CrowdFunding Puts An End To The Market Sizing Fallacy

Facebook originally began as a way for college crowd to connect and has grown to be one of the hottest online properties.  With half a billion members from all over the world and growing, it has surpassed any “market sizing” imagined in the early days. Arguably, there are some options for “market sizing”, specifically when the aim is to disrupt and replace those in power.  Even still, the world is shifting outside the incumbency as well. Market sizing has become one of the largest out-dated and wrong theories, propagated by arm chair quarterbacks far away from the football fields. A more realistic strategy is to “fail fast”, making quick decisions, than to “follow fast.” No one knows better what the market will do than the market itself.

Future crowd funded ventures will require firms to use the crowd for investment decisions and de-investment decisions.  This should prevent the emotional and “save face” issues of removing losing investments that de-investment decisions often face. This crowd-involved funding mode of decision making should also affect the current standards in dealing with the onslaught of startup ideas coursing at the base and help find those powerful new ideas that now lie stagnant because the current system can’t find them. One can only imagine the modern economic situation if we could only discover those good ideas efficiently and we believe crowdfunding can do that.

Crowdfunding Also Saw Decline of Outlier Identification

Our society used to be much more hierarchal and class-based. Whether a person could read, received a degree and where from, what they wore, who they mingled with; these were social indicators within the social food-chain and determined a person’s status. This nearly instant assessment of another’s abilities is ingrained into our nature and necessity with the growing population of people one can know well. Once there was a deep connection between education, literacy and status and this was an easy short-cut to evaluating another’s ability to manage complex and/or highly skilled tasks. Unfortunately, the present day has a large population with educations and even graduate level degrees, like an MBA. Despite the over saturation of educated people within the population, class is a still used as a social short-cut, significantly in the financial world.

It has been an admitted practices that those in financial institutions filter resumes, only those from a handful of elite academy pass through, the rest are just wasting time and paper. A lot of venture capital companies have a similar class filter built in, although there is no definitive generalization for the whole industry. Many need the euphoric state brought on by the entrepreneur with the perfect degree from the perfect school. If such a filter worked in reality, then one could hardly blame them, but it doesn’t and hasn’t for many years. In a study about one’s probability to win a Nobel prize in Medicine or Chemistry by attending a “brand-name” university. According to the study, as with life, it was more about being the right place in the right time than where one learned their skills.

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