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11/15/2013 McKinsey & Co - Why crowdfunding appeals to the Middle East
12/20/2013 Gulf Times - Silatech Hosts Seminar on Crowdfunding in Cairo 12/19/2013 Kiplinger - Investing in...

The Role of Transparency in Small Business

While the most basic definition of transparency is “see-through,” in today’s competitive, online marketplace, this term has become synonymous with a new trend in customer service -- being completely open, honest and upfront with consumers, especially on the internet.

What are some benefits to utilizing this translucent approach?shutterstock 184576229

In a Perfect World

There is no such thing as perfect, period, and today’s consumers are well aware of this fact. Rather than attempting to hide mistakes, bury problems and otherwise pretend that something negative never really happened, acknowledge the errors and move on. Everyone makes mistakes, and people will give their trust and identify better with those who accept their shortcomings and still persevere.

The Internet of Everything

Many have already heard this phrase, or its cousin, the internet of all things, because practically everything related to any type of information can already be found online. There aren’t really any trade secrets, little known industry facts, it’s all pretty much out there, and consumers will find out whether you choose to share the information with them or not. You might as well just put it out there yourself and your customers will recognize and respect these revelations.

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Many ecommerce sites attempt to conceal their identity, hide their contact information or stash their phone numbers out of sight to cut down on incoming inquiries that can often become frustrating. But keeping this information under wraps will lead to suspicion from consumers who will look elsewhere for a business with a more open image.

From the Inside Out

Practice transparency from inside your organization and this will promote trust and teamwork from within your business. Today’s web savvy consumers can often sense if things are running smoothly, people don’t “click” within an organization and this can be concerning to them.

Internet speeds move at a rate equivalent to the blink of an eye, and if customers don’t see what they want right out of the gate, they will simply move on to a more pleasant, transparent site.

How Trust Influences the Flow of Capital In Crowdfunding

How Trust Influences the Flow of Capital In Crowdfunding

With our role in starting this industry and our work in 34 countries over the last 4 years on all types of crowdfunding (debt, equity, rewards), we have deep understanding of the social and psychological dynamics of the process of raising capital online. One of these that is important to understand is the correlation between the speed of capital flows (efficiency), the amount of capital flows, and the trust individuals have with crowdfunding campaign sponsors.  Or:  how does the degree of connection to a potential investor change their willingness to invest? 

So we set out to talk to as many people who have backed campaigns as possible[1].  We asked them about the kinds of campaigns they backed, the degree of affiliation with the campaign sponsor, and the size of their investment.  The chart below graphs some of the directional findings (a full report will be published shortly).  For the image below we normalized the data so we could chart it.

Screenshot 2015-06-05 11.13.15

The short answer is, as one might expect, the greater the degree of affiliation between a campaign sponsor and his donor/investor the more likely that the donor/investor will part with more money and the campaign will have more individual donations/investments.  As this affiliation diminishes so does the amount of investments in both quantity of investors/contributors as well as the amount per investor.

An even more interesting findings from the data is that depending on the type of business (nonprofit, startup that is only proof of concept, startup that is at product stage, or an established business), the curves for each move differently.  For instance, companies that were already established and hence had customers (and most likely cash flow from sales), were able to raise the most money particularly from those closest to them.

This likely has a lot to do with the trust these individuals have in the business and the business owner’s ability to execute.  On the other hand, non-profits that had a lot of trust were also able to raise more money faster but usually at much smaller amounts.  Both the size of the donations and the quantity of them were smaller for nonprofits at the 1st degree connectivity than they were for the established business.  However the converse seems to be true at the opposite end of the scale where nonprofits were able to raise more money from people they weren’t closely affiliated to over established businesses because at this end unaffiliated individuals were probably backing the cause of the nonprofit which was harder it seems for unaffiliated people to do with established businesses.



[1] For a copy of our online survey send an email to This email address is being protected from spambots. You need JavaScript enabled to view it.

Crowdfunomics Selection Matrix (CSM) – Matching Your Product or Service to the Right Kind of Crowdfunding

Crowdfunomics Selection Matrix (CSM) – Matching Your Product or Service to the Right Kind of Crowdfunding

One of the biggest questions we hear from entrepreneurs using our Success with Crowdfunding program is “How do I know what type of crowdfunding is right for my kind of company?”  The importance of this question cannot be understated.  If you fail to select the right kind of crowdfunding model (eg: donation, rewards, debt or equity) for your campaign you might very well never hit your funding target.

To assist answering this complex question we created the Crowdfunding Selection MatrixTM. It is a 3 dimensional way of helping you determine what type of crowdfunding is right for you.  It is meant to be a guide more so than a definitive choice for you but it is based on the deep analysis our firm has done into where campaigns have been most successful based on the type of individuals backing the campaigns.

Screenshot 2015-06-05 15.04.58

 

Here’s how you use it.  Answer the following questions to the best of your abilities.  The answers do not necessarily have to be all or nothing.  They could be in-between (this is why the matrix is 3 dimensional).

