Crowdfunding in Europe – Funding innovation and growth of SMEs

Crowdfunding in Europe is booming. Crowdfunding for SMEs is taking of rapidly. In the current financial crisis it is difficult to raise enough funding to finance innovative or growth plans by SMEs through traditional ways of financing by banks. Crowdfunding offers a solution. Crowdfunding is a collective effort to raise money to realize a project. Instead of having one large funder, you have hundreds of funders who are also the ambassador of your project. Worldwide this is used by millions of people and in 2012 $2,7 billion was raised through crowdfunding, a growth of 81% from last year. Besides raising money, crowdfunding offers more advantages. It allows the project owner to gain feedback on some of the most critical parts of the product before it is released onto the market. For example, the project owner is able to receive feedback on how the design of a product can be improved, get a better idea about market demands, and get direct customer interaction. It can also lead to word-of-mouth recommendation. For the project owner, crowdfunding establishes a direct link between himself and the customer. This link is the first step towards marketing, customer loyalty, participation, and emotional  attachment to the innovation. Crowdfunding is an incredibly effective way of gauging if their product or idea has a mass appeal. Even more important is the time in which the project owner is able to make this assessment; a two-month long crowdfunding campaign is a relatively fast turnaround for getting an idea off the ground. For project owners who experienced a successful crowdfunding campaign to fund the first phase of their ideas, the aforementioned benefits can be extremely useful for financing the next phase. Some project owners may utilize crowdfunding again, where others may resort to more traditional forms of funding. They can then use their fan-base of funders to show there is public support for this idea. When project owners combine different approaches they can fund the whole life cycle of a project, product, service or other business innovation. Either way, being able to call upon pre-sales information, number of funders, amount of money raised in a specific time period is valuable for project owners seeking a second round of financing. In this session I will discuss the concept of crowdfunding. How did it start? What types of crowdfunding business models are there and what is the future of crowdfunding?