It is estimated that there are currently tens of thousands of displaced entrepreneurs living in Europe right now. While we see the emergence of incubators and start up ecosystems springing up across the continent, the challenge of raising start up capital holds many entrepreneurs back. Traditional funding, such a banks and venture capital, remain out of reach for displaced entrepreneurs. As crowdfunding is a multi-billion dollar annual market and growing, it’s time to focus on how this technology can improve lives and create solutions to transform this challenge into an opportunity.
Crowdfunding can be a viable solution, but only if its done right. Many people are aware of the potential for crowdfunding, the practice of funding a project or venture by raising many small amounts of money from a large number of people, typically via the Internet. However, pros and cons of how the system works must be considered, especially when taking refugees into consideration.
While keeping the logistics of crowdfunding in mind, we must acknowledge the other challenges to be overcome, including regulatory hurdles, such as governments blocking economic opportunities for the displaced. Crowdfunding supersedes many of these barriers due to its grass roots initiatives. However beyond access to finances, refugees must be given external, support and specific trainings to develop skills and businesses in the new market, such as local business practices and marketing.
Let’s take a look into the pros and cons of crowdfunding to gain a deeper understanding of how this can be a useful tool for long-term empowerment and financial stability for displaced persons.
First off, crowdfunding has lower risks than government loans, microfinance — which has a corruptive history in much of the developing world — and non-profits, which consume a high percentage of the donations received for their own financial support. Crowdfunding is low-risk because it requires a very low investment to start the campaign — you do not have to fulfill the project unless you receive adequate funds, which means there is no obligation for refugees to exceed the personal capabilities.
Crowdfunding also means increased exposure, via the handy tool of the internet. However, with increased exposure often comes sensationalized media stories. At this point, is is critical to acknowledge as someone supporting a campaign which projects are feasible and which ones only intend to promote a certain self image in need of help. Exposure of a crowdfunding platform can help spread your idea, but this also means unique ideas can be consumed by larger project platforms and stolen from the hands of the refugee who might not possess the autonomy to fight for creative rights.
Consequently, crowdfunding platforms can only build momentum with stable access to technology and the internet. Access to the internet makes it easy to set up and launch a campaign even if you’re technically-challenged, but you must also have a sustainable way of accessing the internet and the skills required to properly market your campaign. What sets crowdfunding apart from other donation based fundraising efforts though is that it does not require knowledge of methods typically used in online funding, such as payment processing, HTML, or the creation of an online store, as the crowdfunding platform acts as an intermediary to these assets.
Using crowdfunding online also allows you to tap into a larger audience, helping you discover potential backers that otherwise would not have known about your idea. Over 12 million people have previously backed a Kickstarter campaign, and the familiarity with the idea of crowdfunding cities makes people more comfortable donating their money to a cause. Thus, crowdfunding can be leveraged as a community-building tool.
Much of the popularity of crowdfunding can be attributed to social media usage and people’s desire to help an individual story rather than attempting to conceptualize a complex idea. The community support of crowdfunding on social media also makes it fun, as most sites allow you to share the projects you support with your friends. Because there is a lot of excitement around the launch and success of a crowdfunding campaign, this contributes to a positive connotation of the people launching the platform, something that will help break the negative stigma of our new citizens.
One economic benefit to consider, that could be seen as both a pro and a con, is that crowdfunding campaigns do not give supporters equity in the project. This allows crowdfunding objectives to stay in the hands of the people creating the project. However, it deters larger investors of putting their time and money into an idea if there will be no direct financial return. The more control over a company or product the entrepreneur has, the better they will be able to decide the projection of growth for the idea and who they want to benefit from it, whether that be their community at home or their families afar.
By providing small scale finances to refugees and host communities, crowdfunding aims to facilitate the lost potential of displaced persons as entrepreneurs, positive investments that will benefit your community in various ways. With social entrepreneurship on the rise, crowdfunding for refugees will be able to gain significant traction and success, and the possibilities for empowering entrepreneurs are endless.