[Crowd Leader: Tom Vroemen] Positioning of Venture Crowdfunding Concepts and the Exploration of New Markets
In months prior, I have written about the ease at which new platforms are launched and the diversity of crowdfunding models and how they are accepted in Europe and the US. Reading those articles, you will probably know that I am sceptical about the booming development platforms and how they all consider themselves to be the financial infrastructures of the future.
The number of platforms has risen to about 400, coming from 200 two years ago. There is also a huge increase in focus on the US market with the coming up of the JOBS act. Adding to that I saw a lot of Europe based initiatives suddenly change focus to the US.
A lot of attention goes out to new initiatives that are being launched. Perhaps more than to initiatives that have proven successes. Especially since the JOBS act gained ground in the US, this is noticeable in Europe as well. Additionally attention goes out to many existing crowdfunding concepts that change market focus in the first 2-3 years after founding. The JOBS act ruled US market apparently becomes the promised land as of jan 1st, 2013.
The above and what I stated in previous articles has triggered my doubt on how market sensitive crowdfunders really are. Checking the needs of entrepreneurs and investors clearly is of lesser priority than becoming a big platform with significant dealflows. The point is that, without fulfilling investor and entrepreneur needs, nothing can ever become big. But the paradoxical thing is that fulfilling user needs will require such local flexibility and implementation variation that the big dream becomes unrealistic.
In short, most crowdfunding initiatives go down the following path in their first years: 1. Seeing excessive amounts of high-potential startups 2. Having a vision of massive involvement of the public. (in this phase ‘a new groundbreaking platform’ is announced) 3. Devising a model and website, based on best user experience and multifunctionality, not on legal barriers or market demands. 4. Running up against a legal barrier. (in this phase authorities are blamed for lack of capital access) 5. Reconciliation of model and legal framework. 6. Launch. 7. Disappointing usage. 8. Geographical market focus change. Back to 7. Disappointing usage. And so on (the last 2 phases cycle until the platform is offered for sale). Perhaps they have funded 2 or 3 companies.
Of course we have kickstarter, and p2p-lending, and a boom in startups and startup incubators. Press writes about their successes every day. But we should keep in mind that those successes are single cases out of hundreds of thousands. You can’t scale these numbers, or base a business plan on it. However, as nobody writes or talks about the regular, average cases, we don’t see them and everybody is only just invited to think big.
I doubt that big thinking will bring crowdfunding far. Crowdfunding is about sympathy. Sympathy is about closeness. Closeness is about local and specific. Local and specific are contrasting to the platformization and centralization that most crowdfunding concepts build. We have a lot to learn.
How do you expect crowdfunding to unfold in the coming years? Let us know in the comments below.