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Pattern description
Pattern description
A product, project or entire start-up is financed by a crowd of investors who wish to support the underlying idea, typically via the Internet. If the critical mass is achieved, the idea will be realized and investors receive special benefits, usually proportionate to the amount of money they provided.
Inventive problems
Inventive problems
It is necessary to attract investments to finance the expanding production (scaling).
There is no need to attract investments (through the corporatization) in order to retain the management control.
The company should constantly keep in touch with customers to attract them and to encourage customers to re-purchase.
The company should minimize communication with customers in order to reduce costs.
The company should be large and have a complex structure to perform a large number of operations for the development, production, and delivery of a complex product to the customers.
The company should be small and have a simple structure to:
- reduce the variety and complexity of the company activities;
- focus on a small number of core operations;
- have a small staff;
- minimize the cost of development, production, sale, and delivery of products to customers.
Application examples
Application examples
Independent film production company Cassava Films was the first to employ Crowdfunding on the Internet to (partially) finance a film. Not having sufficient resources to complete post-production for his film, Foreign Correspondents, after the main shooting episodes, the director and founder of Cassava Films, Mark Tapio Kines, set up a website inviting interested people to participate in funding the completion of the film. The ‘crowd’ benefited by its involvement in helping to realise a project they found interesting, while Kines’s production company did not depend on large investors to finish the job. The production company obtained revenues from its subsequent distribution and royalties, investors received a return on profits made, and donors had the simple satisfaction of being associated with the project.
The start-up Pebble Technology launched a project on the Crowdfunding platform Kickstarter in 2009. The company’s target was to raise US $100,000 to produce its Pebble watch, a digital timepiece that can communicate with smartphones via Bluetooth, allowing users to receive calls and read text messages or email directly on the watch screen. The success of the project was such that Pebble achieved the funding goal in just two hours. Overall, Pebble raised US $10 million, a hundred times its original target!
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