The Power of the Crowd

‘Crowdfunding.’ You may have heard the term or even come across one of the higher profile projects that captured the media’s attention over the past 12 months. Simply defined, crowdfunding is the practice of realising a project by raising many small amounts of money from a large number of people. It can, however, take on many different forms. For example, donation or reward-based crowdfunding can see thousands of people putting small amounts of money – often as little as £5 or £10 – towards a project or cause they support; perhaps Sir David Attenborough’s campaign to help save the mountain gorilla. In return, people received a simple thank you postcard from Kigali where the team were based, whereas higher donations received a bespoke trekking trip to see mountain gorillas in their natural habitat in Uganda. Equity crowdfunding is an altogether more serious endeavour whereby people can invest in an unlisted company in exchange for shares in that business. It has proven incredibly popular over the past few years, which has seen thousands of companies throwing open their boardroom doors and allowing the masses to own a real piece of their business in exchange for investment. These new shareholders hold partial ownership and stand to profit should it do well. The equity crowdfunding industry has seen phenomenal worldwide growth in a very short space of time. A recent reported by UK-based innovation charity, Nesta, said that the UK equity crowdfunding market alone grew by an incredible 618% from 2012-2013, with more than £28million in transaction volume. It is with such facts in mind, coupled with a dormant and often difficult lending market from banks, why many entrepreneurs choose to turn to equity crowdfunding to grow their businesses. As a founder of many start-ups in the gambling industry, I know full well how difficult it can be for great ideas, and potentially very successful businesses, to get off the ground. GamCrowd, the first equity crowdfunding platform specifically for the gambling industry, was conceived to address this critical issue that I believe many feel is stifling innovation in our field. As crowdfunding is such a new concept for our sector, we knew it wouldn’t be enough to simply say that the GamCrowd concept would work. We had to prove it. Therefore, our first project was for shares in GamCrowd itself. We offered 10% equity in our business in return for £200,000 worth of investment. Our offering was incredibly popular; so much so that we ended up overfunding by 12%. As well as delivering funding it has provided GamCrowd with dozens of new shareholders who are experienced within the gambling industry and just as passionate about our business as we are. Off the back of our own success, we launched two project offerings that have already excited investors. Fenway Games, a developer of real-time mobile and social products that operate during live sporting events is offering 20% equity in exchange for £50,000 worth of investment. Fenway’s flagship title, SwitchPlayed, allows small-stakes bets to be placed in-play to predict what will happen next in a football match. The £50,000 investment will be used for additional product development, data feed subscriptions and marketing ahead of a February 2015 go-live date. Another project that is currently seeking investment on GamCrowd is Betify, a London-based start-up looking to raise £300,000 for 15% equity. With nearly £200,000 previously raised through incubation and seed funding rounds, Betify’s revolutionary app of the same name allows users to set or receive challenges from their friends, or complete challenges from brands they follow. Betify’s commercial model aims to capitalise on opportunities via brands that want to target new locations, engage with users and reward loyalty. In addition, brands will be able to harvest Betify analytics to learn more about their existing and potential customer bases. The future of the equity crowdfunding market looks bright. The United Kingdom’s Financial Conduct Authority issued new regulations at the beginning of April 2014 which, in effect, have opened up equity crowdfunding to everyone. A survey conducted just after the change in regulation found that four in ten UK adults in employment were interested in investing at least £500 in equity crowdfunding projects. In addition, the poll found that nearly one in three UK employed adults were interested in investing more than £1,500. If those figures were extrapolated out over the entire adult employed population of the UK, the potential investment pool available to businesses offering equity through crowdfunding could be as high as £31.4 billion. No investor should put all of their available resources into equity crowdfunding – the FCA guidance suggests no more than 10% of net investable assets – however, with interest rates from banks at historic lows, it’s easy to see why so many are turning to equity crowdfunding in search of healthy returns. In addition to continuing to work with exciting new businesses within the gambling space, the year ahead will see GamCrowd launch an innovative crowdsourcing capability. Crowdsourcing, where information or input into a particular task or project is obtained by enlisting the services of a number of people, is a close family member of crowdfunding, but manifests itself in different ways; from hundreds of people helping to beta test websites or new products for a small fee, to the thousands of volunteers that are utilising freely available satellite imagery to aid search and rescue efforts. Incredibly, there have been almost 13 million ‘tags’ of images to date on one website that is helping to search for the missing Malaysia Airlines flight MH370. It is very impressive what can be achieved when a large group of people are brought together. When setting up GamCrowd, we harnessed the power of crowdsourcing to build our website, produce videos and create our logo. Crowdsourcing is the ideal tool for a start-up business that is trying to stay lean and, as such, we wanted to make crowdsourcing available to all of the start-ups that would be looking to raise funds on GamCrowd. The potential benefits are huge. Low-cost expertise would be able to give these new businesses the advice and tasks they need from people within the gambling industry. That is the essential advantage of crowdsourcing; those with knowledge and experience in an area, e.g. software development, can offer to do a task for a start-up which provides the start-up access to brilliant expert ability, without having to commit to permanent staffing costs so early in their lifecycles. The benefits of crowdsourcing aren’t solely for businesses at the beginning stages of their lifecycles. In fact, many of the largest companies in the world have harnessed the power of the crowd to achieve astounding results. Take Google: Google had the ambition to use GPS to map the world, but quickly realised it would need an army of people to accomplish the mammoth task. Google turned to crowdsourcing via OpenStreetMap, sent out GPS devices, and soon dense urban areas were accurately mapped for the first time. Similarly, many well-known companies turn to the crowd to review and improve products before they are rolled out at scale. Dell has been a pioneer in crowdsourcing, launching a dedicated website, Ideastorm, to collate feedback and ideas from users. To date, over 20,000 ideas have been submitted to Dell and over 500 have been implemented after accruing thousands of votes. This kind of crowdsourcing ensures Dell are producing products that the public want as well as increasing brand affinity. Dell is a much stronger business as a result. Over the course of the next 12 months, we are expecting a wide range of services and expertise to be on offer on GamCrowd. As well as traditional crowdsourcing tasks such as design, video production and SEO, we anticipate our expert crowd to be able to help with specific areas such as the bonus strategy for an online casino in the Swedish market, or a dealer’s training manual for roulette. As in any other sector, we believe innovation will drive change within the gaming industry. However, nothing kills a great idea faster than painfully long lead times to access the funding needed to implement said great idea. We are confident that GamCrowd can help to shape the future of our industry by allowing start-ups to gain expertise and that all-important funding, and to launch new products and initiatives. We look forward to welcoming you to the GamCrowd community.