Internet Trends: Asia and the Dawning of Crowdsourcing

One day in May, Singapore-based start-up Pirate 3D raised US$100,000 in just 10 minutes on Kickstarter, a US-based crowdfunding site that has raised more than US$681 million from 4.4 million people to fund some 44,000 projects since 2009. By the end of June, Pirate 3D had reached its funding target of US$1.4 million. 
 
The money will be used for tooling and batch-manufacturing what the company promises will be “the easiest to use 3D printer in the world” – a for-the-home model that will print out three-dimensional objects such as coffee mugs and figurines using additive layering. Pirate 3D is now accepting pre-orders for its Buccaneer 3D printer for delivery in December 2013.
 
That’s crowdfunding. Riding another Internet trend called crowdsourcing, Australian company Designcrowd brings together 127,000 graphic designers from 160 countries to provide creative services including logo, blog, catalogue and website design. Individuals and companies post a brief for design work and then receive hundreds of submission in their inbox from which to choose.  
 
Welcome to the power of the crowd and how it can be harnessed for the good of the enterprise. Singapore Management University recently organised Crowdsourcing Week “to inspire and equip the audience with the practice and tools on how crowdsourcing can benefit their business.” Nearly 60 speakers from the likes of Google, Microsoft and NASA addressed 300 delegates from 23 countries.
 
To be sure, unless you’re a CFO-turned-entrepreneur or head of finance at a start-up, you are not are not likely to be doing crowdfunding at this time. Of the approximately 453 crowdfunding sites worldwide, only about 4.6% are based in Asia. The amounts raised are small, so for most CFOs and treasurers, bank borrowings, bonds, equity and husbanding free cash are still the ways to go.
 
However, this may not hold true for very long. Crowdsourcing campaigns and crowd funding platforms have lately been mushrooming in Indonesia, China, India and Singapore. Already, according to a report in the China Daily, the Chinese crowdsourcing site zhubajie.com claims to have brought together more than 8 million people to provide one-stop business services from logo and web design to copywriting to translation to marketing.  
 
For companies, the crowdfunding sites are also emerging as a rich source of business ideas and acquisitions. For example, crowdfunding portal Circleup is helping big companies like Procter and Gamble to find new companies to acquire or possibly partner with.
 
Crowdfunding
‘Crowd funding’ refers to the collection and utilization of small amounts of capital or funds from a large number of individuals to finance a business venture through the Internet.  It is a fast growing worldwide phenomenon. As tracked by research group Massolution, crowdfunding platforms raised as much as US$2.7 billion and funded more than 1 million campaigns in 2012.
 
This trend is expected to grow by about 81% to reach an estimated US$5.1 billion this year. The US and Europe are far ahead with a cumulative sum of US$2.5 billion as compared with Asia at a mere $33 million.
 
The US-based gaming start-up Ouya, which collected US$8.5 million in funding  over 30 days, and London based electric pay-per use car club e-car, which raised 100,000 pounds are just a couple of the several success stories emerging out of crowdfunding platforms such as Kickstarter, Indiegogo and Crowdcube. The target sectors range from the social sector, which takes away a considerably large share of the pie, to areas such as health, education and technology.
 
Crowdfunding can be donation-based (may or may not have any returns), loan or lending based (with expectation of high returns in the form of interest) or alternatively rewards-based (investor receives rewards as in products or services in return for investment) and equity-based (investor receives equity and becomes shareholder in company).
 
A number of advantages have been attributed to crowdfunding as a means of setting up a venture. One, this facilitates the entrepreneur or businessman to have a wider investor outreach beyond the traditional confines of family, friends and venture capitalists to collate funds. Two, a crowd funding campaign carries the additional advantage of becoming a marketing tool by itself for the product or service offered.
 
There are procedural advantages as well. For the applicant, it is easier to use this method rather than go through the sometimes tedious process of applying for bank loans. On the other side, for the investor involved in such a project, risk is low and can be dissipated considering that investment can be divided into many ventures or even involve small amounts.
 
What is Crowdsourcing?
Crowdsourcing involves an online activity whereby a network of professionals as well as amateurs with a variety of background and knowledge attempt to join hands, heads and resources to co-create and add value to a venture of an individual, organization, company or a non-profit organization. The scope of this innovation spans a broad spectrum ranging from products and service to social causes to finding volunteers.
 
The aim could be to develop new marketing and communication ideas, undertake market research, or even contribute to business modelling. For instance, Unilever is planning to use the eYeka platform to invite creative new ideas for its product marketing.
 
Big companies such as Coca-Cola have also used crowdsourcing in their marketing and branding requirements. Similarly, the Indian government used crowdsourcing to select a symbol for the Indian rupee through a contest thrown open to the public in 2010.
 
This ability and opportunity to tap the intelligence of many becomes easier and faster through the optimum use of Internet and social media. However, this is not to be construed as using a “mob’s popular feedback and ideas,” said Shelley Kuipers of Canadian crowdsourcing company Chaordix, who was speaking at the Singapore Crowdsourcing Week. “It’s about thoughtful, actionable insight.”
 
Chaordix enables and assists organizations such as USAID and companies like IBM and American Airlines to acquire insight through “crowd intelligence” – utilising web 2.0 technology “to rapidly and affordably reach a global crowd, engage their interest, manage and filter their ideas and feedback, and help choose the optimal scenarios to act upon,” as Chaordix puts it.
 
Crowdsourcing is increasingly being recognized as enabler of businesses, allowing them to reach out to a wide range of investors while enabling the entrepreneur or company to receive feedback including constructive criticism from a number of people. In other words, it enables the unleashing of the twin advantages of openness and creativity. These ideas might range from raw to refined, providing both endorsement and new inputs.
 
Beware the Pitfalls
Experts and practitioners are, however, quick to warn that a great deal of groundwork is required for crowdsourcing and crowdfunding. There is a need for entrepreneurs or companies to closely check the market before tapping into these new Internet trends.  
 
For companies using these sites, leadership have to be in place to effectively utilize and implement the ideas received, an efficient team and strong There is also a constant need to maintain transparency, build networks, provide incentives, maintain good customer service and show results to investors and those who give ideas alike.
 
For crowdsourcing in particular, there are serious challenges and pitfalls that need to be addressed. Who owns the intellectual property generated by the crowd? What are the security implications on the company when it, in effect, opens its doors to a crowd of outsiders? Yet- to-be-answered legal questions and lack of a governing or regulating body also stand out as possible drawbacks.
 
The Future in Asia
The Asian crowd funding and crowd sourcing templates look promising. Even though the regional platforms lack scale as of now, they are getting better and faster, noted Crowdsourcing Week speaker Leo Shimada, CEO and founder of Singapore’s Crowdonomic Media. He identified some key challenges to crowdfunding in Asia, including the fear of failure and lack of risk appetite.
 
A clear understanding of the markets and its needs is critical. Towards that end, focus groups of entrepreneurs could meet and discuss ways of augmenting the growth pattern of crowdsourcing and crowdfunding as a way of building businesses in the future, as well as constructing supporting structures and regulations.
 
In the midst of the “dehumanization of work,” said keynote speaker and author Ross Dawson, the best organizations of the future will be those that can draw on the full capabilities of humans, as ideas create offspring, new mutations and possibilities.
 
“Crowdsourcing turns social media into social productivity,” noted Epi Ludvik Nekaj, founder of Crowdsourcing Week. Asia looks firmly set on the growth trajectory in this arena.  
 
About the Author

Arpita Mathur is a CFO Innovation Contributor in Singapore.  

 

Photo credit: Shutterstock

 

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