They hit this at the perfect time. Anti-Facebook sentiment over privacy issues recently hit a crescendo and they got some great press on the NY Times blog DealBook. I had the same thought as Jason Fried that these guys may, in fact, be hampered by this huge windfall. It’s too much money for 4 guys with no experience for a summer internship. Wouldn’t the money be better spent on different teams working on several pieces of the distributed social puzzle? (New term alert: “distributed social”. You heard it here first. Maybe.)

I bring this up on Co-Innovative because it demonstrates the amazing power of Kickstarter; to promote, distribute, and collect funds for a project. As I wrote back in October, Kickstarter is a killer platform. Further, a completely centralized network such as Facebook will not survive long term as they exist today, and neither will Twitter. Diaspora is a brilliant marriage of these two concepts. I’m looking forward to whatever these guys produce. Who knows, maybe in 3 years it will evolve into a Facebook killer.

The Power of Crowdfunding: Diaspora is a post from: co>innovative

Buy A Beer Company has secured $214 million in crowdfunded pledges to buy Pabst Brewing
Pretty amazing feat: 2 ad agencies got together to raise the $300 million necessary to buy the fine purveyors of Pabst Blue Ribbon via crowdfunded pledges. In return you get, essentially, the amount you pledged in beer. I question both the legality of this as well as the liklihood that if the total number is reached, pledgers will actually make good on their commitment. However, I still love the idea. If you can’t get enough of open sourced beer, a couple of years back Flying Dog created a crowdsourced beer. You can also make your own using the recipe and label for the open source “Free Beer”.

ThrustFund: A speculative, crowdsourced loan for social entrepreneurs.

Thrust Fund Entrepreneurs are looking for support to put their current ventures on paths to sustainability and to support them as they pursue new ventures. They are matched to Thrust Funders who are looking for meaningful opportunities that pay both social and financial dividends. Thrust Funders don’t acquire a portion of the Entrepreneur’s venture, however. The terms are individualized based on mutual trust and respect.

In exchange for providing funding for a social entrepreneur, you receive, generally, a percentage of the entrepreneur’s earnings over a period of years. Kooky? Yes. Risky? Yes. But also potentially beneficial to the world, so it’s got that going for it.

A new way to buy furniture with MyFab
MyFab squeezes the inefficiency out of the furniture supply chain using crowdvoting to determine what to make next. Only the most popular items are made available for pre-ordering and after a set period, myfab puts in an order for the exact amount preordered by customers. Items are then shipped directly to customers with prices for shipping ranging from $15 to $99 for a sofa (which sounds like a pretty sweet deal). They are only available in CA and several European countries right now but have plans to spread to the rest of the US soon. Not only are they perhaps filling a need for well designed products that customers wouldn’t have been able to get otherwise, but also selling these items hyper-efficiently leading to very low costs.

March Crowdsourcing Odds and Ends is a post from: co>innovative

Each of these “crowds” (and there are surely others) has its own unique characteristics and its own unique strengths and weaknesses. Some crowds, for instance, gain their usefulness from the individual talents of their members. Others (notably the “averaging” sort) gain their usefulness by essentially filtering out those individual talents.

I would also add what I would call a Resource Crowd, which is represented best by crowdfunding platforms such as Kickstarter, Kiva, and IndieGoGo. These platforms aggregate small amounts of money to accomplish a fundraising goal to complete a project. They allow for participation in the funding of projects that might be far out of reach for the average contributor while also providing the funding necessary for a producer that may not have been able to raise funds before such a platform. The power is in the aggregation of small contributions by a large crowd.

Crowds come in many flavors is a post from: co>innovative

I put the idea on the back-burner and, thankfully, Kickstarter read my mind and began working on what they launched a few months ago which is an almost perfect manifestation of what I had envisioned. (I also wrote a general overview of crowdfunding with a ton of examples back in June, 08. Here are more examples over at the crowdfunding wiki. If you don’t like the term crowdfunding, perhaps you would prefer “collective ex-ante fundraising”.) Creators have long had the option of posting a paypal link and begging for money, but this provides the infrastructure and eases the process along with much more powerful tracking tools available.

How it works:

1. Post a specific, potential project, listing available pre-order/pledge levels
2. Set an amount to be raised and a deadline
3. Promote to your fans and wealthy friends.
4. If you hit the amount raised before the deadline the project is a go, otherwise, you don’t get the money.

