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Starting a Business

Crowd-Sourcing: The New Angel Investor

Will crowd-sourcing revolutionize the financing industry?
2 min read
Opinions expressed by Entrepreneur contributors are their own.

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2009 has been a tough year for digital media startups. Ad revenues are declining and consumers are tightening their belts just as investors are realizing venture returns have been weak for years.

As a result, investors are asking their portfolio companies to watch their bottom lines as closely as possible, focusing on current investments and making less new ones.

Where are entrepreneurs to turn for that crucial initial funding to help get their ideas off the ground?

Read Write Web thinks crowd-sourcing is emerging as an alternative method to raise funds for startups.

Crowd-sourcing as a form of financing can range from syndicating many micro-investments to commissioning films by pitching the public in an online forum.

Here are a few companies RWW profiles in its article:

  • Kickstarter: artists and designers raise funding for specific projects from multiple donations.
  • Filmmakers and reporters pitch the public on their favorite story ideas then report on them using multiple donations. Though this will not save the newspaper industry we still found it an interesting attempt to get the public to pay for quality investigative reporting, which struggling newspapers are having difficulty paying for at the moment.
  • Sellaband: Bands fund the recording of their albums from multiple individual investors who then share in any profits down the road. We're guessing this may actually turn out to be good for record labels since many of these bands will likely use their initial release to pitch independent and major record labels on record deals.
  • Contenture: Users pay a monthly fee and Contenture-member sites share in the revenue when users visit their sites.

Crowd-sourcing likely won't revolutionize the entrepreneurial/venture industry, but we wouldn't be surprised if more resourceful entrepreneurs start turning to similar methods.


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