CROWDFUNDING Topsy-turvy crowdfunding


What should you help crowdfund? Is your project suitable for crowdfunding? These questions may have seemed easy to answer a few years ago, but the current panorama has shown there’s more to crowdfunding than meets the eye


Junior Fintech Reporter Henry Vilar


IBS Journal May 2018


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ack in 2015, Japanese entertainment giant Sony announced that it had intentions to release a well-loved videogame sequel. They announced that the funding would be raised through


Kickstarter, a popular crowdfunding platform. It wasn’t long until it became clear that the sum raised would only be a fraction of what Sony needed, and that the rest of the investment would be greenlit by the publishers and investors on the proviso that the project reached its crowdfunding goals.


More recently, Monzo has offered crowdfunding rounds ever since its launch. Monzo allows customers to pledge money, and only opens up company shares to them if the money pledged reaches a certain amount. Monzo is a company that has ridden the wave of trendiness and corporate humanisation – and it has done it quite successfully. The bank has thrived on word-of-mouth, which means that every new way to involve the user personally in the bank’s success has the effect of encouraging them to keep spreading the word – and crowdfunding, as well as involving them in the app’s development through feedback and forums, may just be the best way to gain that allegiance.


These examples of the current state of crowdfunding show that campaigns often have ulterior motives beyond raising capital, which in these cases include product market validation, to ensure that big enterprise investors have some tangible proof of the market’s sentiment towards a product; and, in the case of Monzo, customer satisfaction and marketing might have also been included in the equation.


Since crowdfunding began, there hasn’t been any shortage of disappointment with past campaigns – misleading or fake products, unprepared projects and creators, and so on. As a result, in the past year, crowdfunding in the consumer space hasn’t seen the popularity that it did a few years ago. Due to the reasons discussed above, big corporates have also started to get their fingers in the crowdfunding pie, a space that purists deem to be reserved for up-and-coming firms that struggle to get their funding. But again, these usually do not really have an established house name, which can spark some reticence in consumers to invest. Even returning creators are able to acquire much


larger funding from traditional means, so they don’t always come back to these crowdfunding platforms. It’s a Catch-22.


The fact that now crowdfunding platforms are opening up to ICOs and cryptocurrency is not very encouraging. 2017 was, indeed, a fantastic year for cryptocurrencies, but it also highlighted their volatility side. If the content creators found on crowdfunding platforms were not always too reliable, it seems that those launching short-lived currencies through ICOs hoping to make a quick buck would find these sites a thriving place to launch their stage debut, if they manage to get the traction. PR has often been a large ally of these new companies in these platforms but lately, the distrust in new and unknown projects has made it less effective than it used to be. With ICOs, it’s a double-whammy.


However, in spite of the disarray that we currently find in this area, most predictions lean towards the positive. Accelerators are endorsing and facilitating crowdfunding campaigns, for example. The model of equity crowdfunding that Monzo adopted has also been replicated successfully in many other cases, and it seems like it’s catching on. People are increasingly more able to gauge the risks of a project, now that crowdfunding is fairly mainstream and we have learnt the ropes. Moreover, the possibility to use blockchain technology to manage these campaigns has many enthusiasts excited on the prospect. And lastly, crowdfunding is now being regulated in the European Commission’s Fintech Action Plan. All in all, if you’re looking to crowdfund your project, it seems like the bar is being set quite high.


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