Crowdfunding & Crowdsourcing PrimerPaul Dombowsky

Paul DombowskyFounder and CEO – IdeavibesFounder of Fundchange (www.fundchange.com - one of Canada’s first crowdfunding sites for charities and non-profits.

Welcome

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So many definitions …

According to Wikipedia – crowdfunding describes the collective cooperation, attention and trust by people who network and pool their money and other resources together, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding occurs for any variety of purposes,[1] from disaster relief to citizen journalism to artists seeking support from fans, to political campaigns, to funding a startup company, movie [2] or small business[3] or creating free software.

What is Crowdfunding?

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DefinedAn engagement process whereby organizations seek input from either open or closed communities of people, either homogenous or not, to contribute ideas, solutions, or support in an open process whereby the elements of creativity, competition and campaigning are reinforced through social media to come up with more powerful ideas or solutions than could be obtained through other means.

Why Bother?Organizations have a difficult time engaging with their communities to strengthen their relationship and be citizen/crowd focused. Internal or external, the community has ideas that can be harnessed that come from diverse backgrounds, experiences and education.

So what is Crowdsourcing?

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Types of Crowdfunding

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49%

18%

22%

11%

Donation Based

Equity Based

Lending Based

Reward Based

Donation Based

Equity Based

Revenue & profit sharing

Lending Based

P2P lending, P2B lending &

social lending

Reward/Preorder Based

Crowdfunding Worldwide

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US$1.5BN2011 –raised through crowdfunding globally

45204/2012 – Number of Crowdfunding Platforms

Crowdfunding in Canada

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Name Site Focus OriginPosible www.pozible.com creative AustraliaIndieGoGo www.indiegogo.com creative, community USASoKap www.sokap.com creative CanadaRocketHub www.rockethub.com everything USAKapipal www.Kapipal.com creative ArtistShare www.artistshare.com musicisans USAPledgeMusic www.pledgemusic.com musicisans UKGambitious www.gambitious.com video games NetherlandsUnbound www.unbound.co.uk book publishing UKFundrazr www.fundrazr.com charity CanadaRockthepost www.rockthepost.com everything USAPeerbackers www.peerbackers.com everything USAHaricot www.haricot.ca creative QuebecFundweaver www.fundweaver.com Aboriginal Projects CanadaSponduly www.sponduly.com creative UKFundchange www.fundchange.com chairty CanadaCrowdventure www.crowdventure ? CanadaKivendi www.kivendi.com Community Projects AfricaGetspringboarded www.getspringboarded.com everything CanadaSmallchangefund www.smallchangefund.com environmental projects CanadaChip-in www.chip-in.com development? ?

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Why?• There was a gap for funding ‘change’ and the

market filled the need with a new channel• The gap was for a new way to fund change

• Innovation - products• Creative endeavors• Startups• Charities – new channels

• Reflection of the dissatisfaction with current channels for funding

• Control maintained by the creators/founders• Funders aren’t looking for control – they just want

to participate / belong / connect

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Motivation to Fund – Not only about the payback• Rewards:

– early access to music or film– First run of a product

• Supporting people in their social network• Support creators and causes – personal connection• Engage and contribute to a trusting & creative community• Hyper Local Connection – support endeavors close to where you live• Making change happen in your community• Impact outside of local community• Return on investment (small % of motivating factors)

Who is your crowd?

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Supporters

Prospects

S/E Investors

Mailing Lists

Supporters’ Network

Prospects’ Network

S/E’s Network

Mailing List’s Network

The crowd you know The crowd you don’t know

Social Media Makes the Connection

• A crowd

• Business challenge / problem / question you want answered – ideas

• A process and tool for engagement

• Trust and commitment in your crowd to take action

• Key performance indicators – what does success look like?

• Proof of action – your crowd wants to see what happened

Crowdfunding - What do you need?