Check out what appears to be the largest fund-raising projects so far: a book called Designing Obama. Looking to raise $65K and so far have made it to $42K.

Now, there is a certain amount of trust necessary in this process. Kickstarter writes: “Project creators are wholly responsible for their promises. Kickstarter is a venue, like eBay or Etsy.” In the early stages, I would imagine this won’t be a much of a difficulty, but it will be something to look out for. But, in the end, most of the people pledging will either know or know of the person/group and will have some kind of existing relationship with them. That or the projects themselves will be so clever or worthwhile that people with no connection will pledge as well.

So, how is this an innovation?
Fans/customers:

Feel a part of the process, a deeper connection with the project creator.
Can help make a project possible.

Project creators:

Get access to capital and some way to survive while they work
Get real feedback on the desire of supporters for a particular project, measured in cold cash
Decrease the risk of a project: if you have essentially pre-sold the first run of your project, you’re much farther along

Just as microfinance provider Kiva allows for the direct, small, impactful loan between individual and entrepreneur, so does this allow for the same in the form of a pledge/preorder.

It’s just amazing when something of value catches on and people pile on to provide funds for a worthwhile project that would likely have never seen the light of day, but for crowdfunding. And the best part is, usually, you have something to show for it: a book, an album, an event to go to, or a good deed done.

Need money for your project? Crowdfunding comes of age with Kickstarter is a post from: co>innovative

Help Obama prioritize and solve problems with the Citizens Briefing book: Of course, it’s inauguration week, so how could I resist? Leading up to the transition (and going forward, I assume) the Obama administration has set up the Citizens Briefing Book on change.gov which allows you to suggest ideas and priorities for Obama and vote on the best ones. These will be compiled and presented to the President. Regardless of whether it turns into something of substance or not, it is a great example of what I discussed in Part 3, the Digital Suggestion Box. As with any of these efforts whether it be from Dell, Starbucks, or Obama, the impact this technology will have depends on how whether it becomes a useful, two-way conduit of information. Are popular measures acted upon or, at the very least, responded to? (Case in point: the first and third most popular ideas with 16,000 votes involve relaxing or doing away with marijuana prohibitions.) And is the tool effective at surfacing quality?

Crowdsourcing classifications: via MadeForOne, Scott Klososky at TechnologyStory lists his view on classifications of crowdsourcing:

Voluntary vs. Involuntary
Social vs. Commercial
Rewarded vs. Unrewarded

CoInnovative Roundup: 3 Odds and Ends to check out is a post from: co>innovative

Extremely cool and definitely effective, Crowdfunding is a viable application of these principles. Of course it is: it’s been going on for centuries via investing in companies and projects — but now it’s so much easier and transparent of a process. No longer focused on commercial enterprises, any enterprise in need of funds can connect the long tail of people interested in a particular topic, play, artist, film, event, political candidate, even a niche knitting and crocheting site to bring together small amounts of money to raise what is needed. Raising money from fans to record an album, for example, would have been prohibitively difficult in the past, but now a band can easily offer free downloads, take payment, show progress, and keep fans abreast of developments.

And this extends beyond simply an alternative for funding but can also be applied in untold new ways. Case in point: what about crowdfunded investigative journalism?

Verdict: Viable and ripe for experimentation.

Examples of crowdfunding:
Album recordings and band support: Sellaband, ArtistShare, SliceThePie, VIP Band Manager.
Soccer club takeover: MyFootballClub
Fashion: Catwalk Genius, nvohk,
Community funding: Liverpool Culture Cafe.
Creating a film: A Swarm of Angels, Its Our Movie, FilmRiot, IndieGoGo,
Content creation: Countless blogs seeking donations, Ze Frank, Fund A VLog, Democracy in America.
Loans: Prosper, Kiva, Zopa, Lending Club.
Brewery Funding: BeerBankRoll
Journalism: Guerrilla Journalism Fund, Assignment Zero
Software: MicroPledge
Political fund raising: ActBlue
Music festival: Tennents Mutual
Tools for crowdfunding: Crowdfunder, FirstGiving, BountyUp, Fundable, Global Giving
VC decisions: VenCorps

Resources:
Crowdfunding Wiki
P2P Foundation
Know The Music Biz

Read previous parts:
Part 1: Figuring out crowdsourcing: What does it mean? What’s working? What isn’t?

