We have been having a great debate this week over how quickly and how far the democratisation of startup activity will go. The question is, whether the internet will pave the way towards such activities as crowd-funding and crowd-sourcing. Crowd-funding is the participation by multiple investors in raising capital for ventures or projects. Crowd-sourcing is the provision of services through large communities of individuals to realise projects or ventures.
We came to the view that whilst the internet would lead to some democratisation there were a number of barriers to this happening on a large scale in the foreseeable future.
Firstly, there is the issue of symmetry of information. Potential investors do not have access to sufficient information to make qualified decisions. The situation can be improved by providing company profile templates, ‘like’ boxes and other peer level review mechanisms but this does not go far enough.
Secondly, so much is dependent on the quality of the management team. Can this be determined online or even over Skype? A fundamental problem is that the one-off pitch is a poor determinant of startup success. If it was a good method, then there would be a far better track-record to point to. We believe that it is important to form a relationship with the entrepreneur and get to know the team.
Thirdly, there are a number of regulatory hurdles that restrict investment in startups by the general public both locally and on a global basis. Until these restrictions are eased it will be impossible to devise legal investment frameworks to support the type of activity we are discussing. It is also far from trivial to construct the type of commercial agreements needed to underpin mass participation. There are always complexities regarding how second stage investors will view a crowd-funded venture and how it will impact their investment.
However despite all this we believe there is a way forward for DreamStake to promote a more democratised approach. We believe that access to information is the key to startup success. We are building strong relationships with our community of creative and digital entrepreneurs and slowly building an open network to encourage collaboration on a large scale. We are introducing features to improve visibility.
We strongly believe in an online/offline approach to startup building. The www.dreamstake.net community is all about connecting entrepreneurs online, giving access to free information and increasing awareness of events and other activities. Whilst.
our Land and Expand programme is focused on providing hands-on support. We have just announced the launch of two startup workspaces in London. These will be places for entrepreneurs to start their businesses and collaborate with other entrepreneurs and advisors to accelerate the growth of their ventures.
We have a high degree of confidence that this is a great time to start a venture. We believe that the internet will play a part in stimulating participation on a mass scale and that we will be at the forefront of this trend. If you have a great business idea, backed by strong management skills please participate in our various programmes. If you have a view on the evolution of the crowd-funding and crowd-sourcing please join the debate by commenting on our blog on www.dreamstake.net