Crowdfunding: more work needed

Crowd-funding challenges

Nice post yesterday by “Startup Iceland” on the challenges of creating a robust Crowdfunding platform. This concept is certainly resonating way beyond the normal Silicon Valley world!

The author acknowledges some of the issues that are scaring various pundits in the blogosphere, and might make crowdfunding “risky”. He mentions:

  • Information asymmetry;
  • Valuation issues;
  • High cost of transparency and accountability.

His conclusion: more work needed. But soluble.

I think the importance of posts like this is that there is a whole community out there interested in figuring out how to make crowd-funding robust and fair and safe. The optimist in me thinks they will roll up their sleeves and figure it out if we let them.

Perhaps that would be a better approach than relying on the government to manage these potential risks by micro-regulation. I am starting to think we need some broad rules and cap’s on investment to avoid any big disasters. And then to stand back.

Lots of crowd-funding experiments. Hype grows.

Meanwhile, experiments continue. Last month a high profile crowdfunding initiative closed down (Profounder shutting down). See a discussion of /speculation about the reasons. But I am hearing weekly about new crowdfunding concepts and emerging platforms.

In fact, I would say we are pretty far along the Gartner hype curve (“On the Rise” portion). During the dot comm bubble, when I got my hair cut, all the stylists were discussing whether they should buy JDSU or MCI WorldCom. Normally they talk about very different topics, and I remember being astonished at the time. When they all start talking about whether they should sign up for GrowVC or Kickstarter, I will take that as a sign we are approaching the peak of the crowd funding hype curve.

After the hype peak comes the Trough of Disillusionment, so we should expect that in the next year or three. The good news is that after the trough comes the slow steady phase of real impact. Need a long term perspective.

Figure 1. Gartner's Hype Cycle

Source: Gartner Aug 2011

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