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September 1, 2014

Crowdsourcing Success

microloan

Banking is based on the principle that the more you have, the more you can get. But we reversed the basic principle of banking, saying that if you have absolutely nothing, you are our most prominent client. – Muhammad Yunus, Grameen Bank.

In the 1970’s, a newly independent nation was in the grips of economic and institutional crisis. An economist returned to his native country and became an Economics Professor in Bangladesh. He witnessed rampant poverty and desperation, and noted cruel private lending conditions. Two-thirds of the world’s population is deprived of services available from financial institutions, and bankers told Yunus that not only would they not lend to poor people, but they would deny all women – wealthy women too.

He went on to identify forty-two loans in one village arriving at only $27 borrowed. “I thought, ‘I cannot do anything for the rest of the country, but I can definitely do something for one individual in the village next door.’ People were going through so much misery—so much hardship—for so little money. So, one way I thought I could solve this difficult problem quite easily would be to give back this $27 myself. I did that: I returned the money to the lenders so the people in the village could be free.”

That seemingly meager amount transformed mostly a basket weaving cottage industry, and more surprisingly, against conventional wisdom, it was paid back. Muhammad Yunus tested this phenomenon with many more villages, and with such success, he founded the Grameen Bank. Yunus went on to win the Nobel Peace Prize in 2006 for developing the concepts of microcredit and microfinance, where these loans are given to entrepreneurs too poor to qualify for traditional bank loans. Yunus has gone to show that “Small gifts can equal big impacts.”

The Grameen model has advanced a global movement toward microlending, microloaning and even in Alaska, after a model supplied by The World Bank, business start-up grants with the Alaska Federation of Natives Alaska Marketplace.

Alaska may be a First World oil-rich state, and while its hinterlands are resource rich, they are infrastructure poor. The concepts and execution of Western Economy tenets are typically left to government, corporations, or immigrants. For example, in most of the major rural hubs, which are only accessible by air or by boat, most private businesses up until 10 years ago had only been owned and operated by enterprising foreigners. Nothing wrong with that, they are hard working to say the least. It takes years of start-up costs, blood, sweat and tears to run the machinations of town commerce like restaurants, shops, and taxis. But somehow, they have access to capital, whereas the local denizens do not. In reality, it has never occurred to many Natives that they can run their own business. The Alaska Marketplace has done much to change that mentality and like the Grameen model, it has helped the less privileged unleash their entrepreneurial skills. Twenty seven dollars would do nothing to help a business start-up in rural Alaska, but the Alaska Marketplace grants from as low as $1,000 to $60,000 have turned many business concepts into years-long run operations with validation and leverage to access more traditional lending and finance sources.

An offshoot to microlending is crowdfunding. With the undeniable power, reach, and influence of social networking, a crowdfunding platform allows a person or entity to submit a project, set the goal amount, deadline, and any rewards offered to donors. One must raise 100% of their goal before the deadline, or all the donations are returned to the donors. Deadlines are typically less than 60 days. Crowdfunding is mostly used by artists, charities, & start-ups to raise money for projects that wouldn’t register a response from a traditional lending institute, meet grant parameters or necessitate a costly and high effort fundraising event. Not to forget state and federal resources available for small and/or minority business, the red tape and bureaucracy of the Small Business Administration and many trade programs out there like the Northwest Trade Adjustment Assistance Center may be daunting and still require collateral or detailed applications one can’t process. As for high profile investor avenues from the high-stakes television show Shark Tank, to well-known and small Angel Investor groups, well, your ownership (which is only what most owners have to show for their enterprise) is typically the first to go in those arrangements.

One of the most popular and well-known crowdsourcing platforms is Kickstarter, which has been very successful for Alaska projects. Inuit world music group Pamyua successfully Kickstarted their Bubble Gum music video project, having raised $6,110 with 57 backers. Their music video was shot in Unalakleet, Alaska, and took advantage of the supportive medium of the Tweeto family, during the filming of the Discovery Channel’s show Flying Wild Alaska season three by Anchorage-based film collective Electric Igloo Creative.

