Posts Tagged ‘Social network’

Crowdfunding: The future of raising capital for SMEs?

July 29, 2009

In yesterday’s FT there was an aritcle, “Financing model with bounce”, looking at Trampoline Systems and their efforts at raising £1m of new capital for business expansion.

They failed to get much interest from venture capitalists and “[s]o Trampoline hit upon another route: “crowdfunding” – raising small stakes from a large group of investors, particularly through online communities and social networks.”

It follows the same idea, but much smaller scale, of SellaBand and Slicethepie. Where bands can raise money to record and publish an album from small investments by fans, in return the investors get an exclusive copy of the cd, other gifts, and in some cases a return from sales.

But would it work for a business? I’m not so sure, firstly the amount of money that needs to be raised is likely to be much higher than the minimum amounts on these two band-based sites. Although for the very smallest start-ups it could be quite useful if raising money from banks or other means is not possible.

Also it requires the person looking for funds to fully engage with their potential investors. Who is going to put their own money into something (whether that is £5 or £10k) if they don’t get a clear idea of what the business is about, don’t like the product, don’t see that the fund-seeker has a clear plan on where to use the money, don’t see a benefit for themselves.

Andy Baio, chief technology officer of Kickstarter, an online platform which raises funds for creative projects through crowdfunding, agrees: “The success of projects hinges on two factors: first, rewards for supporters. It doesn’t need to be financial, it can be a phone call or a credit on a film, or an exclusive update on the project. Second, their ability to promote it to their social network.”

So the key issue for me basically boils down to transparency. How open are you willing to be to secure the funds. To get anything meaningful from complete strangers requires the fund-seeker to be absolutely transparent, candid, easily contactable and involved with reaching out to potential investors. Without absolute transparency the market cannot work as there is asymmetrical information.

I like the idea, and think it works for the small scale of £5-£50 where it can be an impulse investmet, but for the larger scale I don’t think it is possible. I reckon potential investors need to ‘touch and feel’ it firsthand before even considering it; and are super-rich going to bother to take the time to look for these investment opportunities, I doubt it.

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WikiJob: Knowledge Sharing in Action

February 12, 2009

WikiJob, as I discussed in my last post, is a British community-based website dedicated to helping students and graduates to secure places on graduate and internship schemes, through wiki-pages about many of the largest organisation’s graduate schemes and the varying recruitment processes they use, and the use of a forum where people can receive help on any questions they might have.

With the site’s core audience being students and recent graduates (roughly aged 19-24) it is perfectly suited. This audience, is popularly called the Net Generation or Generation Y, and have grown up with computers and the Internet, with their comfort with technology comes a willingness to share their experiences with others, whether through status updates on Facebook, tweets on Twitter, or posts and comments on blogs.

This sharing culture is enabling the users of WikiJob to perform better in recruitment processes through having more knowledge of what will happen at each stage and a more accurate view of what an organisation is truly like. On both of these fronts, in the past graduates and students would have been reliant on what the organisation says (if you believe what they say you’d conclude they are all super-green, give the best training, and are fun places to work… is this really the case?), or if they are lucky what an acquaintance who works there says about it. When trying to choose who to apply for it is very difficult to make informed decisions, which is what probably leads people to just apply to anyone and everyone in a scatter-gun approach, harming their performance in the process. WikiJob users have often been through the process, and some are now working as graduates in many of these organisations with the knowledge to help give other users the knowledge to make better choices.

Interesting Info about WikiJob

Of the users who signed up in WikiJob’s first three months, over 90% are still active on the site (info courtesy of Ed at WikiJob). Which is quite an incredible statistic from my perspective, I’m sure most forums and websites on any subject matter have relatively short active membership periods, where users sign up to get a question answered and then dissolve into the ether; indeed on the average graduate job board the user life span is typically less than 2-3 weeks (info courtesy of Ed at WikiJob).

This quote nicely sums up what the founders of WikiJob have created:

But then.. we’re not just a job board. We’re a community, and once you join in and starting communicating with people it’s a nice place to come back to again and again – we hope!

WikiJob – A Knowledge Market?

Knowledge buyers or seekers are usually trying to resolve an issue whose complexity and uncertainty precludes an easy answer… Knowledge seekers are looking for insights, judgements and understanding. (p.457, Cross and Prusak, 2003)

WikiJob has >175,000 visits each month, of this only a proportion will be registered members. Indeed just this minute on the forums guests out-numbered logged-in members 4:1. So just like most markets, there are many more buyers or seekers of knowledge than suppliers.

Knowledge sellers are people in an organization with an internal market reputation for having substantial knowledge about a process or subject… Although virtually everyone is a knowledge buyer at one time or another, not everyone is necessarily a seller. Some people are skilled but unable to articulate their tacit knowledge. Others have knowledge that is too specialized, personal, pr limited to be of much value on the knowledge market.(p.458, Cross and Prusak, 2003)

Cross and Prusak (2003) say that knowledge sellers (I will call them ‘knowledge suppliers’) assign a value to their knowledge, but as WikiJob is free to everyone, in its case knowledge suppliers are acting altruistically in providing information to others for free. Indeed by providing insights and knowledge to someone going for the same graduate scheme as you may increase the competition of competent candidates out of the seller’s favour.

What benefit is derived from providing information?

Knowledge suppliers placing knowledge that they have acquired onto wiki and forum pages for everyone else to read and learn from, must bring some benefits for it to be worth their while. I believe there are three main reasons for this knowledge sharing to take place:

  • Supply their knowledge for others to benefit in an act of altruism, “for the good of the rest of this community”;
  • Believe that by supplying knowledge to others they will increase the chance of getting a good answer to their questions when they seek knowledge;
  • For the rewarding feeling when you hear that the knowledge they supplied has helped another student of graduate get a job offer.

So, what does Richard think about this?

WikiJob is a fantastic example of knowledge sharing revolving around a community of like-minded people and also of a knowledge market in action. Its success is based around the willingness of members to contribute knowledge to the community, for whatever reasons they may have. It is like having the world’s largest network of friends ready to answer your questions around applying for graduate jobs or internships, something which would have been nearly impossible without the Internet, and quite possibly this is the first generation of people who would have the willing to share their experiences on such a large scale. Long may it continue!

Reference:

Cross, R., & Prusak, L. (2003). The Political Economy of Knowledge Markets in Organizations. In M. Easterby-Smith, & M. A. Lyles (Eds.), The Blackwell Handbook of Organizational Learning and Knowledge Management (pp. 454-472). Oxford: Blackwell Publishing.)

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