Kickstarter, Zidisha, Sellaband, and Other Current and Future Crowdfunding Cites - Coursework Example

Emerging Technology: CROWDFUNDING Name Name of Institution 1. Abstract One of the latest technologies in the modern day characterized by globalization is crowdfunding, also referred to as crowd funding. As its name suggests, it’s a technology that is framed around the idea of a crowd that offers it to fund an initiative or an innovation by other people. This funding is not necessarily large amounts of cash; it depends on the financial position of the donor. It is also unique in that we can have a situation where so many donors fund one project. In this respect, it is a technology that leverages upon the willingness of a crowd to pool their resources to support feasible initiatives. This paper will explore through this emerging technology, focusing on its operational mechanisms, emerging trends on the technology, its current outlook, the manner in which the technology has been applied in real life situations, its strengths and weaknesses and future prospects of this particular technology. The report has provided possible recommendations that will boost crowdfunding, if implemented. 2. Introduction Crowdfunding refers to the use of small amounts of capital sourced from a large number of people to fund a new business (Young 2013: 7). It is a technology that is emerging and it has already began taking on various trends, which the first part of the body structure of this paper exhaustively explores. This emerging technology has great potential to shoot up entrepreneurship by increasing the pool of investors who raise money in days to come. This assertion is covered in the second section of the body while the third section gives the mental picture of the functionality of this technology, its outlook. Crowdfunding ideas are already in use in various sectors of different economies as articulated by the last part of the body structure of this paper. It covers applications of crowdfunding while the conclusion part provides a recap of the whole paper. 3. Technology a. Trends The first trend is differentiation. Platforms that fail to distinguish themselves from angel investors will be compelled to merge or get phased out of business, because of lack of deal flow. Second, is due diligence. Every platform will start claiming that they are doing some kind of due diligence on new businesses they introduce to investors. The third trend in crowdfunding is Broker-Dealer Registration. Many platforms will partner with a broker-dealer because it is challenging and expensive becoming one. Worse still, the process is quite lengthy. Fourth is Private Equity. Many platforms are trending towards looking like private equity funds by pooling investor capital into a fund. Eventually, it will be upon money manager’s task to invest that capital into several startups on behalf of investors. The last trend is Growth. This trend envisions continued expansion of platforms at a near 100 percent rate of growth rate (Maguire 2012: 32) b. Future Although crowdfunding is beneficial in instances such as allowing film producers some creative control over their projects, it is equally susceptible to potential risks of fraud, embezzlement and misappropriation. These may result to the likelihood of exposing finances through adverse judgments and the consequent cost of litigations. This can most likely halt the project. Critics assert that crowds easily get excited by these kinds of novel initiatives. Boring but operational infrastructure that could develop an area, roads and parking lots for instance will become hard to sell. What worries more is that funds from crowdfunders will signal to government to reduce spending on public areas. That will impact negatively on poor neighborhoods in particular (Trigonis 2013:47). Proponents of crowdfunding counter that such sites will boost the government, not only help in financing it. They insist that its only genuinely popular initiatives that get funded, not officials. This school of thought hopes that crowdfunding will not only help residents plan small initiatives, but also finance the surveys and audits in order to implore governments to even focus on bigger ones. Deloitte Company which is an accounting firm project that web audience will contribute approximately $3 billion into crowdfunded initiatives by the end of this year. Roughly $500m of this will be given for free to outfits that offer no equity in return (Roebuck 2011: 56) c. Outlook Project initiators must come up with a well thought out idea and submit it to a crowdfunding website or platform. For this to happen they need to have signed up an account with the crowdfunding platform where they can post their content accompanied with well-established fundraising goals. The platform also should allow them to update the status of their projects. Sponsors or donors must as well register an account with the site in order to access the projects, interact with project initiators and track as well as monitor its progress (Monteiro 2011: 67). Both parties need to have PayPal accounts to facilitate sending and receiving of the financial contributions. Project initiators should be able to update their profiles in order to show the progress of the project to the supporters. (Monteiro 