According to Nesta, the alternative finance market has doubled in the last year. As Stian Westlake, Executive Director of Policy & Research at Nesta explains, there is “a growing movement afoot to revolutionise banking, investing and giving by using technology to simplify the links between those who want to invest money and those who need it.”
This is because crowdfunding, which is at the head of this movement, gives entrepreneurs and small businesses the chance to test the waters by conducting risk free market research and product validation, and gives new companies the opportunity to find traction and get their brand or project known.
While all crowdfunding platforms offer the opportunity to validate business ideas and gain exposure, they differ in the scope of what they can offer, and in particular what they can offer startups.
At CrowdShed, one of the key objectives is what CEO Henry refers to as “bridging the gap between the online platform and the people who make projects happen.” Their business model encourages entrepreneurs who have signed up to their platform to make use of The Shed – their central London hub, open office and event space, where crowdfunders are able to host campaign events, get advice from CrowdShed experts and meet potential funders and business partners.
ShedTalks are a take on the non-profit, thought provoking and community based TED talks. ShedTalks each give individuals 12 minutes to share insightful stories, strategies or viewpoints on a particular word to an intimate audience at The Shed, and are a part of the CrowdShed event and education programme.
Co-founder Duncan Madden explains that ShedTalks are “a brilliant way for entrepreneurs to gain some invaluable insight into what it takes to transform innovative ideas into legacy.” With the ShedTalks based around intriguing everyday words such as Emulate, Reach and Shift, they are a great opportunity to hear from other entrepreneurs and previous project creators.
At a talk at the 2013 Aspen Ideas festival, Kickstarter co-founder Perry Chen discussed the fact that when Alexander Pope translated The Iliad from Greek to English in 1720, “he had a group of about 750 people who subscribed to the work, essentially micro-funding its publication, then got their names inscribed in the first edition as a reward for backing the project.” Crowdfunding, often thought of as a new and revolutionary movement, has its roots set deep in the past.
The idea of Alexander Pope crowdfunding the translation of The Iliad also sheds light on the wide scope of projects crowdfunding caters to. CrowdShed is aware of this, which is why they have eschewed the current trend for industry specific crowdfunding platforms and are tackling a wider market. As co-founder Duncan explains, “we see crowdfunding as an opportunity for everyone, from the teenage tech prodigy to the grandmother who wants to open a florist in her local village. In our view, the limit to who can crowdfund with us is limited only by the crowd itself.”
This philosophy of diversity is illustrated with the wide range of projects successfully funded so far. Midnight of My Life, a biopic of legendary mod musician Steve Marriott, overfunded to £15,563, more than £3,000 more than its original target.
Heidi and Adele raised £2,276 for their eco-friendly leather bag and purse company, and Goods4Good a social enterprise startup raising funds to send a truck of humanitarian aid to Ukraine crept past their £3,000 target in the dying minutes of the campaign.
Crowdfunding success then is limited only by the mood of the crowd and the clarity with which a project creator can convey their message.
Using the internet and social media to create an online presence is the best way to do this, as having relevant social media pages with Facebook and Twitter, is vital for exposing your project to as many people as possible. In order to make the most of what social media has to offer, it is also incredibly important that you update social media regularly and remember that social media runs 24/7, so responding to new followers, comments and private messages relatively quickly is important to building momentum.
Having a blog is also a great way of creating a presence, as it is a free and fantastic way of updating backers and potential funders about the details of your project, whilst showing your undying enthusiasm for it. At CrowdShed, understanding the importance of promoting your project is high on their agenda.
CEO Henry emphasises in particular how vital it is to “Not keep your project a secret- to not be afraid to use your entire network – to tell everyone about it”. They try to drum this home even before projects are started with their CrowdShed starter pack, which sheds more light on how to promote your project and how to successfully build it from scratch.
According to the 2014 Nesta report, the market share of alternative finance almost doubled in the last year. This is why Manos Schizas, Senior Economist Analyst and Acting head of SME policy at ACCA has predicted that alternative finance will be confronted with “a substantial disruption, out of which a more concentrated, more networked and more mainstream industry will emerge.” The future of alternative finance and subsequently the future of crowdfunding thus lies in the fate of merging with traditional finance models.
In the UK, this trend has already begun with the crowdfunding platform Seedrs offering equity based funding and Kiva providing loans based funding as an option for project creators. Offering this mix of financial solutions will allow crowdfunding platforms to act as what Henry refers to as, “an engine of capital, which will provide individuals, entrepreneurs, arts creatives and charities with the appropriate funding they need.” CrowdShed itself is moving into the equity and loans sector towards the latter end of 2015 as it builds out its investor network and builds its bespoke trading platform.
This move, which they hope will set them apart from their competitors, will give previous and existing funders on CrowdShed the opportunity to invest in a successful project again through an alternate mode of funding.
The future of CrowdShed and of crowdfunding, therefore lies in a shift away from a focus on gaining short-term capital and exposure and shift towards helping businesses expand by offering a financial solution for the different stages of a business’s lifecycle.