CrowdFunding Is The Do It With Others (DIWO)
Beginning in the mid-twentieth century, the phase, “Do It Yourself” (DIY) has been a continual trend. For several projects, DIY allows the self-satisfaction of accomplishment. Yet for others, doing a project on your own is rather boring and unsatisfying.
Luckily, the creation of the internet allowed an easy connection to others who enjoyed the spirit of DIY for whatever project was started, creating a DIWO evolution. It is in that spirit that we find crowdfunding.
The crowd invests (usually) in startups they have an emotional or social interest in.
Some want to invest in “the dream”; others desire to be in close proximity to crowdfunding projects they respect.
Others are friends and family of the crowdfunded startup members and are investing as way of support. Actually, it is this group of familial and friendly investors that creates a great importance to several crowdfunding initiatives. According to a study by RocketHub, 95% of contributions to the creative area come from first and second level friend circles on average – so this is important to keep in mind when you plan on starting crowdfunded project. These people who typically know the crowdfunding project creators best establish a trust signal to alert the next group of investors.
Without the “trust signal” from the creator’s circle of friends and family, very few crowdfunded startups get much further. In the end, only a few crowdfunded projects build the momentum to have 70-80% of investors are strangers. “No community generally means no funding,” Danae Ringelmann of IndieGoGo points out. If one crowdfunded initiative comes to the table with a decently sized anchor crowd, then one only needs to do a less “moving and shaking” afterwards to secure other funding or just crowdfunding in general. Ironically, outsiders tend to stress about fraud within crowdfunded projects while insiders usually gripe about the difficulties of gaining outsider funding! While community and passion play major parts in crowdfunding projects, there are many perks to remember. Obviously those projects that have monetary returns speak for themselves, but many crowdfunding projects are focused on the perks, especially when considering the regulatory issued discussed later.
Because of the restrictions placed on financial rewards to source providers of crowdfunded projects, the rewards in turn, have gotten creative. Obviously, the backers of such crowdfunded ventures receive the finished goods of the funded venture (i.e. books, CD’s, DVD’s) they also receive mentions in the credit, actual appearance in film projects, studio and set visits, limited edition product, funder only information and other discounts, to name a few. For those who are crowdfunded, the funders are VIPS. The more one gives, the better the treatment one receives. Such tiered treatment worked ages ago for the building of the Statue of Liberty and it only makes sense it should work today. These VIPS are just receiving gratuity and perks; they’re also instrumental in the marketing of the projects and gaining their next round of funders. The advent of social networks such as Facebook and Twitter greatly helps with CrowdFunding. These VIPS are answering questions, perhaps also helping with design work, but are also the most loyal of all the project’s consumers. DIWO is an important new business mentality, but as with group work in any social dynamic, there are sections that can’t seem to hold up their end of the bargain.
This is only the glimmering day of the modern crowdfunding trend, but the development of punishment for those who can’t produce once they were crowdfunded will be interesting to watch. It’s only logical and human nature to do so and one can believe that the mechanisms will be created with the rise of problems of non-producers. PirateMyFilm, a pioneering firm of crowdfunding media, warns that “Any producer who fails to live up to their dividend paying responsibility can be voted out of the community”. This coming from Max Keiser’s product is not surprising, who was one of the most profound movers in crowdfunding, a former CEO of Hollywood Stock Exchange and inventor of the Virtual Specialist technology. This forecasts what is to be expected in the underlying social norms of crowdfunding.