  1. 1.What kind of business do you have? Is it a service or a product?
  2. 2.What stage of your business do you have?  Is it an idea or it is established with customers and sales?
  3. 3.What is the growth potential for your business? Are you a Main Street type of business that will have slow or moderate growth or are you a tech company that has great growth potential?
  4. 4.Are the people that are going to be backing you risk takers?  Or are they conservative?

Now on each axis plot the answers to your questions.  Then connect the dots.  The point of intersection should give you an idea of the type of campaign that is right for your type of business.  You can see that each cube is color coded and numbered for the type of crowdfunding model.

We looked at a lot of campaigns and have dropped some of our findings in there.  The colored circles with the small letters tell you which types of campaigns seem to work best for these kinds of businesses. 

Remember, this is a tool that is meant to guide you.  It doesn’t have to be this way. However the best way to confirm your findings on this matrix is to answer the questions, plot your findings, find your result and then ask someone whom you think would be a backer of your campaign if they agree?  If not, talk about where they would plot you on the axes and have a discussion. 

What Wine Country USA Could Learn from Iceland

When recently visiting Wine Country USA for a storybook wedding, I was taken aback by the wine, the scenery, and the lifestyle. I understood why so many people are drawn to a life of making wines. However, I learned that making wine isn't easy, isn't cheap, most vineyards take a long time before they start-producing grapes, and a longer time before they see a profit. I also learned that businesses that support the industry are categorized as either those that grow grapes or those that make wine. What about all the other opportunities?

Being an entrepreneur, proponent of the crowdfunding movement, and a consummate 'idea guy,' I thought there was so much more potential to Wine Country USA than what I was seeing. Sure there were the hotels, spas, and restaurants that come with such an ideal location but what about the startups? Why isn't Wine Country USA another Silicon Valley? Not for technology, but for the wine industry? Why isn't there an incubator there focused on creating businesses that come from selling all parts of the wine than just the grapes?

In June, I had the chance to speak at Startup Iceland. In a speech given by the President of Iceland before I spoke about Crowdfunding's potential for Iceland, I learned how this island nation of 300,000 people is turning their core competency, fishing, into an industry of products and services consumed by the global fishing industry. In doing this, these businesses have helped the country recover from the its own financial meltdown to create jobs and economic opportunity.

Iceland did this by thinking out of the box. A perfect example of this is the Iceland Ocean Cluster House, a privately owned business incubator focused on ocean-related industries. The Ocean Cluster brings together people from very different companies and industries so they can exchange ideas and collaborate on money-generating concepts. Businesses have to pay a fee to join, but they are paired with other businesses to develop projects.IMG 4331

Nearly 40 companies in the group have offices in the Ocean Cluster House, an old fish warehouse in Reykjavik that was renovated in 2012. And it isn't just about the fillets. Companies produce products that turn enzymes from fish intestines into cosmetics, bones into protein powder, and fish leather into expensive garments. They sell these products globally. And when you start to think about how broadly these products are used you can see the potential is much more than just the meat.

How would Wine Country USA take its core competency and accomplish the same? Here are some thoughts:

  • Find an old abandoned warehouse and convert it into a modern incubator. From the looks of it, there are hundreds of options.
  • Fund this with either private donations, a matching grant by local municipalities or crowdfund it with the community. If you crowdfund it, give investors some equity in the incubator. This will turn them from passive supporters to active investors. They will become marketing and branding agents for the incubator and help spread the word. (Note: The Iceland Ocean Cluster is a private company that receives little government funding).
  • Court the local universities and institutions focused on educating students about the wine industry and foster business plan competitions to spur innovation. Invite winning ideas and the ones with the greatest potential to join the incubator.
  • Use crowdfunding to test the viability of these businesses to raise seed capital to build out their business concepts in the incubator. Provide matching grants from the wine industry.
  • Encourage traditional businesses (technology, graphic artists, legal and accounting) to set up offices in the incubator to support these startups and share ideas and best practices.
  • Mimic the "Alliance of Ocean Clusters in the North Atlantic" an association of similar fish-focused clusters to form the "Alliance of Wine Clusters" to cross-pollinate ideas and technologies.

 

The Ocean Cluster House is an amazing center for startups focused on the fish industry. A Wine Cluster can be a potential model for fostering innovation in Wine Country's manufacturing, processing and agriculture industries. Wine Country is well suited to develop its own version of the Iceland Ocean Cluster because it has a wide variety of wine-related businesses and some top wine research institutions, such as the University of California, Davis. A Wine Cluster could serve as a model for similar wine clusters globally. And it can bring a lot more innovation, entrepreneurship, and jobs to an area where a lot of people would love to live.

15 Reasons Why Every Entrepreneur Should Join CrossFit

Today, I turn 45.  To be honest, I’m not in the least bit thrilled about that number.  Sure I don’t feel like I’m 45.  Clearly my sense of humor wouldn’t match that of a 45 year old.  But I’m 45 and that’s a reality, so I just have to deal with it.