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Motivations for Seeking Funding• Its not just about the money but – but that is

primary.• Other motivations: – Establish Relationships– Validate ideas – endeavors– Replicate successful experience of others– Expand awareness of work through social media

Crowdfunding: Why People Are Motivated to Post and Fund Projects on Crowdfunding Platforms by Elizabeth M. Gerber, Julie S. Hui, Pei-Yi Kuo at Northwestern University - 2012

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Projects or Doable Asks• Easier for most people to wrap their head around a

smaller project as opposed to a ‘cure’ or a ‘hospital wing’

• Examples:• Piece of medical equipment• Stream revitalization• Education program• Conference attendance• Sports equipment for a couple kids

• It’s social – the crowd promotes projects it likes• It’s social – the crowd won’t promote projects that aren’t

shareable• Success comes to those that actively build a crowd • A challenge for organizations new to social media

• It’s the free market at work• It’s the free market at work

• Build stickiness to the project• Need to pay attention to write-up to inspire funders

Benefits & Challenges

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Focused on Charity and Non-Profit Projects

Not ‘all or nothing’ – after 21 days a project can be removed

Costs:$99 + hst to join

includes 2 postings3.9% processing fee

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ie: Fundchange – Donation Based

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Ie: Crowdrise – Donation Based

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Ie: Impact Trader – Impact Investing Impact Bonds and Stocks

Goals generate Impact Points

Approach is similar to traditional ‘trading account’

Complex but interesting for more sophisticated funders

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Ie: Greenunite – Reward Based

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ie: Rock the Post (US) – Equity/Royalty Based

Recent Survey on Crowdfunding Attitudes

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Ideavibes and CATA Recently carried out a survey focused on thestart=up community on their attitudes towards crowdfunding.

Results can be found in this infographic:

http://www.ideavibes.com/pdf/Ideavibes_CATA_Infographic_hr.pdf

Things to keep in mind: • Crowdfunding success comes quickest to organizations that are social –

media-aware and engaged. If your organization is not yet social media-enabled, it will take time and human and financial resources to do so.

• Because your efforts are only as good as the crowd you are able to mobilize to your cause, it makes sense that your organization strategically manages and promotes its brand online.

• Make sure your target audience is online and will give online• If you opt to post your projects on established crowdfunding sites, do your

homework – be careful of the company you keep.

Integrating Crowdfunding into Your Organization

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What are people looking for… • Projects that will have impact• Projects with a beginning – middle and end• Tell a story with what you plan for the funds

• Articulate what success looks like• Video is important tool – pillar for success on

Kickstarter• Show social benefit and link to past successes

Making the Pitch

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• Be open and transparent• Make yourself available for questions• Communicate progress with funders• Build confidence in your processes with regard

to reporting, etc.

Eliminate the Risk

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Will Rogers famously said that “Everybody is ignorant,just on different subjects.”

One of the lessons of modern social media is that the reverse is also true: everyone is knowledgeable, just on different subjects. Social media and crowdsourcing provide unique ways to tap into that knowledge.

Bittle, Haller and Kadlec – Promising Practices in Online Engagement, Australia

Engagement SpectrumThe shift to the right makes for happier stakeholders and drives innovation.

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DefinedAn engagement process whereby organizations seek input from either open or closed communities of people, either homogenous or not, to contribute ideas, solutions, or support in an open process whereby the elements of creativity, competition and campaigning are reinforced through social media to come up with more powerful ideas or solutions than could be obtained through other means.

Why Bother?Organizations have a difficult time engaging with their communities to strengthen their relationship and be citizen/crowd focused. Internal or external, the community has ideas that can be harnessed that come from diverse backgrounds, experiences and education.

Crowdsourcing – Moving Left to Right

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Citizen Engagement for Ottawa

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• There are many one way conversations happening:• Blogs

• Apartment 613• TransitOttawa• Sun & The City• West Side Action• URBSite• Tea Party of Ottawa• Spacing Ottawa

• Podcasts• Inner City Podcast• Spacing Podcast

• Make no mistake – your citizens want to be involved in transforming the City of today to City 2.0.

• Where is the engagement? Where is the innovation happening?

Driven by Social Media Platforms

ONLINE ENGAGEMENT

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Identifying problems, opportunities or future issues

Policy Consultation

Customer Service andService Delivery

Communication and Promotion

Use Cases

Land Useand Development

Programs and Initiatives

Listen & Identify

(Audience Analysis)

Inform(Information)

Consult & Involve

(Consultation)

Collaborate & Empower

(Collaboration)

Levels of Engagement Lifecycle

T O O L S

Explicit

ExpertsEmergent Experts

(community leaders, front line stakeholders)

General Audience

Who is your crowd?

