The other day I received a downright inspirational email from my friends at IndieGoGo, a site dedicated to the collaborative funding of ideas. (Here’s a short video of my friend Slava Rubin, co-founder of the company.) The missive pointed to a video featuring 9 year old Jackie Evancho a rising America’s Got Talent star who belts out To Where You Are.

In creative work, there are three risks:

  • execution risk — will the new work be any good?
  • financing risk — with the artist or patrons make money on their investment?
  • marketing risk — will we get to the audience in an efficient manner and motivate them to buy?

What is so, so cool about IndieGoGo and other crowdfunding sites is that they completely change the financing and risk structure of creative work. The implications are profound.

  1. By “sourcing” the financing, crowdfunding collapses finance and marketing risk. When people pony up cash for little Jackie, they are already identifying themselves as people who are willing to buy the product. Financing IS marketing, and marketing IS financing.
  2. Crowdfunding lowers the minimum efficient scale of making something new. Jackie only needs $7,000. If she had an agent, and other intermediaries in the mix, this effort would blow through orders of magnitude more money before she was actually in touch with her audience. With crowdfunding she starts with her audience.
  3. Crowdfunding spreads the risk of the riskiest part of the creative process across many people. Put another way, no one relative needed to give Jackie the $7,000 she needs to produce her first CD’s — each person can take a little piece of the risk. “Professionals” in the business like promoters, and record labels can “see” the track record — lowering their risk.

I have pointed out before that the collective absorption of risk creates tremendous opportunity for innovation. I believe that crowdfunding of creative work can unleash the creativity of millions while lowering the risk of things new. Isn’t that at least as inspiring as a nine year old belting out a melancholy tune?

Original Post: http://www.sviokla.com/marketing/creative-work-unlocked-by-crowdfunding-a-disruptive-innovation/

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