Bernie Callaghan: Crowdfunding's a credible system for raising finance

For small and start-up businesses, crowdfunding is fast becoming a credible alternative financial system. The newly published Centre for Cities report said that the North East lagged behind in terms of business start-up

Bernie Callaghan
Bernie Callaghan

Crowdfunding’s a reason to cheer for an increasing number of businesses.

The success of crowdfunding for independent brewery BrewDog, which reached its £4.25m target a month before deadline, and the news that the Government’s Start Up Loans scheme is partnering with Crowdcube to encourage crowdfunding for new enterprises, show just how quickly this method of financial support is growing.

For small and start-up businesses, crowdfunding is fast becoming a credible alternative financial system. The newly published Centre for Cities report said that the North East lagged behind in terms of business start-up.

Access to finance for regional start-ups and SMEs is a continuing difficulty, and crowdfunding may be an effective, imaginative route to raising funds for those who’ve found banks reluctant to lend.

BrewDog’s co-founder James Watt says that crowdfunding is “a worthwhile and innovative means for business growth” and his company’s ability to sell £1m of shares in the first 24 hours certainly seems to bear that out.

Alongside crowdfunding, crowdsourcing uses the same techniques to generate powerful new ideas and solutions for businesses and universities worldwide.

In most crowdsourcing projects an organisation posts a problem on a crowdsourcing platform and invites solutions.

The crowd votes on the ideas, and the best one is rewarded by the organisation which owns all the responses to its posted problem.

Around 50% of Procter & Gamble’s products are now involved in crowdsourcing, from research and marketing methods to packaging and design. In America, the company uses an online crowd of 240,000 female consumers to test brands and create a significant ‘sizzle’ about a new product before it is launched.

P&G monitors results and finds out what propositions are strongest by analysing the comments of these contributors.

The power of crowdsourcing is in its ability to create innovative solutions and widen access to knowledge. Developments in technology make it increasingly easy to stay connected.

In a way, we’re all involved in crowdsourcing through social networks through which we create our own crowd. It is estimated that 348 million person days are spent every year on Facebook.

When social networks and crowdsourcing interconnect, an influential new way of sourcing information results. It means instantly available information which is the collective view of hundreds or thousands of individuals.

For businesses with a big idea or a stubborn problem to solve, crowdfunding and crowdsourcing are fresh, fascinating ways to grow businesses and create commercial ideas.

:: Professor Bernie Callaghan is dean of the faculty of business and law at the University of Sunderland

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