In this LinkedIn article, Kiva board members explore the world of crowdsourced small business ventures. Fueled by the difficulty of securing loans with large banks, more and more entrepreneurs have turned to crowdsourcing efforts like Kickstarter and IndieGogo (Kiva is among these ranks, maintaining a network of individuals and microfinance institutions to generate opportunity via small loans and startup capital). Highlighting case studies like the 73-year-old teacher in Kenya for whom crowdfunding supported his ceramic stove liner business, Julie Hanna and Reid Hoffman argue that, “while many traditional attempts to address poverty often set up recipients for a vicious cycle of dependency, crowdfunding platforms tie opportunity to innovation, accountability, and self reliance,” and provide support where it is arguably most likely to do good.
While crowdfunding has been around in various forms for hundreds of years, its contemporary foundations are often traced to 1997, when fan-based Internet campaigns helped fund a tour for a British rock band and the first film by writer/director Mark Tapio Kines. Today, most crowdfunding platforms fall into one of four categories: reward-based crowfunding options, like Kickstarter and Indiegogo, provide donors with rewards at various levels, often ranging from handwritten notes or certificates to more elaborate prizes like walk-on roles in films; equity crowdfunding enables potential donors to acquire shares and make longer-term commitments to crowdfunded endeavors (beginning this Sunday in Wisconsin, for example, small companies will legally be able to sell stocks on the Internet via crowdfunding sites); donation-based crowdfunding — like GoFundMe, used largely for personal campaigns that may not meet other platforms’ criteria — relies on donors’ interests in particular causes; and credit-based platforms like Lending Club and Kiva, the latter a nonprofit that works with volunteer networks, match applicants to pools of interested investors and/or microfinance institutions. Follow along with our #crowdfundingfacts hashtag on Twitter to learn more.