“When the credit card bills from Christmas come rolling in, and when some crowdfunding platforms and sites start to post their actual success and failure numbers, prospective contributors are going to be tougher to come by”.
CrowdFunding Incubator LLC (CFI) senior executives are predicting that crowdfunding project sponsors, as well as the website owners and operators, are going to see a change in the attitude of contributors to crowdfunded projects in 2013.
This comes dispite no less an authority than Forbes saying that crowdfunding is going to be a major source of small business investment capital very soon. The growth according to Forbes will not be limited to the United States. The European business community is also looking to crowdfunding as a major source of capital according to media reports. Last year the crowdfunding website Kickstarter.com had pulled in $100 million from small-amount investors.
Now that the new year celebrations have ended and the real performance data of sites and the entrepreneurs who’ve posted their projects on them are getting closer scrutiny, a shakeup is inevitable according to CFI. Project sponsors will have to put more of their resources into promotion and building credibility, and this will translate to an improved standard of quality in this new capital market medium.
Like a hangover from 2012, there is a growing and potentially painful misconception that if you just toss an idea up on a crowdfunding website, money will come running after it. Or the belief that contributors stay up all night scouring the internet for projects they can toss extra money at. This grandiose belief in monetary magnetism is going to cause a lot of crowdfunding project sponsors incredible grief in 2013. The fact is that any venture requires a vigorous and continuous participation on the part of sponsors in promotion.
“When the credit card bills from Christmas come rolling in, and when some crowdfunding platforms and sites start to post their actual success and failure numbers, prospective contributors are going to be tougher to come by. They will be more cautious, more skeptical and have less money to gamble with than in 2012,” says Douglas E. Castle, the CEO of CrowdFunding Incubator, LLC (CFI), looking ahead to an inevitable shakeup in the crowdfunding industry.
Castle continued by saying, “If anything, entrepreneurs are going to have to do everything that they can to convince an increasingly disenchanted public that their projects will not turn out to be embarrassments, and to persuade the public that contributors, as true believers, will receive some form of compensation, either real or emotional, in exchange for their paid vote of confidence.
The notion of just posting up a request for funding on the web and waiting for the money to materialize is disappearing. Now, more than ever since the crowdfunding phenomenon started gaining media traction and public attention two years ago, organizations which require crowdfunding for their capitalization base are going to have to participate actively in the promotion of their ideas.
This will include more than ever a great deal of blogging, classified advertising, emailing, text message announcements, press releases, videos and social media activity And while that doesn’t have to be expensive, the small sums and significant hours required to get the news of a project to stand out and reverberate are going to be a requirement. Sponsors who are truly ambitious about raising money through this supercharged vehicle will have to drive much of their own traffic to the crowdfunding sites or platforms where they are being featured.”
CFI’s Chief Operations Officer, RD Watkins added, “The better crowdfunding websites are going to be getting more choosy about which project promoters they want to rent out their valuable website real estate to. The decision makers who own these crowdfunding platforms are going to be looking very, very carefully at not only the viability of any given project, but they’ll also be looking at how much the project’s sponsors are willing to participate in the promotional process.
Money is not getting easier. It is getting harder and will probably continue along that trend for some time to come. The whole process is becoming much more active and participatory than before; especially in light of some recent refunds to contributors and some funded but badly stalled projects.”
Castle added, “People are getting educated about crowdfunding. Contributors as well as the operators of the funding sites want to see three things. They want an idea or a business plan that makes sense; they want some kind of consideration in exchange for their contributions of seed or early-stage capital; and they want to see that the innovators and entrepreneurs who are looking to them for funds have some serious skin and sweat in the game.
“Projects just don’t fund themselves. In the coming year, the entrepreneurs are going to have to do everything within their power in order to drive prospective contributors to the platforms where their businesses or business ideas are being showcased.
“On an optimistic note, this market scenario will impose a higher standard of quality on the part of both the website owners and the entrepreneurial hopefuls. It’s an inevitable form of ‘market adjustment’ or ‘correction’ that follows a period of too much money and too little oversight. This will benefit the contributors and the private sector. It will be refreshing to see some sensibility and sanity brought home to the crowdfunding market.”