Go Fund Yourself!

It used to be that if you needed money for a project you either dug deep in your pockets or approached the bank for a loan. These days, some enterprising companies and individuals are bypassing the bank altogether and looking to you and me to help fund their projects.

Perhaps the best known one in our industry is Swiss timepiece brand DuBois et fils, which recently took the innovative step of looking to watch aficionados to help raise money to fund its latest collection. At the end of its campaign, DuBois announced that it had raised its target of 1.5 million Swiss Francs ($1.6 million) from the "crowd," and production of its new models is already underway.

But the company, which says it is Switzerland’s oldest watch factory, was selling more than just a share in its latest model. It was actually selling a share in itself. Investors, who by the end of the fundraising period numbered 226, had the chance to actually buy shares in the company, as well as the opportunity to purchase DuBois et fils watches at a discount.

Given how hard it is to get loans from the bank and how tough it is to actually get a project off the ground – even a worthwhile one – it’s no surprise that people are increasingly bypassing the banks and taking a more unorthodox approach to raising money.

For those looking to get a piece of the crowd-funding action, Kickstarter.com is perhaps the best known platform. Since its launch in April 2009, Kickstarter has raised more than $450 million by more than 3 million people funding something like 35,000 projects.

According to the site’s stats, 17 projects each raised in excess of $1 million last year, which is a huge amount of money, especially considering it is essentially a no strings attached donation (fundraisers generally offer some sort of thank you “reward” to investors). 

While this way of conducting business isn’t suitable for everyone, it could be a good opening for newbie designers and companies looking to make their entrance into what we all know is a difficult business.

Instead of taking on the burden of debt on themselves, people are able to spread the risk around by getting small investments from people who believe in them and believe in the potential of the product. Surely we should be rewarding ingenuity and enterprise.

A crowd-funding site of a very different nature is Kiva.com. Through this microloan site, lenders invest in a business or enterprise in $25 loans, which are paid back over a specified period, from six months to a few years. Of course there is the possibility that the loan may not be paid back at all, but default is rare and the risks can be assessed beforehand – and really, what is $25 to most of us?

There are people looking for loans from right across the developing world. Currently, there are 14 people or groups asking for help in Sierra Leone, with some people looking to raise as little as $200 to help their home business get off the ground or to send their children to school. With all we get from these countries, it’s time to give a little back.

James Surowiecki wrote a book entitled The Wisdom of Crowds in which he posited that groups of people collectively make better decisions than any individual can make on their own.

When it comes to money, it seems that the power of the crowd could just be the next game changer, and we all have the power to change the rules.