Mike Dunham of the Anchorage Daily News has been spotlighting such projects with satisfying results: he just wrote an article about photographer Clark James Mishler’s efforts to turn his upcoming Anchorage Museum exhibit into a book of portraits of Alaskans from every region and ethnic background from a more than 40 year span. It will cost $38,000 to produce the book. In May he wrote about Homer photographer Jim Lavrakas’ book project, and it raised $14,726, more than double the $6,000 goal, with 289 Backers. In June he wrote about “expanded media” artist Nathan Shafer who has a plan to digitally reconstruct the former termini of Exit Glacier, and turn them into an augmented-reality, public art project for the iPad. That project raised $4,055 for a $4,000 goal, with 84 Backers.

While these “First World” projects don’t necessarily illustrate changing the economic landscape of a people, an epidemic, or eradicate poverty, it lifts many lives, ekes out talent, and builds skills and ambition to leave a lasting imprint in a high-information age. No less critical, it inspires countless numbers of people of all demographics to devote themselves to social causes and artistic endeavors all over the world.

My company, ArXotica, has been sitting on a source material that is just begging to be put to use, and since we can’t abide waste, we’ve accepted an offer from a new crowdfunding company called Rock The Post to submit a project. Wish us luck!

For more information about micro-lending or crowdfunding companies, check out Rock the Post, KickstarterKivaOpportunity FundAccion USA,  and Women’s Initiative.

I was approached before Christmas by a friend to look into his flexible funding project through Indiegogo, for a long term program called Villages in Partnership  through his veterinary practice. Flexible funding looks a lot different than the crowdfunding projects I’ve seen to date, it doesn’t preclude receipt of funding at the close of fundraising goals when it isn’t reached. Any money pledged is still collected as opposed to Kickstarter that needs to hit the goal in order to disburse funds.

For $45,000 each year, for the next five years, they will put together a team of highly specialized Veterinarians and Agriculture experts to travel to Malawi Africa at the start of the ‘hungry season’ in March with the goal of improving agricultural animal health and vitality in the fourth-poorest nation in the world. With Malawi having been decimated by the HIV/AIDS epidemic, there are virtually no middle-aged people living in this country. Most of the households are led by children or grandparents, caring for up to nine children each. With six months out of the year known as the “hungry season,” when rain is scarce, and crop farming impossible, they need this expertise to teach and set up sustainable food sources from dairy goat, and cow farming and breeding, to poultry science, bee keeping, and aquaculture. While Malawi is a peaceful nation, it is surrounded by other African countries at war. This, along with no coastline, limits its ability to receive supplies. A supporter can invest in something as innocuous as a brick, to two chickens, two cows, or finance the beekeeping operation.

This is the future of fundraising and financing with the power of the Internet. Artists, writers, companies, altruists, and those in the grips of a healthy mid-life crisis are going to have many go-to sources to see if a bunch of people are going to finance their dreams, whims, or life-saving endeavors when their boss, parents, significant other, or spouse says no. In all seriousness, crowdsourcing, microlending, and start-up granting may displace some of the immense power that banks and other financial institutions have wielded throughout the ages. If you have a dream, if you have a project, you have options with only a summary, budget, and a few prizes to send out as the only accountability fulfillment in the whole deal. Good luck and do good with it.

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3 Responses to “Crowdsourcing Success”
  1. yukonbushgrma says:

    We are a small rural bush community in Alaska. You mentioned a veterinary friend ……. we could sorely use a vet from somewhere, someplace, to do yearly rabies, vet checks, spays/neuters, surgeries.

    We’ve had vets interested, but it always became too expensive. The State doesn’t think rabies is a hazard for us. So we’re on our own.

    Nothing has worked, even with vets who really wanted to help us.

  2. Zyxomma says:

    Excellent post. A designer friend just tried a Kickstarter campaign. She did not reach her goal, but has attracted some investors who may help her establish her excellent brand.

  3. Alaska Pi says:

    Thank you Ms Sparck!
    Have worked my way through most of the links you’ve provided here. Was familiar with a couple but hadn’t heard of others.
    Still working my way through the ideas. Microlending has long made sense, donating/lending to make sure art
    (On the Ice ! ) isn’t at the mercy of a system which freezes out beginning/small artists makes sense.
    Some of the other crowdsource stuff is too new for me to make sense of but I’m working on it!

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