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Putting Job Creation into Hyperdrive

In this blog, I'm going to look at how crowd funding might kick job creation into high gear and how it helps launch products with much higher success rates in the marketplace.

Jobs, jobs, jobs... That's all I hear about in the media these days. So when I think about the ability of crowd funding to power job creation, I'm thrilled. I love the idea that someone with a brilliant idea can meet up with a "crowd of funders" and give his idea life and, in turn, increase the velocity of job creation. Here's what +Indiegogo's CEO, +Slava rubin, had to say during our interview in New York earlier this year.

"The average small business starts with less than $10,000, which also happens to be the sweet spot for Indiegogo funding campaigns," says Rubin. "Take a T-shirt store by the name of 'Walk in Love,' for example. A young designer started an Indiegogo campaign after seeing how well the T-shirts he'd made were selling at a kiosk in Lancaster, Pa. Business was so good that he decided to try to move his operations to a store, but he needed money to realize that dream. He created a campaign to raise $30,000 to afford the lease, inventory for a year, to hire people," Rubin said. "He raised the money and now has 15 employees at his store in Pennsylvania. That's real jobs."

A huge game-changer that you need to know about is the recently signed "Jumpstart Our Business Startups," or the "JOBS" Act, which is designed to encourage the funding of small businesses by easing various securities regulations. In the past, the Securities Exchange Commission would only allow "accredited investors" (i.e., wealthy people who could afford to lose their investment) to invest in a company. Now the JOBS act changes all that. "This will allow crowd funding to become an investment vehicle," Rubin said, "allowing anybody to invest in any idea."

Since its beginning in 2008, Indiegogo has funded many tens of thousands of campaigns, and Rubin estimates that it's led to the creation of perhaps hundreds of thousands of jobs.

"I see the world of crowd funding becoming a normal way of funding things," he said, "and soon you'll see the governments using it, you'll see corporations using it, colleges using it -- you'll see all types of businesses using it."

While it's still early, Rubin feels that eventually large companies will take advantage of crowd funding campaigns in three specific ways:

1. Charity and promotion. +Nokia has already matched funds on an Indiegogo campaign for a charity called Camp Interactive, which allows inner-city kids to learn technology skills. Camp Interactive ran an Indiegogo campaign to raise $10,000 for its summer program and Nokia matched that amount.

"Nokia gets the benefit of saying, 'Hey I don't want to give money just to give it away. I want to know that other people care about this. And I want to be in line with what other people care about,'" Rubin said. Nokia benefits too, from the social media reach of Indiegogo users. "Nokia doesn't have to pay for that, except for being supportive of these great campaigns."

2. Research and development. "You'll see companies like +General Motors, a mammoth car company, use Indiegogo to outsource/crowdsource their R&D, Rubin said. "Not only will you have all these people who are hobbyists be able come up with ideas, but you can have each of them come up with their crowd funding campaigns to determine which of them are the best campaigns."

From among those many campaigns, General Motors can take the top 50, "and incubate them with matching funds brought in house to turn them into amazing products," Rubin said. "You don't have to have a million-person R&D company in-house, you can have everybody working on it. Not only is it R&D of ideas, you're actually proving that there's a demand there. And you can use GM's execution and distribution to bring it to life."

3. Gauging consumer interest and building a community. Consider the world of books, and the physical bookstore. Imagine +Barnes & Noble, with its physical store and digital outlet. "On Indiegogo, you can have an entire community of writers who start coming together and offering up what their books and writing ideas are," Rubin said. "If they can get them crowd funded to the point that they need to, then maybe they can get online to the Barnes & Noble site to be able to get exposure. Or if they reach a certain threshold they'll be able to be in the physical store. If they reach a better threshold, they'll be in the front of the store.

This solves a problem of inventory management -- a big issue in retail, especially bookselling. "You don't have to actually to take a risk as the owner or the manager of that store: you have the data proving that the community wants this," Rubin said.

"At the same time you have this digital connection with these people so you're creating this community," Rubin said. "You're shifting from a transactional brand of selling books to nurturing the entire book community."

