It’s the latest spin on crowdsourcing: if venture capitalists and business angels are thin on the ground, low on funds and hard to access, why not appeal to the general public to back your start-up?
Crowdcube claims to be the first website to link would-be entrepreneurs with a host of potential non-professional investors. It’s a variation on the theme of peer-to-peer borrowing and lending sites, such as Zopa and Kiva, sites like Kickstarter where people club together to back creative projects, or Grow VC which provides seed funding for start-ups.
Via Crowdcube – which operates under the rules of the UK Financial Services Authority - members of the public can buy shares in a start-up for investments of as little as £10.
After having their credentials checked out by the operators of the website, would-be entrepreneurs showcase their business and investment potential by uploading a video of their elevator pitch, along with images and technical details of the product or service for which they want backing.
Every citizen is a potential innovator
This development should be of interest to Members of the European Parliament (MEPs) on the Industry, Research and Industry Committee (ITRE), who this week voted in favour of a report on the Innovation Union programme and called on the Commission to boost creativity and encourage greater risk-taking.
According to Judith Merkies MEP, author of the report, “Every citizen is a possible innovator.” She is pleased then that ITRE has called for action to promote citizen-centred innovation. In ITRE’s formulation, this will involve boosting excellence in education, bringing social innovation to the workplace and supporting businesses in taking a more open-minded approach to risk.
As Merkies notes, “Innovation is not just about technology. It is also about more dynamic workplaces [and] about empowering employees to improve processes.” She proposes a one-stop-shop to make it easier for all innovators – and especially small start-ups - to access finance from European Union support programmes.
But there is evidence in a study of 160 Italian high tech start-ups published this week1 that such an ‘If you provide the resources, they will innovate’ model is too broad brush to be effective. The companies in the study are all academic start-ups, formed between 2000 – 2005 in response to new incentives which in many ways mimic those that Merkies now wants to provide for citizens at large.
Growing in a protected environment
New rules made it possible for academics in Italy to take leave of absence to set up companies to commercialise their research. In addition, the rules covered the supply of services needed to support spin-offs in the period immediately after they are established, giving fledgling companies the opportunity to grow in a ‘protected environment’ thanks to free services provided by the home institution, and access to staff and research facilities free-of-charge, or at less than the market rate.
But as Donato Iacobucci and colleagues at the Polytechnic University of Marche in Ancona describe in their study, changing the rules to make it easier for academics to set up companies, and providing free or low-cost resources, does not of itself overcome the huge difficulties spin-outs face in transforming an initial idea or piece of research, into a wealth-creating and sustainable business.
Iacobucci’s analysis points to many obstacles, but the chief of these is a lack of the entrepreneurial drive and zest that is needed to match the technical expertise of academic founders.
This – one suspects – is the same obstacle that stands in the way of Merkies’ vision of every citizen as an innovator. All start-ups need an entrepreneurial figure who is fixed on the task in hand – not an academic interested in having a go but still hung up on publishing research papers, or a citizen-innovator still trying to do the day job.
As Iacobucci concludes, “Entrepreneurial motivation is crucial.”
So of course, there needs to be an ecosystem that supports innovation, but it should incorporate mechanisms to ensure resources are targeted on those best able to deploy them.
And maybe convincing the general public to take a stake in your business via crowdsourcing should be the number one qualification for anyone seeking taxpayers’ support to commercialise an innovation.
Reference1 "Fostering entrepreneurship in academic spin-offs"
Donato Iacobucci, Alessandro Lacopini, Alessandra Micozzi and Simone Orsini
in Int. J. Entrepreneurship and Small Business, 2011, 12, 513-533