Part 2: Crowdfunding, Investing and Donation 2.0 is a post from: co>innovative

So, let’s set out with a few of the current names for it and related concepts that feed into it:

The overarching themes revolve around: Crowdsourcing; Outside Innovation; Innovation Networks; the Wisdom of crowds; and Customer co-creation.

These larger initiatives are supported by: Web 2.0/Social Computing; Mass Customization; the Long Tail; Open Innovation; Peer production; Prediction markets; Voting and ratings; Competitions and prizes; Lead users; Transparent business practices; and Democratized content creation and distribution.

(Don’t forget, Sami Viitamaki has a pretty generalized but effective take on how to think about Crowdsourcing in particular with his FLIRT model.)

So, going forward I am going to touch on a variety of topics that will hopefully clear things up a bit. Some of the topics I will cover:

• Crowdfunding
• Prediction markets
• Crowdsourcing: Graphic design
• Customer co-creation and crowdsourcing: New product development
• Home Fabbing and Crowdsourcing: Physical product design and development
• Crowdsourcing: Content creation
• Crowd feedback; or, Business starts to listen
• Crowdsourcing: Problem solving
  
• Many hands make light work: The atomization of work resulting in the completion of massive jobs.
  
• Crowdcooperation
  

All of this stuff is connected somehow, is undergirded by similar philosophies, tools and technology, and methodologies — and I love geeking out about it. There are some powerful changes hidden in all of this and, while many of the concepts have been with us and operating for some time — centuries even — only recently has a confluence of developments led to the ability to really harness it all.

Part 1: Figuring out crowdsourcing: What does it mean? What’s working? What isn’t? is a post from: co>innovative

A friend of mine asked recently whether this crowdsourcing stuff works; if I could point to a single product that had resulted from “crowdsourcing”.  The answer is yes and no.  It depends on what you’re talking about.  Is it potentially overhyped? Absolutely. Is there one monster “Crowdsourcing Success”?  No.  Are there projects out there that are attempting to leech off of the crowd for their own gain? Yup. (I like to call these “failures”.)

It’s not a magic bullet and it definitely won’t replace a vast majority of processes for product development/design/refinement or classic freelancing/outsourcing work. But it’s an alternative, niche way to develop things and get certain things done.  (Crowdsourcing has become an umbrella term to describe a whole bunch of crap going on, so it’s a bit of a fuzzy term, similar to Web 2.0.)

But there are tons of examples of various areas that have been successful that can be called crowdsourcing in one way or another:

Open source:
No examples necessary.

Funding:
Sellaband, crowdfunding of several album recordings.
A Swarm of Angels, crowdfuding and voting to create a film.
SliceThePie, funding, investing in bands
Prosper: P2P loans

Graphic Design:
Threadless, awesome tshirt designs submitted and voted on by anyone. Top 7 get made each week. I think their revenues are like 20 or 30 million a year.
Sitepoint: this is more of a design contest, you post what you want and how much you’ll pay. Dozens of people submit designs and you pick your favorite. Still, it’s crowdsourcing.

Product enhancements and new product development:
Dell’s Ideastorm, customer suggestions for new products and enhancements
P&G Connect+Develop, throw your ideas/products over the P&G wall and see if they want to buy it
Lego Mindstorms Community,

Writing:
Assignment Zero, crowdsourced research and interviewing for a Wired article

Small tasks done by many people:
Amazon’s Mechanical turk.

Complex scientific/chemistry/engineering problem solving:
Innocentive, used by large companies, post a complex problem, put a price on it, and open it up to people. This has been pretty successful.  Companies get to tap into resources that they don’t have internally.

Just plain crazy:
MyFootballClub: crowd ownership and control via voting of a soccer team in europe.
Tribewanted, crowd voting, building, eco-tourism Fijian island vacation. I highly recommend it.

Yet to be proven
Crowdspirit, consumer electronics development, which is probably the closest thing to what you’re envisioning.
Cambrian House, focused on website/software ideas and creation: a good example of a ton of talk with little to show for it from what I can tell.
Kluster
Spigit

And, of course, there are myriad closed, high-powered, complex collaboration platforms that allow people to interact across teams/geographies to design and engineer complex equipment.