In fact, Rubin believes that crowd funding is going back to basics.

"There's this new fad in diets," he said, "called the Paleo Diet. It's about eating the way we used to eat hundreds and thousands of years ago. All it really is, is eat the way you used to eat yesterday. I like to think of crowd funding as Paleo Funding: all it really is, is funding things the way we used to do hundreds of years ago. That is, the local community wanted something to happen -- 'Do we need it? Let's get the money to make it happen' -- now you have the technology to do it on a bigger spectrum. It's incredible to see now with the Internet that people can do funding the way it potentially can be done."

In my next blog I'm going to explore another of the top crowd funding sites, this one called RocketHub, which has a powerful vision of supporting scientists and engineers to have their dreams come true.

NOTE: As always, I would love your help in co-creating BOLD, and will happily acknowledge you as a "contributing author" for your input. Please share with me (and the community) in the comments below what you specifically found most interesting, what you disagree with and any similar stories or examples that reinforce this blog that I might use as examples in writing BOLD. Thank you!
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21 comments
 
I'm a big fan of crowd funding, but the way I see things it's transitional. At some point, hopefully soon, we'll get beyond money.

Technologically we've reached the point where patents and such hinder our progress and proprietary information being secret does as well.

We're approaching the day when I can print the next great smartphone at home. That day can't get here soon enough, as far as I'm concerned.

Marshall Brain's Robot Nation and Manna turned me on to this possibility years ago. It's a good read.
 
This is bottom up/groundswell logic.  What would a top-down crowd funding model look like?  I believe there are a lot of people who have done well in their own business who would like to fund/advise smaller businesses.  How can we better scale and support these kinds of investing relationships?  I'm thinking about this. 
 
The benefits of crowdsourcing, or crowdfunding, or crowdemployment in one sentence:

WE are smarter than ME

and I belive that's true everytime I see a good kickstarter campaign. The company I'm in at is called #LiftPort, it makes space elevators(literally :-) ) Recently, they did a kickstarter campaign to do one more experiment which was supposed to mark the start of the company
They earned $110,353 for a $8,000 pledge, had 3,468 backers, and a real boost that hitched the whole thing into a genuine 'company'

Link to kickstarter campaign: http://www.kickstarter.com/projects/michaellaine/space-elevator-science-climb-to-the-sky-a-tethered
 
We are in the process of taking over a business that has released VOC's for years. Today, we discovered a filtering system that can eliminate these potentially harmful gases from the plant's exhaust. The system cost exceeds our start up funding budget. After reading your blog, we have decided to enter our plight for a completely VOC free plant into one of the sites you have recommended. Thank you for the great work you are doing! I loved Abundance and look forward to Bold! We will keep you posted on how it turns out.
 
Thanks for the interesting article.

I think for me the key thing about crowd funding at the moment is how best to use it, i.e. how it can be leveraged by ordinary folks running small/medium businesses, start ups, charities or social enterprises, ppl that don't necessarily have a lot of skills in marketing, etc.

While it certainly democratises funding of ideas and opportunities, there's still a big learning curve for people to be able to fully and successfully utilise these technologies and platforms.

What your blog posts are doing Peter is part of helping ppl in that learning curve. So thanks for that!

Just wanted to mention too, kudos to Lift Port the info on their kickstarter project page (link above) which also gives some really useful info on how these kinds of funding projects can be successful (abt building community as well as funding). And good luck to them too in their endeavour!!
 
Mr. Peter Diamandis, that's a great article, as always.
After all, there's a chance for some new projects, that can bring to the world new ideas, new solutions and new jobs. We should support that very strongly. On the other hand, we notice that world population is groing tremendously fast and that is one of our bigest problems. We already have serious unemployment rates and I'm afraid that will increase in the future. So, we must be greatful for this job creation, but unfortunately I think it want stop this expanding unemployment problem. However, I believe in your fantastic strength to make this world better!
 
As part of a R&D Co I love the idea. The point is how many information related with the development must be disclosure in order to have the money.  Excellent article!!!
 
