Crowdfunding: The Disruptor's Disruptor
Ivey Business Journal
Crowdfunding — which includes the use of web-based outreach and interaction to raise funds — has resulted in hundreds of thousands of loans. Since the Great Recession, bank lending for the types of entrepreneurial activities that crowdfunding helps to finance has virtually dried up and crowdfunding is becoming the new disruptor in the financial world. Similar to “open calls” in the entertainment business, where a large pool of talent is brought in to audition, crowdfunding allows entrepreneurs to reach a large and diverse audience of potential investors. Examples discussed include SeedInvest, an online platform that makes it easier for investors to identify their ideal startups; and CircleUp, which screens startup businesses, provides financial and other company information, and enables investors to ask CEOs questions. Men’s apparel designer Gustin made headlines when it crowdsourced customer opinion on the styles and make of its high-end jeans, went completely online and direct to the consumer, and raised much of its funds from pre-orders. Crowdfunding, however, is not for entrepreneurs who are technophobic or resistent to new ways. Nor is it ideal for investors looking for quick returns. The success of crowdfunding ventures often depends on the vision of a single individual and on others’ desire to connect and be part of something new.
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