New business models don’t necessarily mean no people advisors; they just change the kind of advice people need in the future and we are beginning to see a thin outline of a new financial service market.
The other day, I participated in an event ”Unlocking the secrets to raising millions on Indiegogo and Kickstarter” at Google’s London Campus in Bonhill Street in an area where new business ideas are constantly devised and coded by disruptive startups. The speaker was a young woman from Toronto, Khiersten Ross, and even though she hadn’t understood the value of the British Pound yet, over the last couple of years she had helped numerous young entrepreneurs to raise more than 4 million dollars on the two crowdfunding sites Indiegogo and Kickstarter. Khierstyn is a “crowdfunding advisor”; when other entrepreneurs her age are short of funding for a project (they don’t go to the bank anymore) they call on experts like her to help them get the money. Crowdfunding took off 6 years ago but is already an established funding procedure for thousands of small businesses developing cultural project or making physical products like “a padlock, which opens when it recognises your fingerprints.”
Before 2010, when Kickstarter was the website of the year, an entrepreneur would go to his bank or an investor with his idea, and when he got the money he would start to manufacture, market and sell his padlock – in that order. With crowdfunding it’s different: now you start to market your new padlock when you have your prototype, and only when a sufficient number of future customers have promised to buy your padlock you start to manufacture the product. This is how Elon Musk does it too, when he sells 300,000 Tesla 3s based on a prototype. The business model behind crowdfunding is turned upside down. Finance, marketing and sales merge into one integrated process; you market your way to funding and by then the product is already sold although not manufactured.
As a crowdfunding advisor, Khierstyn Ross helps her clients to get funding as does a traditional banking adviser, but opposed to the banking advisor she also assists the client with marketing and sales. This is a new kind of financial service we haven’t seen before. In my naivety I thought that crowdfunding primarily was about getting a good idea and upload the idea with a short video on Kickstarter. Wrong! The market for good ideas is awfully crowded and you don’t just get detected by the masses. ‘Before you go live on the site you need to have the first backers in place, ́ Miss Ross explains, ‘and you also need you own audience ready on the social media’ The clothing company ThiNice failed to do that, when they launched the special wear that could help people loose weight – so they only raised $16K – far too little! Then Khierstyn took over, created a new clear avatar for the prime customer, build a new big audience on the social media, timed the campaign so ThiNice got mentioned in Kickstarter’s and Indiogogo’s newsletters and the campaign exceeded the initial goal with $600K. If you have a bright crowdfunding advisor like Khierstyn Ross who needs a banking advisor? Or what if I re-phrase the question: I you have a sharp banking adviser who knows what crowdfunding is all about and at the same time knows a lot about marketing on social media – why would you need Khierstyn Ross?
To be honest, I’m not worried about the young Canadian; she is clever and will pull it o in her new profession. I’m more worried about the two million banking advisors who will loose their jobs over the next decade according to a report from Citigroup. THEY need to redefine their jobs and get their banks get in sync with the brave new world. Fintech is in the process of reshaping business conditions for coming generations where new professions, such as crowdfunding advisers and others we haven’t thought of yet, will occupy the emerging space between finance and the customers. This new fintech-created space is expanding rapidly; Kickstarter, for instance, is now on the the top-5 list of publishing companies in America and practically all new graphic novels are now being crowdfunded; changes are coming from the bottom not the top. Banks are talking about digitisation but they fail to understand what goes on amongst millennials below their fixed radar.
An excuse for the banks to keep away may be that they know little about marketing and branding. But so did Khierstyn Ross when she set out as a crowdfunding adviser; she had a bachelor degree in biochemistry. At the moment we see a new fintech consulting market in its making and it is not being attended by the banks.
By Nils ELMARK Consulting Futurist