In terms of Kluster: Ben Kaufman’s first company was called Mophie and they did actually use many crowdsourcing/outside innovation concepts to develop real, successful products (specifically iPod accessories).  At Macworld last year, they had an intense, in-person version in which people submitted ideas or drawings, these were voted on, etc, and by the end of the event Mophie’s industrial designers had created a CAD mockup of the most popular designs/ideas.  They took preorders and then eventually sold them as real products.  They are taking that core concept and creating a platform for anyone to do it, digitally.  And they also had in place an early version of kluster that was actually used successfully to create products called Illuminator.  (They did a similar thing this year at TED.)

Bottom line: the basic philosophy has been applied in many cases successfully, but it is still a nascent idea that hasn’t been fully worked out yet.  (Not to mention that there have been and will continue to be many failed attempts and companies who attempt to exploit the crowd for their own gain, which will fail as well.)  Sort of reminds me of the early days of search: search engines were largely crap dependent on just counting the words on a site to see if it was relevent, then, of course, people just repeated the word they wanted to be top search for over and over again. It wasn’t until Google came in with PageRank that search took a drastic leap forward: the signal to noise ratio went way up.

(On a side note: the concept of lead users http://en.wikipedia.org/wiki/Lead_user has been around for 20 years and successful harnassing of lead user innovations for the creation of real products is well documented.)

The thing that really intrigues me about kluster is: can you create a platform that can hit the required scale and quality of participation and actually create a marketplace (with real money involved) in which users are rewarded for their creativity and judgement (both intrinsically, because they are interested in it and want the products, and extrinsically, financially.) They need to: get scale and quality of participation and have a high signal to noise ratio.  My thought is that they should focus on a more narrowly defined category of goods, instead of such a wide range.

Three main points:
1) This is not magic. It still requires the hard work of individual people designing, engineering, innovating, and — my new favorite word — ideating.

2) It’s difficult to do right.

3) And most important: There is a vast difference between tapping into the innovation and ideas of your most passionate customers and attempting to incent outsiders to contribute who do not have a stake or love for your product. Projects that will most readily succeed are those that tap into passion that already exists rather than attempting to create it via incentives. 

– If you have any other examples of successful crowdsourcing-ish implementations, let me know and I’ll update the list.–

Spigit: Kluster for the enterprise… and will all of this crowdsourcing stuff pay off? is a post from: co>innovative

What you can do:

• As a FAN: essentially start a label with a portfolio of acts (albeit, owning just a portion of those acts); get paid to review music, finance new artists; get to know artists and be involved in the creative process; trade in artists by buying/selling contracts.
• As an ARTIST: submit 3 tracks, then get 30 reviews. The 20 best rated artists go to the Showcase, by getting fan support they recieve 15K pounds to finance recording of album and they get to keep control of copyright
• As a TRADER: buy and sell artists contracts, make money when the artist does; build a portfolio of great acts and help promote them.

Of course: will it work? And will it help ferret out good new bands? Who knows, but it’s friggin cool. The main issue is whether they are able to hit critical mass. An illiquid market could get pretty boring. And without enough activity on the site, they won’t be able to finance new acts.

It’s definitely a cool alternative the regular route 0f impressing (and then being beholden to) a few head guys at a label. The great thing about all of these tools and online services is that it puts the power much more squarely in the hands of the artists and the fans. It becomes much more of a meritocracy.

Here’s an example of a band that just won 15K in the showcase.

(I wonder how many bands without label support have a full time or contracted online promotions guy to manage these various contests and social computing sites….)

Invest, trade, and promote bands on Slicethepie is a post from: co>innovative

Itsourmovie.com is another example of a new way to finance movies (or anything really). Similar in concept to A Swarm of Angels — though, it seems, much more likely to produce something of quality — It’s Our Movie begins with a script and director (Alex Jovy, nominated for an oscar for a short film) and looks to the crowd for funding, audition tapes, and feedback. They have apparently raised ₤121,970 from the internet, but since the film is fully funded, they must have gotten the rest of the ₤1.2 million through a more traditional route.

It’s Our Movie gets right what A Swarm Of Angels does not: it is extremely difficult, if not impossible, to take inputs from untold hundreds and thousands and create a coherent creative output, which is what ASOA is attempting to do. The crowd CAN identify quality outputs fairly well and can also produce quality outputs as individuals, but collaboration through the web is not conducive to voting or pulling together a script, for example, as ASOA has attempted. Alex is an experienced director, has control of the project, has done the difficult work of creating the script, and is simply using the crowd’s input wherever it is best suited.

Can’t wait to see what these two projects produce.

Crowdfunding and crowdauditioning a film is a post from: co>innovative