I do this crazy thing every 5 years where I get my body in the best shape it has ever been in.  This anniversary is no different with the exception that I decided to do what many advised against. I did the unthinkable for a person my age and joined CrossFit®crossfit CrossFit for those who don’t know is an intense cardio weight workout.  Those in it espouse its benefits as if they were members of a cult. Those outside of it fear it is a masochistic workout that can do more harm than good. 

After 4 months, I have to admit I’ve become part of the cult.  I’ve remained unscathed despite the naysayers. And I’m getting more than a fit body. CrossFit has made me a sharper entrepreneur and the lessons that I’ve learned are many of the same lessons any entrepreneur can learn about building and growing a successful venture.

  1. It all starts with a healthy body.  Without a healthy body you cannot accomplish anything. Exercise while it may be painful during, makes you feel good afterwards. A healthy body leads to a healthy mind.  A healthy mind gives you the ability to think clearly, logically, and strategically.  These are all skills entrepreneurs need to use everyday.
  2. CrossFit is both an individual and team sport. So is entrepreneurship. Both require that you set individual and team (aka company) goals.  In both cases, you should have a long-term objective. In both cases if you set smaller, daily, challenging yet achievable goals, you will have a greater chance of reaching your desired outcomes.
  3. Crossfit like running a business is never the same routine.  Working out and managing the operations of a business is never ending. If you give it your all every day you will never let yourself or your company down.  CrossFit also teaches you how to manage multiple things at the same time and how to prioritize.  Important business skills.
  4. In CrossFit it is all about showing up and execution.  This includes stretching, warming up, exercising, and cooling down. In business this equals researching, preparing, executing, and following through.  Taking time to prepare for what you are going to do will allow you to execute better and that doesn’t only relate to what happens in a gym.
  5. In CrossFit if you aren’t a puddle of sweat afterwards you lack commitment. In business if you don’t feel like you’ve given it your all, you lack determination.  A business cannot succeed without determination and your body will not get into shape without commitment.
  6. Getting in shape isn’t a sprint but a marathon.  You train daily for incremental improvement. The end game comes from your ability to stay on track and endure the hard work. Growing a business doesn’t happen overnight and neither does getting rich.  So go into it with a long-term outlook and you can get both the business and body you desire.
  7. It isn’t about the weight but the form. I’ve never had a CrossFit coach tell me to put on more weight. As a matter of fact I usually do less than the prescribed women’s weight.  However what I do hear is coaching (aka mentorship in business) about how to perform the exercise (or deal with a business challenge).  In business execution isn’t always about how fast you do something but how well you do it.  People judge you for what you can accomplish and how well you accomplish it. 
  8. In CrossFit even though you might have done an exercise 100 times, they teach it to you as if it were your first time. In business repetition is key.  Employees and investors need to understand what you are trying to accomplish.  By repeating it you reinforce in them what you want them to know, what you want them to do, how you want them to do it, and what outcome you expect.
  9. There is risk everywhere. You might have heard stories about people hurting themselves doing CrossFit. In CrossFit you are taught over and over how to perform an exercise. (See repetition above).  They teach you the right way to do an exercise and also show you the wrong way. Nonetheless, people sometimes don’t listen or forget what they are taught.  That can lead to harm. Business is the same.  You need to listen to learn.  You need to practice to make perfect but there’s always the risk that something could go wrong.  There are no guarantees.
  10. You can’t think negative thoughts and complete a rigorous workout the same as you can’t think negative thoughts and succeed as an entrepreneur. You need to think positive, have a “can do” attitude, and push forward.  You need to have a dose of humility and a strong sense of confidence.  Not everyone can lift heavy weights (nor should they). And not everyone can take on the challenges of starting and growing a business. You need to be honest about what you can do however you should be confident in your capabilities.
  11. Be encouraging and help others.  Ever try to exercise when people tell you not to?  Ever try to work when people tell you not to?  It is easy to skip out.  If you are encouraging and helping others chances are they’ll be better off for it and you’ll feel good about it.  A simple “you can do it” shows you care.  It will also engage people to do more than they think they can.  It sure helps when lifting heavy weights.
  12. Competition is a natural part of CrossFit. It is also a natural part of business and life. How you deal with it determines how you will succeed.  Look at competition with a positive attitude and not something from which to run away.
  13. Engage diversity.  In CrossFit, you don’t have to be a 20 something white male to compete.  Thanks to crowdfunding now you don’t have to live in Silicon Valley and be a tech only company to start and grow a business.  You can be a minoirty in an innercity but leverage your online social network to help you succeed. Embrace who you are, what you want to do, and a community of people around you to fulfill your dreams.
  14. Watch others but be your own person.  In Crossfit I like to see how others are performing an exercise and when they hit exhaustion. I use that to pace myself so that I can complete what I need in the time allocated.  In business survey the landscape to see what others are doing.  Use that to strategically plan your path forward.  And finally …
  15. A fist bump means “job well done,” “I’m proud of you,” “we did it,” “let’s keep on going.”  Start bumping fists or whatever else you can do to commend people in your business and around you on a job well done.  It is a small gesture that will carry you and your company a long way.