Crowdraising new biz cash is blooming wonderful: Michelle Rodger speaks out
Many PR and digital firms entering the Social Buzz Awards (entries close this week) are smaller start-ups who have kickstarted their funding. While some may think crowdfunding has peaked, Michelle Rodger from Bloom VC thinks it's only just beginning in the UK...
Crowdfunding infographic. That's a SEO optimised caption for you.
Hasn't the Kickstarting-funding type model peaked?
Far from it. While real crowdfunding (rewards-based) is booming in America, it is still in the early stages of uptake in the UK and Europe. Nesta is the UK's innovation foundation, and a huge supporter of Bloom. They have released a report into the future of crowdfunding, which makes for exciting reading.
"In 2011, crowdfunders raised $1.5 billion, mostly in the US, to finance over a million projects, ranging from start-ups to community projects, and from new video games to scientific research. The UK crowdfunding market is small, but growing fast. We expect that over the course of 2012 UK crowdfunders will deploy double the £70 million they invested in 2011.
"But the real growth lies ahead. It is possible that within five years, crowdfunding could provide over £5 billion of finance per year in the UK. With the right frameworks and standards, this could grow even further, and a day could come where crowdfunding replaces a large proportion of the £115 billion financial services industry."
Are services like Bloom required because of the failure of vision by banks to lend?
Crowdfunding is about more than just the money. Clearly money is important, but the wraparound benefits of a crowdfunding campaign are significant; you can prove a concept, demonstrate market appetite, presell a product or service and fill an order book, test a price point (from the reward value), raise awareness of your business and start to build a brand, and ultimately, build a community of ambassadors (or database of customers for the more corporate amongst you) who are so keen to buy your product they are paying you to start your business.
That makes a business more "investor ready" and will answer a lot of the questions banks and traditional funders will ask that won't be answered by a business plan.
Do new starts in digital services have a rougher time of trying to get start-up cash than more traditional businesses?
I think it's hard for all businesses to access start-up cash. If you don't have a business plan with 3 years financial projects, including cash flow, and a two year blemish free trading history then you're stuffed.
Crowdfunding is democratising the funding process, making startup cash available to anyone with a good idea, a supportive social network, and the ambition to go for it.
Why should people take a chance and invest in unknown businesses?
With real crowd funding (rewards-based) there is no investment. People give money in return for a reward, or a perk, it’s a simple transaction that is only carried out when the project reaches target. If the project fails to reach target the backers don’t pay any money and they don’t get their rewards, and the project owner receives nothing.
What's the one useful link you can share with people that you think Working Digital attendees would like?
The best link to share would be Start a Project - it doesn't cost you anything to try (you only pay commission if your project reaches target) and at the very worst, even if you fail you'll have gained some of the wraparound benefits I mentioned earlier.
Michelle Rodger will be speaking at the Working Digital Event, taking place in Ayrshire Sep 2-Sep 6 2013)
(Editor's note: another interesting read on the power of the press and crowdsourcing is this article at RockPaperShotgun which shows the impact an article had on boosting income.)
Interview by Craig McGill