When looking for a capital for starting a new business, entrepreneurs have a wide set of alternative tools and platforms to find the funding within their community. These new tools and platforms, that can also be understood as alternative ways of funding, are very different in their methods and how the communities and activities are understood, but in this article, we are going to delve into crowdsourcing, a model that allows individuals and/or organizations to obtain goods and services (ideas, funding, voting, etc.) from a large group of participants, usually via internet, in order to develop new business activities.
There are a wide variety of models that spur out from the concept of crowdsourcing (crowdvoting, crowdsolving, crowdshipping…) but the two most popular models are crowdlending and crowdfunding. The model of crowdlending consist of a series of small loans from individuals to companies and organizations. These beneficiaries will later give back that money with a small interest, but it can also give back some company shares to their lenders. Parallel to crowdlending is crowdfunding, a collective funding network where the crowd collectively grants financial resources, in the form of individual micro-patronage mostly through the web, to develop a new product or service, as well as a tool to test, promote and market their products.
But how do these digital platforms for alternative ways of funding impact our social entrepreneurial initiatives and what is the role of our communities? First, we need to define the concept of Social Entrepreneurship. There have been different definitions through the years, but one of the most accepted definitions is that this type of entrepreneurship is “the act of creating innovative solutions to immediate social problems and mobilizing the ideas, capacities, resources, and social arrangements required for sustainable social transformations”, this is, the transferal of the market-based methods of traditional entrepreneurship to initiatives and projects that aim to solve social problems that affect communities.
There are several roles that the community, understood as a group of people involved in the initiative either as the target group or as mere collaborators, can play in the different stages of the crowdfunding campaigns, apart from their main role of funders. Some examples of these roles are: general advisors to the company; testers of the product, giving feedback on the campaign materials and their design; promoters, sharing on social media and in their own contact networks the product that is being designed; and, on a smaller proportion, even as labors, hired by the promoters as manufacturers or as shipping support, as well as advisors that offer a specialized skill expertise.
Studies show that the direct impact that these campaigns have in the communities improve their access to skills resources and connections to complete the tasks assigned during the campaign, while strengthening their local capacity, supporting their resilience and serving as the base for future innovation. The qualitative data that shows the impact of crowdfunding in communities, as collected by the London Assembly, presents the following results:
- 77% of those involved feel more empowered as a result of crowdfunding for their project;
- 72% of projects said the experience increased community cohesion;
- 86% of projects said that this process significantly improved the skills of members of the team;
- 65% of projects funded things that could not be funded elsewhere;
- 73% of project leaders had plans to start another community project in future.
In this regard and with the proven effectiveness of these alternative ways of funding and the positive impact they have on the communities, there are a wide variety of initiatives, open calls and overall institutional support and promotion of crowdfunding for companies and promoters.
Withing the RAISE Youth project we are in the process of developing a new crowdsourcing platform which will help young future entrepreneurs included in the project activities. The idea behind the development of a crowdsourcing tool is to engage “the crowd” to contribute a small amount of money, services or goods and collectively bring a new business idea or product to fruition.
