[Crowd Leader: Shelley Kuipers] Funding the Crowd

It's the beginning of a new year, and there was so much interesting and encouraging evolution in the crowdsourcing space in 2011 that I thought I'd like to break it down a bit and, each month, examine a different trend. This month I like to look at the topic of "funding."

We can look at funding from two different angles: 1) the further legitimization of crowdfunding as a means to raise money, and 2) venture capital funding into crowdsourcing companies.

In 2008, when (then) presidential candidate Barack Obama leveraged the Internet to raise over $47 million from "small givers" (people donating under $200 to his campaign) and surpassed one million total donors, Crowdsourcing: Why the Power of the Crowd Is Driving the Future of Business author Jeff Howe stated, "Crowdfunding is an unprecedented phenomenon." Well, President Obama helped take crowdfunding one step further into the mainstream in 2011 as part of a multifaceted effort to jumpstart the American economy when a House bill (related to the proposed American Jobs Act) was easily passed in a vote of 407-to-17 on November 3rd. The goal of easing SEC rules around startup companies trying to raise capital from "unaccredited investors" is to help microfunding from individuals flow (like on Kickstarter and even Kiva) to entrepreneurial small companies in early stages of development.  Still lots of discussion about controlling fraud, etc. but the shift is encouraging.

Also this year, venture capital finally recognized the impact and potential of crowd-driven platforms. Dorothy Sanders of Sandfish Design estimates that over $280 million of venture capital was invested in 35 different crowdsourcing platforms in 2011, with an average investment of over $8 million. (The actual total value of VC investments in this space is likely quite a bit higher, as there are certainly other undisclosed investments.) I'm astounded that it's taken this long for traditional VC money to flow to crowdsourcing, as it's clearly a disruptive business model that replaces inefficient processes, delivers real value to customers, and generates real dollars.

This year we've seen major multinational brands, global agencies and influential government bodies adopt crowdsourcing processes and technologies... investment regulation and venture funding was bound to catch up.