LOVE the term Paleo-Funding because it is both accurate and appropriate.
 
Peter, do you have a visit to DC on your calendar?  Our start-up scene is distinguished by a large and active funding community with many public-spirited funders/mentors who are aligned with your goals.  Also, do you have this Brookings event on your radar?  http://www.cvent.com/d/0cq3gv/5s
 
Another solid article to stretch our thinking further. Many thanks. 

It would be great to expand further on the how. Some further queries I have which you perhaps may have answered or may be able to answer in Bold:

- How does an idea come to fruition being crowd sourced? What are the steps taken?
- Does a Crowd Sourcing organisation need to be used to gain access to a qualified network?  
- How will networks be used to get the word out about each opportunity? Perhaps if you could detail this further in your book. A great idea is only that if no one acts upon it. And for a group to act upon it people need to know about it. How does word get out? How does one ensure adequately skilled people are working on the project?
- With Crowd-funding what happens if the business fails? Do all investors lose their capital?
- Could this then be viewed as a high risk investment vehicle and hence have negative connotations followed by limited uptake?

Perhaps I am still thinking linearly and not exponentially with many of these questions? 
 
Thank you ,Peter, for this informative  article. It's interesting to use the wisdom of the old past in the new garment of the present.This will benefit all the  world since it's based on some universal values and principles.In fact, life can only be understood backwards, but we must use  new tools to move forward. .
 
these cases are really inspirational, especially because they are humane-oriented
 
This is a very interesting development, particularly with the Jobs Act.  What needs to happen now is a state wishes to drastically reduce unemployment is to datamine the unemployment rolls to find those capable of running a business and partner with their chamber of commerce to connect with the local resources and set up the croudsource endeavors.  

The downside is that the unemployment office will not be able to show "common measures" necessary for federal reimbursement and statistics, but in building a new business, the unemployment office can provide the workforce necessary, and will receive the credit for all placements except the newly minted CEO.

The advantage to this is that for the state it drastically reduces unemployment by literally creating jobs, and thus increases state and federal revenue.  The community gets a new business which diversifies their economy as well as more people gainfully employed, improving their self worth and quality of life, in turn reducing crime and reliance on services.

The largest gain is for the person starting the business...  This may not have been something that they had considered, which in turn means that we have created more opportunity for the person than they would have normally had.  We advance the individual, and through them advance society.  What's not to like?
 
Government is dragging its feet big time with regards to the JOBS Act.  There's a lot more uncertainty around the JOBS Act ever since the big shakeup of leadership at the SEC.  The SEC has been granted carte blanche to define how to regulate an industry that doesn't yet exist. Also, the SEC is taking it's sweet time with defining the rules for crowdfunding (a political favor?).  A clean canvas to sketch archaic investment rules, an open ended timeline to deliver those rules, and a new leadership team that will pursue a different agenda should raise serious doubts as to whether crowdfunding will ever be something more than a pipe dream.
 
Crowd funding is only going to continue growing. I just saw a commercial for the Dodge Dart that advertised how consumers could crowd-fund that vehicle with contributions from friends and family.

We have already grown used to wedding registries and essentially crowd funding newlyweds' homes. It won't be long until we see couples crowd funding their first homes!
 
+Bill Toth I too enjoy the term Paleo-Funding. And similar to the Paleo diet omitting grains, I feel that Paleo-Funding omits the often ominous task of pitching to potential investors repeatedly. The beauty of crowd-funding lies in the fact that people who want to provide funds are able to, and the people who have no interest simply keep scrolling.
 
Just a simple thank you Peter - for brining attention to this as a very effective way of creating wealth and jobs in local communities, by leveraging the power of the internet based crowd. Awesome work.
 
Crowd funding is a great idea because it allows people with small funding and great ideas to join big companies and see their dream come true. Great article, as always.

 
I wonder if Peter ever looks at this blog? I see peer to peer comments on the blog, but no real indication that there is a feedback loop to Peter himself. Can't have a conversation with a machine.
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