2011: 45). The crowdfunding software interface should display the details of contributions that are done such as the minimum and maximum contribution limits, expiry date of the project and the general progress of the project (Gass 2011: 90). Search engines must locate your project content very fast and with ease so people can find it. The project should be configured such that when a prospective donor wants to view its details, he is prompted to register an account with the crowdfunding site. Contact information should be accessible because it is crucial in this kind of platform to enhance communication between the project initiators and the supporters. The software should allow easy editing of the project by the project initiators while it allows the supporters to just monitor the progress and probably make comments. d. Applications Web start-ups that are inspired by Kickstarter which is one of the crowdfunding sites help game-designers, artists, and also gadget-makers find patrons. It has helped locals fund-raise for improving their neighborhoods (Maguire 2012: 98). Spacehive from Britain is a site meant for urban projects. In March 2012, it was used it to collect 28,000 US dollars to complete a community centre in a village in Wales. Browser to that site have given out part of the money to install free wireless internet to Mansfield center, in Britain, and has also helped Edinburgh’s locals to modify an idle phone box to an art gallery (Metzler 2011: 37) Zidisha is a US-based crowdfunding platform that has taken this technology on a totally new front. It applies a one-on-one phenomenon to microcredit lending for small scale business people in the third world. Borrowers have to undergo a background check first, after which they can apply for a loan on the website. In their application, they are required to specify the proposed terms of credit and the proposed rates of interest as well. Individual web visitors can lend to these borrowers, however little they give. This crowd funding platform also allows lenders and borrowers to engage in direct conversations. When the money is repaid, the principal and interests thereto is given back to the lenders, who can choose either to withdraw the cash or fund new borrowers again (Steinberg, Demerit and Kimmich 2012: 64). Sellaband is another crowdfunding site that was launched in 2006. It has since coordinated recording sessions of over 80 music artists. It has funded music bands with approximately $4,000,000. It offers maximum freedom for one’s music composition. One is free to make deals with a label of his choice, Management Company or a publisher without restrictions. Similarly, PledgeMusic another is another crowdfunding site putting much effort to grow new talent into the music world. Music career is an expensive undertaking that requires heavy funding and publicity. This is enhanced by PledgeMusic. Finally, GoFundMe is quite handy when one wants to raise money online, for a particular cause, or for personal use. In this platform, one gets sponsors to donate for his personal campaign. This could be anything, ranging from personal transports, fees, to medical charges (Young 2013: 98) 4. Conclusion There is immense hope that the technology will gain much more momentum in years to come. There are indications that this technology might improve and take to trends that make the globe a better place to interact on more sophisticated socio economic crowd funding platforms. However, in any undertaking, challenges are inevitable. Overcoming them will be motivated by excellent, flawless and appealing project initiatives in order to avoid donor fatigue. No one likes to be associated with a project that is likely to fail. References Cunningham, W. M. (2012). The jobs act: crowdfunding for small businesses and startups. New York, Apress. Gass, D. (2011). Crowd funding: how to raise money with the online crowd. Las Vegas, NV, Jump Profit. Lawton, K., & Marom, D. (2013). The crowdfunding revolution: how to raise venture capital using social media. New York, McGraw-Hill. Maguire, A. (2012). Crowdfund it! Canberra, Editia. http://www.contentreserve.com/TitleInfo.asp?ID={3C42D467-FE00-47D2-A8D4-ABF1E50B88AD}&Format=410. Metzler, T. (2011). Venture Financing by Crowdfunding: [Studienarbeit]. München, GRIN. Monteiro, B. (2011). Microfinance: crowd funding. [S.l.], Six Degrees Books. Neiss, S., Best, J. W., & Cassady-Dorion, Z. (2013). Getting started with crowdfund investing in a day for dummies. Hoboken, Wiley. http://www.UCM.eblib.com/patron/FullRecord.aspx?p=1050341. Roebuck, K. (2011). Crowdfunding. S.l, s.n. Steinberg, S., Demaria, R., & Kimmich, J. (2012). The crowdfunding bible: how to raise money for any startup, video game or project. [S.l.], READ.ME. Trigonis, J. T. (2013). Crowdfunding for filmmakers: the way to a successful film campaign. Studio City, CA, Michael Wiese Productions. Walther, T., & MüLler, C. (2011). Cost Effectiveness and Efficiency Analysis of Crowdfunding in Switzerland. Young, T. E. (2013). The everything guide to crowdfunding: learn how to use social media for small-business funding : understand crowd psychology : gain an online presence : create a successful crowdfunding campaign : promote your campaign to reach hidden funding sources. Avon, Mass, Adams Media. Read More