Many start-ups use crowdfunding to finance their innovative creations. Wiebe Hendriks, a second-year student of Technical Business Administration at the Eindhoven University of Technology (TU/’), became interested in how these young companies could finance their “cool products” while he was still in secondary school. He discovered that there was plenty of room for improvement and decided to develop a crowdfunding platform himself. “I believe that a lot more can be gotten out of crowdfunding,” he says.
“I find it really interesting to help companies. And to see so many innovative projects pass by.” Hendriks became fascinated in crowdfunding and blockchain. “I love that combination of technology and business.” His enthusiasm spills over to Niels Snakenborg, iOS & Web developer at Shareforce. They got talking about one and a half years ago and decided to found Fundle. They work together, mostly in the evenings and weekends, on a funding model that runs on blockchain.
There are four different types of crowdfunding. Fundle focuses on the reward-based version. “That’s where the real product fanatics are. They are interested in the product and not in the money,” Hendriks explains. In this version, the so-called ‘backers’, people who donate, put in a certain amount. In return, they either receive the product at a later stage, or, for example, get a discount code as a reward.
“Basically, you validate your idea with reward-based crowdfunding. You put it online. If it catches on, then funders will come. If not, you’ll know that right away.” A kind of community is created, Hendriks notes. “It’s a very effective way of marketing. You get fans and you also instantly have your first sales.”
Balance of power
“The main problem with crowdfunding is a skewed balance of power,” Hendriks says. On the one hand there are the ‘backers’, on the other, the ‘creators’ – the people who run the project. “The ‘backer’ gives their money. But then they don’t have any rights. All they can do is hope that they will receive the product. There are no regulations from the government, for one thing. So, it can lead to fraud. A ‘creator’ can just take off with the money.”
Then there is also the problem that ‘creators’ are often not very good at esitmating the target sum, the student goes on to say. “There are always setbacks. How do you take that into account in your estimate? And it’s incredibly time-consuming to set up a good crowdfunding campaign,” Hendriks maintains. “Sometimes ‘creators’ spend two months on campaign preparations. That takes a lot of time and money. Then they only have access to the money once the campaign has ended. Sometimes these kinds of campaigns and preparations take up to three months. They actually end up wasting time by not being able to access their money.”
Hendriks also wants to use the new crowdfunding platform to improve the accessibility of crowdfunding. “That people who are not as handy can also create a campaign more easily with clear and structured pages. So that they can quickly set up a campaign and learn from other creators in the process. And create a community where it’s not just about the scramble for money. We also want to actively involve the backers in the project.”
For the sake of that last point, the ‘backers’ are given voting rights. This means that they have to make themselves heard and actively contribute ideas, Hendriks emphasizes. That voting right must also serve to stimulate the entrepreneur’s drive. “A ‘creator’, for instance, can access the money sooner. That way, they can get to work on bringing their product to market more quickly. The majority of backers must subsequently agree to that.” These should not be endless discussions, according to Hendriks. “Because of the voting rights, the backers are involved and the creators have got to show that they really believe in what they are doing. A relationship of trust is created. If a ‘creator’ makes a mess of things, the backers will pull out.”
Under the hood
The platform runs on blockchain. “Something that happens under the hood. The future of blockchain is huge. You can apply it in business processes in dozens of ways.” All transactions are automated without intermediaries like a bank. “And the money is available 24/7. When a bank intervenes, it sometimes takes a day. Even longer internationally with higher costs.” Blockchain also heightens security, Hendriks points out. “No one can change the contracts on which the campaigns run just like that.”
As to when the platform will go live, Hendriks can’t put a date on that yet. “We want to do it right and carefully in one go. If that means it will take a long time, so be it.”
Six months ago, Hendriks and Fundle decided to join TU/e’s Innovation Space, an open community where students, student teams, student entrepreneurs and researchers, together with companies and civil society organizations, all work in interdisciplinary teams on the challenges of today and the future. The pair comes into contact with experts from the business world through the Innovation Space’s ‘GURU program’ where they give them feedback and help them move forward.
Read more about Innovation Space here.
Hendriks and Snakenborg are ready for the next step: Finding funding to complete the platform. Their dream? “That we establish ourselves in the mainstream world. Next to platforms like Kickstarter and IndieGoGo.”
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