The Next Big Thing in Crowdfunding? Kickstarting People

Upstart Beta… Let’s start with Kickstarter as the obvious crowdfunding example. The company was founded by three guys with no previous finance experience. The target return for investors who back development of new products — from objects to movies — on Kickstarter is … nothing. Backers are instead rewarded with early access or other in-kind rewards.

Given these facts, the idea that crowdfunding could be disruptive to the venture capital industry may have caused uncontrollable giggling in the VC conference rooms of Sand Hill Road. But what skeptics fail to realize is that the motivations of crowdfunding “investors” are different: These are not quant investors looking to maximize financial returns while minimizing risk and volatility.

They don’t want to pour money down the drain, obviously, but their motivations differ substantively from those of traditional financial investors. Crowdfunders and angel investors, while not purely philanthropic, share the common desire to participate and be involved in the creation of something new.

Read more at Wired

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