Transparency as part of the distributed financing model

Published on 10/22/2010 - Crowdfunding

Contributors: Platoniq

Related with: Goteo, social network for distributed financing and creative credits

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"For many people, the experience of art is shaped as a final product. Generally, the artist's process remains invisible to the viewer and, frankly, this is one of the reasons that leads the public to think that art is merely a talent, not a job or a learned quality. Our intention was to bring this process to art lovers and fans of the artist. So we created the function 'Studio' in Society6. Supporters and partners can enter the virtual studio of the artist, where he/she can share both the process and the final result. If they take part on the development of artists and their work, we think we will increase the level of appreciation for both. (Interview to Society6 co-founder Justin Wills).

Similarly, transparency understood as clarity ( in which the applicant must explain its initiative to achieve the necessary economic goal) is also crucial in crowdfunding. Given the speed at which these platforms continue to multiply, and the large number of proposals that each shelters, crowdfunding culture has had to adapt to its own environment a key resource of the traditional business sector: the idea of the "elevator pitch". Wikipedia defines it as: "The concept was created with the purpose of naming the speech necessary to explain briefly (the time of an elevator ride) everything about a business, company to those interested in the project are aware of the issue, investors, entrepreneurs, shareholders, customers, etc.. "The elevator is obviously a rhetorical figure, which symbolizes the brevity of speech (usually between thirty seconds to two minutes). Thus, in the context of a network to exchange ideas / investments such as Goteo or any other crowdfunding or microfinance platform, an elevator pitch is crucial to communicate an idea of the most effective possible way in the shortest time.

In recent years, the MIT holds an annual Elevator Pitch Contest in which students and researchers from various departments can briefly present their idea to a panel of invited investors to get the financial support they need. Tim Rowe, inversor, MIT Elevator Pitch Contest judge and member of the Cambridge Innovation Center explained in an interview why he launched the initiative "if you walk through the halls of an institution like MIT, it's easy to find a teacher with a visitor, perhaps a venture capitalist. The teacher introduces you to the investor and he/she tells you that he/she is looking for ideas in which to invest. This is your moment. Scenes like this occur literally every day. If what you're interested in is purely making money, you will probably end up in Wall Street. But if you're hunting for ideas in the halls of MIT, and in meetings with the director of the chemistry department, chances are you're the kind of person that besides economy is also concerned with the resulting product." Rowe's speech referred to the stereotypical profile of investor that can go to one of these events. As in other areas (the case of Wall Street that Rowe mentions, for example) getting close to a particular platform in search of projects is in fact a declaration of principles in itself, an indication that the investor not only wants to buy or invest in a potentially lucrative idea but also to associate their capital to a particular concept.

In the case of a center with the MIT trajectory, or a project that seeks to enhance the fields of cultural/technological and social innovation as Goteo, it's easy to think that the profile of people interested in contributing collectively to an idea through donations is closely tied to some ideal of progress, advancement and social innovation. The key to this model is undoubtedly in connection with investors. It offers the opportunity to become actively involved, albeit by small amounts of money in an initiative that identifies potential investor as an interesting, rewarding and dignified cause.

Since its inception, the open source movement (one of the potential nodes of the user network Goteo) has based a great part of its strategies in collective and cooperative development. One of the major obstacles for many communities structured around open source initiatives in areas as diverse as web applications, artistic creation, business solutions, etc. remains the initial funding and its continuity for the initiative.

An interesting case study in this aspect is Joomla!, a popular content management system released under a GPL license. Joomla! emerged in 2005 from an amendment to a previous project called Mambo, owned by the Australian company Miro. It proposed to manage the project through a nonprofit organization, but the Mambo development team protested, claiming that the legal basis of the new organization violated the values of open source which until then had been the basis for its development. By creating the web page, developers presented the situation to its community of users, designers and others involved. During the following weeks, with the support of thousands of individual users and the Software Freedom Law Center, the community grew to the point where it dissociated completely from Miro, leading to Joomla!, derived from the English pronunciation of "Jumla" ( "together") of the swahili word. During the first year of Joomla! existence, the system was downloaded 2.5 million times, and five years later is still very popular.

The originating process for Joomla! is a good example of how a community of users using a network platform to exchange information about the project, collectively organizes a change of direction and support to an initiative they trust and believe in. Even more, by creating the community grew, attracting users interested in the open source philosophy. A platform such as Goteo could act as a distributed financing solution for groups that require the support of a particular community. But it could also lead to a synergy between these communities of users of various projects, united by a common interest beyond specific initiatives, and act as an umbrella for uniting active groups, developers, citizens, users and agencies in adjacent areas of cultural, social or technological innovation.

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