The Crowdfunding Solution
For entrepreneurs the most difficult aspect of starting a business is generating capital. They usually suffer from funding gap, a term used to describe the capital need of entrepreneurs that remain unfulfilled by traditional lending institutions and angel investors. Finding angel investors and convincing banks or conventional money lending companies to grant loans are all equally difficult. This is where crowdfunding comes in.
The basic idea of crowdfunding is that people pooling their money together, usually via the Internet, to support an idea or effort initiated by a person or organization. Crowdfunders can build up and nurture a community of like- minded individuals who genuinely want to see one another succeed. An online crowdfunding campaign is a key way for an organization to raise money; effectively build an audience for a project, event, or cause; and keep contributors engaged in the outcome.
The International Crowdfunding Act essentially enables start- up entrepreneurs to leverage the power of the Internet to raise funding for their projects. Now, anybody with a cool idea will be able to pool the funds of ‘ micro investors’ into seed capital for the venture. If the idea pays off, then the seed investors can rake in their rewards.
In early 2011, Rachel Sun Xiangyu, a 21 year- old student from China, travelled to Pakistan to complete a traineeship at Nayajeevan. Having a passion for making friendship bands, she came up with the idea of teaching students to make these bracelets, with their own unique style. The staff at Nayajeevan and the Network of Organizations Working for People with Disabilities Pakistan ( NOWPDP) recognized an opportunity to spread her impact on Pakistan, while reaching out to a vulnerable population.
From this seed of an idea, Nayajeevan and NOWPDP are launching a campaign to provide a means for all people to provide a safety net for children with disabilities studying at special education institutions in Karachi ( around 7000 children). Just one bracelet ( for around 200 rupees), will provide health insurance for a month, and a small income to the child or teacher in the school who made it.
This is not just any health insurance; this insurance provides preventive health care workshops and a 24 hour medical hot- line to clients along with their emergency medical coverage in case of an accident. NOWPDP and Nayajeevan have joined hands to put together a managed care fund for these students; who would otherwise be refused coverage from insurance companies due to a misconception that their condition is associated with a higher risk of accidents.
In Asia, however, crowdfunding is a foreign notion. But projects like Togather. Asia, a Singapore- based startup that claims to be the first in Asia, essentially allows anyone to post up ideas for creative projects, social initiatives, and innovations and seek funding from the public to turn them into reality. The money is only passed to the project creators once the target is met. There is no equity exchange involved, so the funding is the form of donation pledges.
Similarly, Indonesia’s technology sector is adopting familiar models to foster growing businesses. Some of those qualities are already visible on the nation’s indigenous crowdfunding sites. Wujudkan. com and Patungan. net have both adopted familiar models and are contributing to some local success.
Crowdfunding does not offer a replacement for traditional money lending options, but an additional avenue that small and medium entrepreneurs can consider to get access to capital to get their business stand on their feet or to fulfill expansion goals.