We’ve been using the power of the crowd to launch some innovative projects. The Sustainable Dance Club sells and rents dance floors that generate energy from the movement of clubbers. Three Wheels United provides services to improve the quality of life of millions of auto-rickshaw drivers in India while reducing CO2 emissions.
These innovative ideas were generated and developed by our crowd. At Enviu, our Dutch company, we are firm believers in the economy of the crowd, where the community is not only generating ideas, developing and producing them, but financing and co-owning such ventures. We’ve been leveraging the power of the crowd — of creative people, entrepreneurs, students, professionals and senior executives — to turn great ideas into real ventures.
But what’s the best way to raise money for these young companies?
Traditional crowdfunding works like this: Someone has an idea for a product or a service but needs money. The entrepreneur posts the idea on one of the online platforms and asks for contributions. Typically, those contributions take the form of a donation, and in return, donors receive some form of credit — a sample of the product for instance. The market for crowdfunding is growing exponentially, with over 344 platforms worldwide. Crowdfunding is expected to raise $5.9 billion by 2013.
Now we’re taking the next step. Instead of just asking the crowd to be donors, we’re also giving them a chance to be investors. They won’t just get a thank you; they’ll get a return on their investment. We call it crowdinvesting. It’s the natural evolution from crowdfunding.
We used crowdinvesting in December 2011 to raise 100,000 euros for startups that aim to make a social impact. We offered people shares of our startups, with an expected return on the investment of 5% to 7%. This transforms 400 people in our crowd into investors of a portfolio of impact-driven startups. Soon we will launch our crowdinvesting platform for impact-driven entrepreneurs around the world.
We see this as a creative way to finance projects and ventures that would otherwise have difficulties finding money from traditional financing channels. The current amount of impact investments is estimated at $50 billion. In the next decade, this could expand to $500 billion, 1% of all managed assets. Some $120 billion will be from U.S. investors, and half of those individuals will invest $25,000 or less. This shows that an increasing number of investors are looking for impact-driven companies.
If investors want to make a social impact, we think crowdinvesting is the best way to do it. Many see it as the next step in reinventing the economy, since it democratized investment practices.
In the coming years, we expect to see a growth in this field and in the number of platforms that support one sort of crowd financing or another. The future belongs to those imagine and create ventures that just a few years ago seemed impossible.