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Towards an ecosystem for early-stage finance and innovation through crowdfunding

20th of December 2013, 0 comments, category: Innovation Stories

by Onclaude & ECN (European Crowdfunding Network)

In May 2013 Onclaude's founder Maria Serra was invited to participate to a panel on crowdfunding as an impulse for innovation, which was held at ECN first International Crowdfunding Convention in Vienna at the head offices of the Austrian Chambers of Commerce. 

A paper with a collection of essays written by the conference speakers has been just published on ECN website and we're glad to preview it to you.

The paper elaborates on some of the key trends and issues within the crowdfunding sector in 2013 and aims at broadening the views on it.

The short essays include a call to re-examine our perception of money, a take on innovative aspects of crowdlending to SMEs, two views from entrepreneurs who successfully raised equity crowdfunding, the potential impact of crowdfunding on employment and work, innovation in peer-to-peer lending, crowdfunding as a blue ocean strategy and, finally, our topic: crowdfunding as form of open innovation.

An insider view from within the European Commission (not an official statement) is also included.

With contribution from:

  • Dr Joachim Schwerin
  • Stefan Limberger
  • Benoit Vandevivere
  • Hans-Christian Heinemeyer
  • Adam Woolway
  • Ivana Pais
  • Daniela Castrataro
  • Tim Wright
  • Maria Serra
  • Dan Marom
  • Oliver Gajda
  • Radha Dilip Banhatti

The paper is available on pdf and you read it by clicking here

Read a few extracts from Maria's essay:

CROWDFUNDING AS AN IMPULSE FOR INNOVATION 

Is innovation the product of one single genius? Or do innovative ideas rather build upon  the multiple ideas of others? There are several common myths around innovation that  have been recently debunked and this is a key one: there are no lone inventors and  innovation is far from being a single event.  
American author Scott Berkun, a previous manager at Microsoft and Wordpress, has  tackled this issue in a book called "The Myths of Innovation" where he points out those  innovations today are often bound to innovations in the past. Innovation often demands  prerequisite knowledge and this certainly narrows the number of people who can actually  innovate. However, he argues, innovators hardly work alone. What about all of the other  stakeholders involved in the process, in many different ways?  Innovations are the result of a process of exploration and require a network of people to  be recognised, developed, validated, tweaked and turned into meaningful projects that  produce significant positive change. Nonetheless, the processes of exploration matter more than any result that these processes ever produce (most of the time), which is  especially true for social innovation but also for the industry.
Reward-based crowdfunding has an excellent potential, yet not utterly exploited, to work  as a network catalyst and an incubator of ideas, where ideas are shared and tested. These  ideas might prove their value or not, depending on many factors (inherent value, how  they are perceived and communicated, historical circumstances) but once a relevant  exploration process has started it might actually lead to new unexpected directions or  connect with processes started by someone else, as taught by the history of innovation.
Working as a form of early stage fundraising, both reward-based and equity crowdfunding can also be, in some cases, a better option than the traditional venture capital because they enable long-term innovation while investors are increasingly short-term oriented. Tech-startups are benefiting in particular from this aspect, especially those working on open-source solutions, including but not limited to software, as well as independent labs in the science and healthcare sectors whose research cannot guarantee a quick return of investment. 
Design-driven tech startups are also profiting much from crowdfunding, using it not necessarily to fund early stage innovations but for supporting incremental innovation: validate their product idea, test their current prototypes,recruit a unique user base and focus on solving their problems. Service-oriented startups in the design and fashion industry are also starting to experiment with crowdfunding successfully, as well as product oriented companies that might be considered “early adopters”
Crowdfunding seems to effective fulfill the needs of social ventures as well, including those that have developed new forms of service design projects enabling social change, which also require a long-term innovation process and traditionally do not suit early stage equity financing methods used by the venture capital industry. An excellent example is the Social Coin, a Spanish NGO which designed a symbolic coin to be shared among people and initiate chains of random acts of kindness. The NGO has used the crowdfunding campaign not only to raise funds but also for recruiting beta testers for their service and big companies with a solid social strategy interested in launching a pilot project among their employees at a low cost. 

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