Crowdfunding - Not Just A Fad
Wednesday, 27th August 2014 at 12:04 pm
International crowdfunding heavyweight, Liz Wald has a vision for the future of crowdfunding – stretching from the world’s richest economies to the poorest.
Wald is VP of International at Indiegogo, one of the world’s largest crowdfunding platforms.
Founded in 2008, the site allows people to solicit funds for an idea, charity or start-up business – representing the democratisation of access to funding, with the goal to empower those with ideas to be able to raise the funds the reach that goal. Millions around the world visit the site on a monthly basis.
Prior to joining Indiegogo in 2013, Wald spent four years at Etsy where she led the strategic development and initial operationalisation of the site’s international efforts. She also founded a fair trade import business in Rwanda in 2003, and has a passion for female empowerment. The business, Economic Development Imports (EDImports), sources goods handmade by African women living in difficult socioeconomic conditions.
Visiting Australia from Indiegogo’s headquarters in San Francisco, Wald met with Pro Bono Australia journalist Nadia Boyce to talk about the growth of the crowdfunding movement, its future in developing markets and its potential to grow female entrepreneurship.
More than Fundraising
Wald sees great potential in crowdfunding to transform traditional pathways for accessing funds.
But even beyond money, her vision sees Indiegogo “not just as a place where you to to raise your money but also a place where you might meet other people too…that entrepreneurial spirit.”
“I think the main trend is that crowdfunding at the beginning was really focused on the funding part…now people are coming to us for exposure, to test a market, to see where the demand may be,” she says.
“Companies are thinking that and investors are thinking that way. They want to see if you can prove your market more.
“From a contributor viewpoint, people expect more and more diversity of projects. It’s becoming not so much about the money, but a channel,” she says.
Wald says Australia’s geographic location makes it unique it in the global marketplace – and ripe for people to contribute to innovative projects overseas.
“Australia is obviously a very developed market, using e-commerce for a long time, all the things that make for a really strong uptake.
“I think what's really interesting is that Australia is very far away from other places. People are very open to funding things of all types and sizes and shapes. Otherwise they’re never going to see that product…that’s what's really unique about the market here.“
Wald says the era of crowdfunding worldwide is “still in its early days.” In her job she sees variance in the uptake from market to market.
“It’s like e-commerce. The arc of e-commerce has taken 15 years or so to reach out. I’ve been thinking a lot about what economies are most suited to crowdfunding and entrepreneurship. If you look at the poorest economies and the richest economies, that’s where you have entrepreneurs. Either because otherwise you starve to death in the poorer economies, or you have enough money to be creative in the richest.
“The ones in between – they’re risk averse. I think with crowdfunding, it’s going to take time before you see it in the truly developing markets. Plus, there’s some infrastructure things that have to happen – like payments, and shipping address. If you’re in the jungles of Brazil, where are you going to ship it?”
Wald sees a future for crowdfunding even in those nations where economic and social development is lagging. Her time in Rwanda, she says, showed her a model of empowerment through employment and a sustained income.
“Everyone I knew in Rwanda had money in their pockets. Not necessarily in banks, but in their pockets, and they were doing commerce every day,” she says.
“If those people can access capital from their own communities, in the future, because the barriers of payments are down, that’s going to see huge opportunity for crowdfunding.
Walt sees crowdfunding models first developing in these nations at a community or regional scale, without the need for the internet or payment technologies.
“The big amazing opportunity of the future will be when it stays local in those other economies. To me, that’s, when I get up in the morning, that’s the vision that I think is super exciting.”
As well as extension into developing nations, Wald sees crowdfunding transforming markets in developed economies, even being utilised by corporations for CSR purposes.
“Where we are today is more about people like you and me who don’t necessarily have access to venture capital and getting a bank loan, coming out of the recession – that’s where the activity is now, going around developed markets.”
“You have bigger companies starting to play a role,” she says. Often this comes in the form of matching donations acquired through crowdfunding campaigns.
She speaks of a project in the US where car maker Honda supported a campaign to “save the local drive-In.” No drive-ins had funds to pay for projectors for the now-digital films they needed to screen. “Honda stepped in and said if you can raise X, we’ll step in,” Wald says. “So we’re seeing that kind of CSR work form the corporate side.”
Crowdfunding has also proven a boon for another group – women. Recent research suggested that female entrepreneurs were faring better than male entrepreneurs on crowdfunding platforms.
I think this is tricky because I don’t want to put stereotypes out there, but crowdfunding relies a lot on your initial community first,” Wald says. “You have to go to your first 30 per cent first, and women are really good at that, they're good at bringing their communities together. I think they're also a little more risk averse. Unless its really well thought out, they won’t dive in.”
“If you go up on crowdfunding sites with no plan of action and no initial outreach…you’re going to be one of those projects with zero dollars.
“That might be one of the reasons [for female success] – they don’t start it until it’s more planned out – but that’s not a blanket statement.”
More than a Fad
Wald does not see crowdfunding merely as a passing trend.
“I think crowdfunding will creep into every level of finance…the pace, who knows, but two years ago, venture capitalists probably would have been like ‘pffft crowdfunding!’ Now they say go to crowdfunding, see where it sits and then come to me,” Wald says.
She also speaks of the potential for crowdfunding campaigns to act as a form of risk assessment for banks and credits unions, helping pre-qualify projects for loans and forming an evidence base around the existence of demand.
“I think because it’s a great tool for so many, just the way an ATM was going to make it because it’s so convenient, I think it’s going to make it…it’s like the Etsy model on steroids – because now you have access to all this capital.”
“People fund for lots of reasons. A lot of people fund because they really like the mission…people say, ‘isn’t there going to be fatigue?’ I say people don’t get tired of going to the movies, or the next hot new gadget!
“If you position this as bringing out that next big thing, people aren’t going to be like, ‘I don’t want to fund this because I’m funding too many things’, they’re going to be like, ‘I want more great movies!’ You have to shift from funding to building around the communities.”
According to Wald, the groundwork is already in place.
“When I think of mainstream, I think, do people think I’m crazy for doing it or not? I think it’s mainstream,” she says.
“Is it pervasive? No. But I think people are like, ‘this makes sense!’ I understand why people go into this now.”