Crowdfunding, the Funding Innovation That Takes the Investment World by Storm

Over the last few years, crowdfunding has become increasingly popular in Indonesia. A number of crowdfunding platforms have emerged, giving Indonesian entrepreneurs the opportunity to reach out to many potential investors at once rather than just one at a time.

With crowdfunding, good ideas can find their way to people that have the cash that can help them get realized. For the investors, crowdfunding is a good way to invest very early on in products or projects that have the potential to become big in the future, also on ideas and causes they believe in.

We’ve all heard of the overnight success stories of startups or products that raised money through Kickstarter, the biggest and most well-known crowdfunding platform. One of them is Baubax, the creator of what is often dubbed as “the Swiss Army knife of travel wear”. In July 2015, Baubax sought US$20,000 in its Kickstarter campaign to produce its signature multipurpose travel jacket, which has 15 distinct built-in features. The company instead raised more than $9.19 million. Another campaign in Indiegogo in September the same year attracted $2 million.

Crowdfunding offers this kind of opportunity for all entrepreneurs. But how does it really work? And what makes it different from other financial instruments? What’s in it for the investors?

A Funding Innovation

Financing a business used to involve asking a few investors for a hefty sum of cash (think “Shark Tank”). Crowdfunding switches this idea around.

Crowdfunding, as the name suggests, is the process of getting a large crowd of investors to pay a small amount of money and invest in a product, a project or an idea. A crowdfunding platform like Kickstarter or Indiegogo uses the power of internet to connect entrepreneurs with thousands, sometimes even millions, of potential funders. Businesses can utilise these platforms to promote their products or projects and raise the needed fund. When the product is ready to be delivered or the idea is realized, the investors will be the first to have access to it.

The Next Big Thing

Crowdfunding is poised to be the next big thing in investment. An increasing number of investors are finding browsing crowdfunding websites a faster and much more convenient way to find exciting investment opportunities than having to set up pitch meetings with one business at a time.

Investors see potentials in crowdfunding in that it lets them gain access to untapped markets. Many of the businesses that are looking for funding through a crowdfunding platform are small to medium scale and they need money to be able to scale up and expand.

In the old days, investing in small businesses and emerging startups was the domain of the elite and the rich. But with crowdfunding, anyone with a little bit of money can be an investor and gain from investing in businesses that are more than ready to spread their wings and grow.