By A Cecile Watson
A Cecile Watson is the founder of pitchandchoose. com, the crowdfunding platform for the Caribbean. She is also the Principal at Gr8Way Consulting and the Women’s Entrepreneurship Day Ambassador and Regional Leader for the Caribbean.
I’m making a prediction. By the year 2020, crowdfunding will be a household word across the Caribbean, pretty much as it is now in the United States. I’m also predicting that by that time we in the Caribbean will all know at least one person who has benefited from crowdfunding or who has contributed to a crowdfunding campaign.
So you may wonder why I am so bullish on crowdfunding. And some of you may even be wondering what this “crowdfunding” thing is. If so, then you will no doubt be amazed to learn that the economic value of crowdfunding was estimated as having added at least 270,000 jobs and provided a US$65 billion boost to the global economy in 2014. During that time, startup companies benefited to the extent of US$10 billion. Now that’s significant.
Crowdfunding activity is doubling every year, and continuously outstrips projections. In the five years preceding 2014, the growth was estimated at over 1,000%. And in 2014 US$16.2 billion were raised on platforms globally, and by 2015 the level of funding had grown to US$34 billion. Yes, significant. Note as well that in 2013, the World Bank projected that this alternative financing method would reach US$93 billion by 2025, and it estimated that US$11 billion will fund initiatives in Latin America and the Caribbean.
Crowdfunding is literally all over the map now; but not surprisingly, the Caribbean is trailing in its adoption. As I speak across the region to share on the topic, it is clear that for the most part we’re not even aware that it exists. Yet all the well-established international publications like the Economist, Harvard Business Review, Fortune, the Huffington Post and others regularly publish articles on crowdfunding and its impact on the world of financing. So let us not be excluded. It is time for the Caribbean to pay attention and take action to claim its stake in this new industry that can do so much to grow its economies.
What is crowdfunding?
Crowdfunding is the raising of funding for projects or ventures by pooling small amounts of money from a large number of people, usually over the internet.
I’ll demystify this for you. Without me having added “usually over the internet,” you would probably all be saying: ‘So what’s new about that? We do that already.’ And that’s true, but the internet and social media are the game changers that have made the concept explode.
The crowdfunding concept may seem familiar to the Caribbean because it is not unlike the ‘partner’ in Jamaica, ‘meeting turn’ in Barbados, ‘sou sou’ in Trinidad, ‘box’ in Antigua, ‘asu’ in Bahamas, ‘sangue’ in Haiti and ‘box hand’ in Guyana. I’m sure that this method probably has almost as many names as there are countries around the world. Kenya, for instance, has its own form which it calls the ‘harambee.’ At the crux of it, these are funding circles where the community comes together to help its members through a rotating savings plan. Typically, each participant “throws a hand” to pool money on a set frequency (eg weekly or monthly) for an established period (the round). Payout of all the money in the pool is made to one participant every time the hand is thrown, with the round coming to an end when each participant has received their turn. This form of funding has been the bedrock of how many Caribbean families have paid school fees or purchased large appliances, forced themselves into saving for major life purchases or incrementally built their homes, room by room. It is built on trust, and it draws on the inherent goodwill of community to pitch in and help. It is self-funding at its best, and it has worked for us for a long time.
Then comes internet and social media and the online version of the funding circles has evolved into what the world now calls crowdfunding. The technology facilitates sharing your appeal outside your immediate circle and expanding your reach to a global crowd. Your contributors are now persons who may care about you, your project or someone in your direct community; or it may be that your story is so compelling that they feel moved to join the community of backers to help you meet your funding goal. The ways of giving back to those who contribute also varies. So, yes, it is similar to our funding circles, but it is different. It is similar in that we can still seek to fund major projects and causes through contributions made by the community. However it is different in that the community does not necessarily get its contribution returned in the form that it is given. And it’s no longer a circle of people all known to each other. It’s now a crowd that gives different amounts and get different returns.
At its current growth rate, by 2020, crowdfunding is expected to annually contribute over US$500 billion in funding, generate over US$3.2 trillion in economic value and create over 2.2 million new jobs. Now that’s huge. And it’s significant. And the bottom line is that the impact of crowdfunding is far too significant for the Caribbean to ignore its potential. The time has come for the region to seize the opportunity to harvest the power of crowdfunding, instead of continuing to put all its eggs in the traditional funding baskets that have increasingly been failing to deliver expectations.
