRO’s innovation platform, Dialogues Incubator. Seeds.nl invited interested parties to invest a minimum of 50 euros in five companies contributing positively to society – GreenGraffiti, Greenjoy, On The Ground Reporter, We Beat The Mountain and Yuno. The four-month pilot saw 3 companies out of 5 being successful.

Philips used Indiegogo last year to launch a competition where entrepreneurs battle for money for their product ideas. To be eligible for the $60,000 grand prize they had to reach a certain level of their funding goals.

In order to get a picture of the crowdfunding environment for 2014, Devin Thorpe in his Forbes article, spoke to some of the most prominent leaders in the crowdfunding world for causes and mission-driven businesses (in the US). Here’s my top 3 from the 10 he’s covered.

Rapid growth of crowdfunding will continue.
Amanda Barbara of Pubslush observes, “Crowdfunding overall is on the rise, driven in large part by entrepreneurial, artistic and philanthropic ideas. [My] prediction is that this growth will continue at least at the current rate, if not faster.” She goes on to say that Crowdfunding began its exponential rise around 2009. Google Trend data shows a correlating steady rise in social good beginning at the same time.

More people will make meaningful philanthropy part of their lives.
Robert Wolfe, CEO of CrowdRise, predicts, “More and more people will make meaningful philanthropy a part of their personal narratives on Facebook, in school, on CrowdRise and really in everything they do — not solely because the world is an increasingly selfless place, but because people recognize that giving back is cool and thirst for the experience of participating in something that’s fun and feels good.” He explains the driver, “Giving back isn’t just transactional anymore and it’s not just about making a donation. It’s about engaging, participating and being part of a movement.”

Crowdfunding will democratize philanthropy.
Lesley Mansford, CEO of Razoo, predicts that, “Amplified democratization of giving [will] make it easy for everyone to be an everyday philanthropist. Younger generations, especially millennials, are getting more involved with social good and philanthropy, and commonly prefer online giving through crowdfunding making technology critical to bringing generosity into the next era.“

It’s really interesting to see that banks are engaging in this marketplace to add crowdfunding into the mix alongside their core business. The financial crisis and capital requirements placed on banks made it much more difficult to offer funding to businesses and individuals. And the banks don’t want to lose out.

Danae Ringelmann Indiegogo’s co-founder feels brands are getting involved as “these campaigns let brands engage with their customers rather than just treating them as a transaction. The customers feel like they’re working alongside the brand to make something happen.” Or it’s a clever form of CSR to get the punters to help pay.

Crowdfunding isn’t just about the money as the 3 points above highlight. It’s about engaging, participating and perhaps most importantly being part of a movement. Will the sites which foster this spirit the most succeed…..we shall have to wait and see.

Crowdfunding empowers individuals to do social good in their communities and could help ease the pressure on government and councils to fix things. So perhaps one day our taxes could reduce and reliance on local government – a utopian ideal. Power to the people!

Crowd impact: The World’s Largest Social Enterprise Pitch Event

Pitching ideasBen Goldhirsh is the co-founder and CEO of GOOD a community you should join and follow if you want to try to make a difference. They’re a global ‘community of, by and for pragmatic idealists working towards individual and collective progress ‘ = good.

Ben’s a judge for CROWDIMPACT the world’s largest Social Enterprise pitch event offering $100million in capital which is up for grabs.

Social Enterprises get to pitch their ideas in front of an audience of entrepreneurs and investors, dragon’s den style, to win a cash prize and also exposure to impact investment professionals.

GOOD feel what brings Social Enterprises to scale is communities coming together to ‘barn raise’ like this. This is why Crowdfunder has teamed up with GOOD, TED Fellows, X PRIZE Foundation, Social Enterprise Alliance, and many other partner communities for CROWD IMPACT.
The judges need help in deciding who the finalists will be and ultimately which ones will get funded. Here’s how GOOD say you can get involved:
  • Click here to find the social enterprises you believe in and want to support.
  • Click Follow Company on the top right of each company profile you support.
  • Click Share Company to spread the word and share to your social network.

The Social Value Act & Conference – November 20th 2012

As always Social Enterpise UK are doing great things, I’m intrigued into the previous backgrounds they had (must read up). They seem to be true demonstrators of the power of community, when people have a common cause. They’ve had a recent success playing an instrumental role in SalesForce (shivers as I write it) dropping their ridiculous attempt to trademark ‘social enterprise’.

Social Enterprise UK have also triumphed in making a Private Members’ Bill become law in March, which is a ‘rare feat.’  The Social Value Act (which comes into force in January), in a nutshell, means public bodies now need to consider the social value a company creates, the benefits to the community, when they award a contract. The act should result in social enterprises delivering more public services and getting more budget, as they’re committed to doing more than simply making money from a contract. What a role reversal from the Thatcher years.

Social Enterprise UK will be creating guides, best practice events and training offers, to support social enterprises and public sector bodies to build their capacity to comply with the Act. I’d like to go to the  Social Value Conference next Tuesday, particularly to listen to how people are measuring social value and to dispel some slight cynicism I have:

  • Is the Act really going to create good for communities?
  • The threshold is £173,934 if awarded by local authorities and £113,000 by central government, so this doesn’t really help smaller social enterprises deliver public services?
  • Many aspects of social value and wellbeing do not have market values and are difficult to measure. Will the Act create increased burdens, which smaller suppliers might find difficult to bear?

Social Enterprise Funding: £10million open for applications

A few weeks ago I went to a Global Net 21 event about micro-finance, which sounds a bit boring but was very interesting. Mike Baker from Big Issue Invest was a guest speaker, with Dr. Phyllis SantaMaria from Microfinance without Borders – both lovely people.

What became sadly very apparent is that social enterprises don’t have a proven track record and often have business models which don’t follow convention (the standard rules). They’re therefore a high risk and getting bank loans or incubator funding can be pretty impossible.

It’s good to see there’s a new fund, The Social Incubator Fund, which aims to encourage investment into early-stage social ventures.

It’s been introduced by the Minister for Civil Society Nick Hurd. This new fund will allow incubators (organisations that offer funding and intensive mentoring to early-stage businesses) to apply for annual grants of up to £750,000 to invest in social enterprise start-ups. The incubators themselves could also receive between £50,000 and £250,000 per year to put towards operating costs, which seems a significant slice of the pie?

The Big Lottery Fund, Big Society Capital and The Social Investment Business will make decisions about applicants as part of the advisory board (which will be chaired by the Cabinet Office).

Successful applicants will be announced at the end of January 2013, with two subsequent rounds launching in 2013 and 2014. Applications can be made here.

Let’s hope this isn’t just a political manoeuvre and actually does a lot of good.