Investing in new ventures is a risky trade and you would be completely nuts to put the life savings into something you are not well informed about. One can always use the traditional channels like mutual funds, brokerage houses, and so on. If you don't want to go this way, how can it be done? We can come together by harnessing the power of the people. While crowdsourcing relies on bits of knowledge from the crowd to shape an idea or product, crowdfunding applies that same principle to raising money. Lots of it in order to finance projects or open up new opportunities.

The crowd can already exist as a community but they can also suddenly form from disparate groups around the world who all happen to share an interest in funding a person, project, event, campaign etc. The Internet allows for information to flow around the world, increasing awareness. A Crowdfunded network can assemble and disassemble at any time.

This new trend is revolutionizing the way people gather and influence the outcome of a project, be it fund raising, saving the whales or more profitable ideas like owning a sport club or a Rock band.

Examples

SellaBand: Fans sponsor unknown bands and artists by buying one of the band's shares, or parts. Once a band has raised USD 50,000 by selling 5,000 parts, SellaBand sets up a professional recording session. The recorded songs are sold to new fans, and both the artists and owners of their parts (Believers) receive a share of the income generated through music sales and advertising revenues.

MyFootballClub: In less than three months, signed up 50,000 people willing to pay a GBP 35 membership fee to buy and manage a soccer team with a bunch of other dedicated fans. When it got down to picking a team to buy, MyFootballClub was approached by nine football club owners and also sought contact with several others. Some of the crowd's favorites clubs didn't make the cut, because they had too much debt or were too regional.

nvohk: Hoping to build a brand from scratch, the Los Angeles-based company launched a drive to recruit 5,000 "owner managers" who will each contribute USD 50 annually. In exchange they'll get a voice in deciding everything from the clothing styles to the advertising of nvohk's line of environmentally responsible clothing. Plus, they'll receive discounts along with 35 percent of the company's profits, the latter doled out in the form of reward points that can be used to buy clothing items.

microPledge: currently focuses on open source software projects, for which it receives no payment, but ultimately it plans to diversify to include a variety of commercial projects and to charge a portion of the funds pledged. Anyone with an idea for useful software can submit it on the site. Others who like it can then pledge money to help see the vision realized. The site also offers a USD 20 "incubator" service to help protect innovators' ideas. About 160 users and 75 projects have populated the site so far.

Fund, fund, fund

Actually, the real benefits of these business models aren't in the funding per se. When thousands of people choose to support a particular band or team, the incorporation of the crowd's preferences is inherent to the business itself. The emotional and financial connection between the people and the bands or sport teams results in a lot of free marketing, since they also have a financial incentive to promote them. Consequently, this seems to be an open business model with a lot of potential.

Which other businesses could be revolutionized by the crowdfunding business model? Are there opportunities to combine different types of projects and to develop a market platform for start-ups? Perhaps projects never dreamed of before? Wild ideas that no investors have dare to finance?

Now we can turn people's dreams into reality as companies communicate more directly to investors and circumvent the middlemen. Especially for entrepreneurs, great opportunities can arise. With the ability for people to raise money for just about anything, anytime and anywhere, it's only a matter of time before they are allowed to formally crowdfund anything they feel compelled to, like the buildings they live in, or companies in their town they are fond of.