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Crowdfunding's Future: Local Online Ecosystems Comment Now Follow Comments

posted Nov 8, 2013, 11:20 AM by Unknown user   [ updated Nov 8, 2013, 11:20 AM ]
There’s an essential question I’ve been thinking about recently that I believe underlies one of the most powerful and transformative possibilities of crowdfunding…

The question is… how important is “local” to the crowdfunding movement?
I wanted to share my vision for local communities and entrepreneurial ecosystems across the U.S., and globally, and how I see they will be empowered and funded collaboratively.

For starters, I recently wrote about the power ofcommunity-based investing.

In some ways, the Internet has made “place” irrelevant. We live and work in a global marketplace — we can connect, interact and collaborate with virtually anyone, anywhere. However, as we all know, just because we connect with a person or company online, it doesn’t mean we have an actual relationship.

Real connections are forged under many circumstances, but relationships built in local communities are more important than ever for entrepreneurs. Local communities can foster collaboration, innovation, and serendipity, adding essential fuel to the entrepreneurial fire.

If you’re a small business entrepreneur looking to raise money, it’s unlikely that you’ll find funding in the global marketplace. You’re much more likely to secure funding through somewhat local connections. Your local community is also a quicker way to connect with the resources you need to grow your business.

The Quality of Relationships: Meaningful vs. Many

To understand the future of business crowdfunding — both rewards/donation and equity crowdfunding — you have to understand one basic tenet:

The true power of the crowd isn’t about random people connecting on the web.

Funding doesn’t just show up from the web. And you are no more likely to be successful at crowdfunding if you have 1,500 LinkedIn connections rather than 50. It’s not about the quantity of your connections, it’s about the quality.

“Relationships are to the social era, what efficiency was to the industrial era.”
- Nilofer Merchant

The collaborative power of crowdfunding is a result of a few deeper and more meaningful relationships coming together around a business or a team. As the smaller and tightly connected first-level-connection group gives their public support and dollars to a business, others see that as an important signal and follow along, further amplifying the fundraise.

In short, big networks aren’t the key to successful fundraising. Tightly-knit deep connections are. Small, “close-tie” groups are what attract and help form large, “thin-tie” communities.

There are a lot of ways to grow your social network. The smart entrepreneur uses online networks to cultivate their LOCAL connections, and ensures that meaningful relationships are the end result.

Got “Clusters?

If you’re an entrepreneur manufacturing organic vegan energy bars, your local community might include sustainable farmers, health food stores, vegan bakeries, other energy bar manufacturers, local non-profits promoting veganism, and other local companies and institutions that are involved in the same industry.

These communities are called “clusters” — local businesses and institutions that share a vested interest in your industry — a concept defined by Michael Porter, renowned author, strategy guru and Harvard professor.

As an entrepreneur, building relationships and collaborating within your cluster enhances your ability to:
Access new information
Get resources
Hear diversity of opinions
Be exposed to diverse skill sets
Create unexpected outcomes
Promote common interests

Clustering speeds up the process of connecting with potential employees, investors, vendors, and mentors who, a) have valuable expertise and experience in the local market, and b) offer relevant, specialized skills or services.

These relationships can be initiated online, but the true benefit of these groups is when online interaction leads to real-world, local relationships.

At Social Media Week 2013 in New York City, I recently gave a brief talk on my vision of how communities will connect and collaborate to fund and grow small businesses. You can check that out here:


The Importance of Online Connections Leading to Offline Relationships

Experts agree, the “next big thing” is using online connections to create offline experiences. It’s already happening. The online-to-offline revolution is transforming our world, driving deep and significant local relationships, and allowing entrepreneurs to combine resources to improve their collective competitive advantage.

How are online communities moving offline? The online-offline contest model is a good example. These are contests held by online communities that actually occur at an offline event. Contest events like these can help create new, substantial relationships via online collaboration and real world connecting, to help develop a more vibrant local ecosystem. has held two successful CROWDSTART contests to connect startups and small businesses with local capital, and CROWDIMPACT to connect social enterprises with like-minded investors. The initial application process and voting is done online and encourages a wider network of new connections and collaboration, but the live local community events bring people together in-person for a one-day event.

A few quick examples:

CROWDSTART LV: 3,000 online new users engaged, 150 companies entered, multiple new relationships and outcomes in the Las Vegas community.

CROWDSTART LA: 8,000 online new users engaged, 720 companies entered, multiple funding outcomes for participating companies in the Los Angeles community.

CROWDIMPACT: Crowdfunder’s latest online-offline pitch contest is for social enterprises — for profit companies who also have social impact goals. The immediate goal of this contest is to build a richer impact-investment ecosystem online, and accelerate and grow the impact community across the globe, while more tightly “clustering” the local market in California. The initiative gives social enterprises the opportunity to connect with like-minded people online and brings over $100 million in impact-investment capital and $30,000 in cash prizes to the live event.

As in the case of CROWDSTART, the real magic happens when local online communities facilitate both digital collaboration and face-to-face relationship building.

The community members then have the potential to become a whole that’s greater than the sum of the parts; to disrupt old staid industries; to cultivate unexpected outcomes; and to reinvigorate our communities in ways that will positively impact the community, the nation, and even the world.

In the end, your location matters. The quality of your relationships matter. Participating in your local cluster matters too. The future of crowdfunding lies in local online ecosystems that promote meaningful interaction online and off.

Get Local, Get Connected Now

Consider the quality of your online connections and become an active participant in online platforms that connect you with your local community and your cluster. And when the opportunity arises to move those connections offline, take it.

Building meaningful local relationships is not only a good life strategy, it’s also the best way to get the most out of crowdfunding now, and in the near future.

With the JOBS Act around the corner, and with equity crowdfunding coming online, it’s time to get connected with your personal network online and participate in your local entrepreneurial community.

The folks at the Kauffman Foundation put out a recent report, the ‘State of Entrepreneurship 2013 Report,’ that highlights the power of crowdfunding, and as a key community crowdfunding resource.
promote my crowdfunding

So, if you’re an entrepreneur, or you want to support your local businesses… I hope we connect online, and offline!

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