Back to back tweets this morning made me think about the future of crowdfunding. The first tweet was from IDEO dude and angel investor Tom Hulme talking about a kickstarter project he had just backed, a smartphone powered paper airplane set. Make a paper airplane, add the kit, download the app and off you go.
Right after that, a tweet from London Business School leading to an article in the Telegraph which talks about the future of crowdfunding, with one of the professors from the school, Dr. Mullins, commenting, “I think we are headed for a train wreck. The likely outcome is that a lot of people will lose money when the entrepreneurs they have funded fail to deliver, and then we will see a backlash.”
Right, because in traditional risky investments investors always see a return from all of their investments. </sarcasm>
Crowdfunding is an evolution and peer-to-peer fundraising is not going anywhere, it will likely mature and companies and investors will get smarter about the signs they look for when making investments. Some will succeed and some will fail and we’ll see a norm established.
At the same time, the trend I’m noticing is that companies aren’t looking for traditional investment from sites like Kickstarter, instead they’re looking to establish whether they have the product and the market fit right, whether they can grow sales leads and market themselves effectively.
I think the term investors for people who fund product development through these platforms is a misnomer. Personally, I believe they’re patrons, a hybrid customer / backer who believes in the idea but wants a little something for themselves. In some cases a mention in others an early release of the product.
So, I don’t know if peer-to-peer funding is right for all types of companies. I remember when I was raising funds for my venture, my resistance to crowdfunding was that I didn’t really have anything to give on top of equity.
Embarrassingly, I’ve yet to “back” anything on kickstarter or any of these sites yet, but I’ve told people about Kano and Pebble as well as shared videos for movies that are trying to be made and a handful of other concepts that are looking for funding. This is the power of crowdfunding platforms for entrepreneurs, you come for the money, but you stay for the customers and marketing opportunities.