The Nation


the observer

Crowd funding a new idea with high potential

I believe that some of you are, more or less, familiar with the emergence of the "crowd funding" platform. It is a relatively recent phenomenon that has the potential to change the way people raise capital.

For those who are not familiar with the term, crowd funding technically means "the use of small amounts of capital from a large number of individuals to finance a new business venture".

In the past, so-called crowd funding revolved around getting funds from traditional circles of owners, relatives and venture capitalists. But with the arrival of social media and connected online networks, it has become much easier for online marketplaces to start to match people who need capital with those who have capital to invest.

To explain it a bit further, typically most crowd-funding platforms revolve around an all-or-nothing system. People share or post ideas or projects on the portal sites, providing information on ideas and amount of money needed to potential investors, and if a project fails to appeal and reach its target, then pledged amounts are cancelled.

The platform has become very popular within societies with high entrepreneurial spirits. Last year the leading crowd-funding site in the United States, Kickstarter, raised US$145 million (nearly Bt4.7 billion) for pledging projects.

What if someone seizes Kickstarter's model and tries to apply it to property development? Is there any possibility that the idea will materialise?

Typically, crowd-funding projects involve pledges of capital to develop simple consumer products from anywhere in the world that are shippable to each individual investor once manufactured. But what about pledging capital to support and develop something that is static and takes years to complete?

Another challenge is finding a group of people who have a vested interest in getting what they want but who don't individually have the resources to get a multi-unit project, with its economies of scale, off the ground. It is not only that it's very difficult to find and match people with shared visions, but it's also hard to find people who are committed to seeing a project through to completion. That can test the patience of donors accustomed to seeing projects reach goals in weeks, rather than the years it can take for a project to go from plan to realisation.

While many people are attracted by the idea of property development, accepting the risks and committing the time and money to executing on the idea are not for everyone.

Still, there have been recent examples of exploring the idea of applying a crowd-funding platform to property development in the West.

Residents of Glyncoch in south Wales, after years of conventional fund-raising activities, managed to accumulate more than 750,000 euros (about Bt40 million) for the demolition of an old corrugated coal factory and development of the town's civic centre, but they needed another 50,000 euros to finish the pledge, which would expire soon. So they turned to an Internet crowd-funding site called SpaceHive and solicited more funds. Finally, they got the capital needed.

In Rotterdam, Netherlands, locals pooled money to build a pedestrian bridge across a city roadway that had stood between the residential areas and business and shopping districts for years. Instead of waiting for the municipal approval process, which might take years, they also turned to crowd funding, but with a little gimmick. Each individual investor will get his or her name inscribed on a wooden plank used to construct the bridge and a memento.

In Bogota, Colombia, a group of local citizens will soon own part of the new 66-storey BD Bacata skyscraper in the centre of town. And in New York City, two architects are creating and crowd-funding the first ever underground park, in an old tram station.

Some developers even take the idea up to another level. Instead of just applying the crowd-funding idea, Renaissance Downtowns, a developer in Bristol on New York's Long Island, created a plan to re-energise the central business district with a mix of housing, stores, restaurants and public spaces to lure young professionals and new start-ups to the area. And in the spirit of building a community, they used social media to help shape the plan and generate support from the community and residents who would actually use the spaces.

They set up a website for locals to sign up, and people are allowed to pitch in ideas and vote on other people's. Meet-ups are arranged on a monthly basis to discuss the progress. If enough members "like" an idea, Renaissance conducts a feasibility study to determine whether the idea is economically viable.

Crowd sourcing and crowd funding are really interesting concepts, because they allow the democratisation of design and get people motivated, encouraging leaps of imagination and innovation that would be unlikely to occur in a developer's boardroom or the cubicles of a local planning authority.

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