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Putting Job Creation into Hyperdrive
In this blog, I'm going to look at how crowd funding might kick job creation into high gear and how it helps launch products with much higher success rates in the marketplace.
Jobs, jobs, jobs... That's all I hear about in the media these days. So when I think about the ability of crowd funding to power job creation, I'm thrilled. I love the idea that someone with a brilliant idea can meet up with a "crowd of funders" and give his idea life and, in turn, increase the velocity of job creation. Here's what Indiegogo's CEO, Slava rubin, had to say during our interview in New York earlier this year.
"The average small business starts with less than $10,000, which also happens to be the sweet spot for Indiegogo funding campaigns," says Rubin. "Take a T-shirt store by the name of 'Walk in Love,' for example. A young designer started an Indiegogo campaign after seeing how well the T-shirts he'd made were selling at a kiosk in Lancaster, Pa. Business was so good that he decided to try to move his operations to a store, but he needed money to realize that dream. He created a campaign to raise $30,000 to afford the lease, inventory for a year, to hire people," Rubin said. "He raised the money and now has 15 employees at his store in Pennsylvania. That's real jobs."
A huge game-changer that you need to know about is the recently signed "Jumpstart Our Business Startups," or the "JOBS" Act, which is designed to encourage the funding of small businesses by easing various securities regulations. In the past, the Securities Exchange Commission would only allow "accredited investors" (i.e., wealthy people who could afford to lose their investment) to invest in a company. Now the JOBS act changes all that. "This will allow crowd funding to become an investment vehicle," Rubin said, "allowing anybody to invest in any idea."
Since its beginning in 2008, Indiegogo has funded many tens of thousands of campaigns, and Rubin estimates that it's led to the creation of perhaps hundreds of thousands of jobs.
"I see the world of crowd funding becoming a normal way of funding things," he said, "and soon you'll see the governments using it, you'll see corporations using it, colleges using it -- you'll see all types of businesses using it."
While it's still early, Rubin feels that eventually large companies will take advantage of crowd funding campaigns in three specific ways:
1. Charity and promotion. Nokia has already matched funds on an Indiegogo campaign for a charity called Camp Interactive, which allows inner-city kids to learn technology skills. Camp Interactive ran an Indiegogo campaign to raise $10,000 for its summer program and Nokia matched that amount.
"Nokia gets the benefit of saying, 'Hey I don't want to give money just to give it away. I want to know that other people care about this. And I want to be in line with what other people care about,'" Rubin said. Nokia benefits too, from the social media reach of Indiegogo users. "Nokia doesn't have to pay for that, except for being supportive of these great campaigns."
2. Research and development. "You'll see companies like General Motors, a mammoth car company, use Indiegogo to outsource/crowdsource their R&D, Rubin said. "Not only will you have all these people who are hobbyists be able come up with ideas, but you can have each of them come up with their crowd funding campaigns to determine which of them are the best campaigns."
From among those many campaigns, General Motors can take the top 50, "and incubate them with matching funds brought in house to turn them into amazing products," Rubin said. "You don't have to have a million-person R&D company in-house, you can have everybody working on it. Not only is it R&D of ideas, you're actually proving that there's a demand there. And you can use GM's execution and distribution to bring it to life."
3. Gauging consumer interest and building a community. Consider the world of books, and the physical bookstore. Imagine Barnes & Noble, with its physical store and digital outlet. "On Indiegogo, you can have an entire community of writers who start coming together and offering up what their books and writing ideas are," Rubin said. "If they can get them crowd funded to the point that they need to, then maybe they can get online to the Barnes & Noble site to be able to get exposure. Or if they reach a certain threshold they'll be able to be in the physical store. If they reach a better threshold, they'll be in the front of the store.
This solves a problem of inventory management -- a big issue in retail, especially bookselling. "You don't have to actually to take a risk as the owner or the manager of that store: you have the data proving that the community wants this," Rubin said.
"At the same time you have this digital connection with these people so you're creating this community," Rubin said. "You're shifting from a transactional brand of selling books to nurturing the entire book community."
In fact, Rubin believes that crowd funding is going back to basics.
"There's this new fad in diets," he said, "called the Paleo Diet. It's about eating the way we used to eat hundreds and thousands of years ago. All it really is, is eat the way you used to eat yesterday. I like to think of crowd funding as Paleo Funding: all it really is, is funding things the way we used to do hundreds of years ago. That is, the local community wanted something to happen -- 'Do we need it? Let's get the money to make it happen' -- now you have the technology to do it on a bigger spectrum. It's incredible to see now with the Internet that people can do funding the way it potentially can be done."
In my next blog I'm going to explore another of the top crowd funding sites, this one called RocketHub, which has a powerful vision of supporting scientists and engineers to have their dreams come true.
NOTE: Over the next year, I'm embarking on a BOLD mission -- to speak to top CEOs and entrepreneurs to find out their secrets to success. My last book Abundance, which hit No. 1 on Amazon, No. 2 on the New York Times and was at the top of Bill Gates' personal reading list, shows us the technologies that empower us to create a world of Abundance over the next 20 to 30 years. BOLD, my next book, will provide you with tools you can use to make your dreams come true and help you solve the world's grand challenges to create a world of Abundance. I'm going to write this book and share it with you every week through a series of blog posts. Each step of the way, I'll ask for your input and feedback. Top contributors will be credited within the book as a special "thank you," and all contributors will be recognized on the forthcoming BOLD book website. To ensure you never miss a message, sign up for my newsletter here.