There’s no success in the idea economy without failure. Serial, sometimes epic failure. And yet even in today’s most innovative companies, the fear of failure is holding us back. This is the take-home message of Big Think and Singularity University’s recent survey of over 1200 business and thought leaders on “exponential leadership”––leadership for an age of exponential disruption and change.
And Chance Barnett, the founder of Crowdfunder, knows more than a little about both failure and success. He’s a tech entrepreneur who got his start during the dot com boom, and founded multiple companies that failed (and a sufficient number of others that succeeded) on the road to starting Crowdfunder in 2011.
Barnett says there’s at least one moment, and usually only one in every successful entrepreneur’s life when she realizes that a particular idea is worth pouring everything into––time, money, and total personal commitment. For him, that moment came when he realized that federal rules were holding fledgling companies back by (essentially) restricting their fundraising to people they already know. And while “rewards-based crowdfunding” sites like Kickstarter were empowering individuals to fund promising ideas in small increments, they weren’t allowing people to invest in these companies. Instead, backers would receive a reward––the product itself, or a company t-shirt, for example. This sometimes resulted in ill will, as in the case of Oculus Rift, which raised its initial capital on Kickstarter, then sold itself to Facebook for $2 billion, not a penny of which went to its Kickstarter backers.
I don’t think that crowdfunding and equity crowdfunding should disrupt and replace VCs. . . . However, I am a strong believer that over the long term distributed technologies, automation can really scale beyond the limits of what humans can do and start to do a lot of the more rote, mundane or analytic jobs a lot better.
Barnett founded Crowdfunder as an “equity-based crowdfunding site”, which allows individuals without the millions available to venture capital firms to own a piece of a promising idea. Essentially it spreads out the risks and the rewards, empowering bold new ideas to take flight. And should they crash and burn (as many new ventures, no matter how promising, will), the loss is widely distributed. Barnett and his company not only saw the need––they fought to shape the federal JOBS Act legislation and regulations that made it possible.
The idea of mitigating risk and thereby creating the conditions in which failure is not the end isn’t anything new in technology entrepreneurship. Venture capitalists are careful to spread out their investments, balancing calculated risks and safe bets through careful research and “incubation” of new companies. What’s different about Crowdfunder is that it opens up entirely new streams of funding that aren’t concentrated in the hands of a few VC firms, and therefore aren’t subject to those firms’ particular quirks or tendencies. It isn’t a substitute for venture capital, but it creates new avenues for failure and success, and paves the way for industry and life-changing products and services that otherwise would never have seen the light of day.