A friend of mine is producing a short film End of Innocents , which is a step toward a feature film (I presume). She tapped Kickstarter as a way to collect the money she needed. It’s an online pledge system that presents people who might be interested in providing funds with award levels (and suitable recognition) and the goal. If the goal is reached by the deadline, the money is collected (via Amazon), recognitions are fulfilled and the project is done. Kickstarter collects 5% of the money. Amazon grabs another 3-5%.
While Kickstarter was set up for books, comics, photography, music and other artistic endeavors, inventors and designers have made it a new source for startup investments. A notable invention that has gotten play in Wired and Popular Science and on National Public Radio, is Coffee Joulies, These filled, stainless steel beans, with the simple function of keep hot beverages at an ideal temperature, so captured public imagination that the inventors raised over US$300,000 against a goal of US$9,500.
I’ve run across two other online funding endeavors that are working in different arenas. Kiva is and online site that solicits microloans, “a non-profit organization with a mission to connect people through lending to alleviate poverty.” These loans (of US$25) do not collect interest, but they do get paid back 99% of the time. About US$200 million have been loaned out to people, mostly in developing countries, who need capital for small businesses, housing or to bridge to the next growing season. The borrowers are screened and the lenders can pick through their presentations to find clients who most appeal to them.
Lumni encourages lenders to invest in the education of students from Mexico, Chile, Colombia and the U.S. This human capital financing is not on an individual basis. Investors put their money into a pool of candidates. Payback is at a fixed percentage of post-degree earnings for no more than 120 months. This may mean that less is returned than invested, but it also can mean investors can make a profit. (The “loan” can simply be a donation, as well, with any returns going back to Lumni.)
This innovative model provides a new on ramp for economic participation, but in a sense, it is a return to the kind of lending that used to be seen in small communities where everyone knew everyone else. None of these loans are based on collateral. They are all based, at least in part, on reputation and character. And they all seem to be working, with the organizations growing even in a down economy.
In don’t’ think any of these are in their final states. Kiva seems volunteer intensive. Kickstarter could use an eBay-like reputation management system. Lumni does not provide the sense of participation with up-to-date measurements that add excitement to the other sites. And I suspect that organizations like these, as wide open as they are, will attract swindlers and have to weather some bad publicity. (Kickstarter has already created online chatter that it or its clients are fraudulent.)
But what these examples represent to me is a distinct kind of innovation that I hope will expand: the use of community, online technology and market understanding to create more opportunities.