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CITY

EngagementTargets

Where Innovation / Crowdsourcing Fits

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Community

Open SpaceHow we gather

Social MediaHow we talk

LeadershipHow we inspire &

enable

Open Innovation

CrowdsourcingWhere ideas come from

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Applications of Crowdsourcing

Crowdsourcing+ Engagement

HR Innovation

Product Innovation

Service Innovation

Partner Innovation

Member Innovation

Innovation Services

Policy Developmen

t

Problem Solving

Innovation: Crowdsourcing vs The Survey

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Crowdsourcing Surveys

• Lends itself to diversity of participation• Fewer barriers to participation• Drives innovation – new ideas from left

field that have merit• Easy to interpret – the crowd generally

makes things clear• Comments are focused

• Great for solidifying preconceived ideas or directions

• Hidden• Requires interpretation which is open

to biases by reviewers• Doesn’t encourage creativity

The Appeal

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• Crowdsourcing surfaces new perspectives• Invites participation from nontraditional

sources • Infuses real energy into the process of generating ideas

and content• Empowers people when they feel their voice is being heard• Technology can enable participation by disenfranchised

(ie. PCs in libraries/shelters with citizen engagement campaigns)

• Builds engagement and relationships with new audiences

Things to Watch For

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• Excessive lobbying and promotion• Narrow crowds product narrow results• No follow-through causes creditability hit• If you say you are generating solutions for X, communicate

what happened and why• Broad ideation campaign descriptions will result in less focused

results BUT too narrow will restrict creativity• Dismissing ideas that seem far fetched• Ideation often requires refinement – understanding what your

crowd is saying by ‘x’

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Example 1: Open Innovation with Citizens City of Ottawa

Have a Say Sustainability Campaign

San Francisco Engage4change Citizen Engagement Program(2 weeks)

• No. of Engagements = 2252• Referrals = 64% from Twitter• Cost = 500 ice cream cones ($1,000)• Humphry Slocombe’s Crowd

= 320,000 twitter followers and Facebook Friends

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Example 2: Citizen Engagement in SF

Launched in May of 2012

Designed to move ideas for improving Scouts and the web experience from email to an open innovation platform.

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Example 3: Myscouts Innovation

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Example 4: State of Washington Budget Ideas for cutting the state budget were generated

with this online campaign:- 2,000 ideas posted- 130,000 votes cast

Problems:Ideas not implemented – reasoning?- State said some ideas did not take into account

the complex relationship between Federal and State Government

- Most popular idea – end the ability of retired employees to double dip – collect pension and work as a contractor. Not implemented due to political nature of issue.

- Citizens left wondering – is crowdsourcing a legitimate exercise, or only for public relations?

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Example 5: Development Site in NY

https://popularise.com/cities/1/neighborhoods/1/projects/1

IdeaStorm was created to give a direct voice to Dell’s customers and an avenue to have online “brainstorm” sessions to allow them to share ideas and collaborate with one another and Dell. Their goal through IdeaStorm is to hear what new products or services you’d like to see Dell develop.

In almost three years, IdeaStorm has crossed the 10,000 idea mark and implemented nearly 400 ideas!

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Example 6: Product Development - Branded

Quirky is an all in one product development shop for inventors.

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Example 7: Product Development - Inventions

It all starts with a Question or Problem

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• Needs to be:– Clear and compelling– Not leading– Allow for open innovation– Encourage participation– Allow for outliers to feel comfortable

I have a challenge

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• Land use determination – who drives the agenda and the conversation?

• Two approaches• Opportunity driven• Innovation driven

• The difference lies in where the ideas come from

• From the user or the customer• From the supplier

• Easy to set-up and deploy• Able to run multiple campaigns at once• Can run Crowdsourcing and Crowdfunding Campaigns• Build stickiness and community around those that engage (sign-in and see

past votes, comments, ideas)• Hosted solution (in Canada)• Able to be implemented on existing website or set-up in new, destination

site• Social Media connected• Pay per campaign model – multiple campaigns

can be run at once

Ideavibes Citizen Engagement Platform

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• “The Wisdom of Crowds” – book by James Sudwecki• “Crowdsourcing” – book by Jeff Howe• Blog: crowdsourcing.org• Blog: blog.ideavibes.com

Resources

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Thank youPaul Dombowsky | 613.878.1681 | paul@ideavibes.com

www.ideavibes.com | blog.ideavibes.com | www.fundchange.com