dimanche 14 avril 2013

Crowdfunding: financing a project collaboratively

Today, I'd like to speak about crowdfunding, a financial vehicle that developed massively recently thanks to the rise of the internet, social media, and collaborative platforms. Indeed, as "crowdfunding" litterally means, it is about individuals pooling their money in order to finance various projects, ranging from businesses (be it a start-up or a production plant), to citizen journalism, to movie production. The collaborative principle is applied to investing. I'd like to focus here on two organisations I know about and find interesting regarding crowdfunding.

The first one is WiSEED, a French internet crowdfunding platform offering individuals and businesses to invest in the under-8-years-old businesses selected by WiSEED on criterias like innovation, market performance, and market growth. This is pure crowdfunding: people can co-finance projects on the internet. And this is a specialised platform, focusing mainly on start-ups. The maximum loss for the investors is the capital invested (starting from 100€), not more. Before the start-ups are selected, the WiSEED members can first vote for the businesses they find most relevant and second follow and comment them. The WiSEED team then selects the best businesses and relays their funding needs. The interests can go up to 45% for example.

The second one is Babyloan, another French crowdfunding platform. This platform is interesting because it is not only about crowdfunding, but also about microcredit. Indeed, Babyloan is working with MicroFinance Institutions (MFIs) all over the world. The MFIs give Babyloan the informations about the project and project bearer and Babyloan relays the story on its website. There, you can choose the project to which you want to lend some money (starting from 10€). Some projects are developed right down the street, others are located on the other side of the globe. Once you've given your bank account informations and the project has been fully funded (by other Babyloaners), the money is collected from your account and transferred to the MFI responsible for the microcredit to the project bearer. A few weeks later, you start being paid back on a monthly basis. A few days ago, I received my forth notification 4€ had been recredited to my Babyloan account, paying back for my lending to a Filipino women wanting to increase her stockpile in her clothing store. A specific feature: on Babyloan, you don't receive interests, you just lend the capital, as you would do with a friend.

Of course, there are other platforms, but these two are those I know best, and I think they give a rather good idea of what crowdfunding can be today. Crowdfunding is also part of collaborative finance, a term used to describe financial transactions that occur between individuals without the intervention of traditional financial institutions. Generally, those transactions are highly personnalised (in the two examples I've used, you can choose the project you are co-funding) and when there is an intermediary institution between the lender and the borrower, its governance mode is more open than of traditional institutions (as you saw at WiSEED, the WiSEEDers give their opinion before the final selection is done).

1 commentaire:

  1. Great article.
    This a major financial and political issue.
    Babyload only acts as a middle man and does not "finance" anything directly. True crowdfunders are actually facing a legal issue: only leagal financial institutions can act as crowdfunders. This has to change drastically. But if this happens, it is a massive political issue allowing the emergence of a new economy in the wake of a new way to finance it. Start ups would be the first to benefit from the change no matter if they are "ESS" or classical.