Why every entrepreneur should invest in 'crowd capital'

We are living in an age of abundance - wealth, information and opportunity. The problem is that there is uneven distribution and hence the economy is inherently unstable. How can we sustain economic growth in such a climate? Through crowd capital.

The Oxford dictionary defines capital as: "wealth in the form of money or other assets owned by a person or organization." To most, crowd capital sounds just like crowdfunding. But it is not just about crowdfunding. Crowds and communities provide more than funds which are turning out to become the building blocks of the new economy.

Analyst and strategy consultant Barbara Gray explains that "blue ocean" of opportunity meets the "long-tail" demand to create sharing economy giants like Airbnb and Uber - and economic abundance. I call this crowd capital, where value for a more robust economy and outlook is created. Let’s take a look at the current scenario.

What is the "blue ocean" of opportunity?

In her article, Gray references authors W. Chan Kim and Renee Mauborgne and their book 'The Blue Ocean Strategy: How to Create Uncontested Marketplaces and Make Competition Irrelevant', that calls for a different business strategy using technology to create vast "blue oceans" of opportunity in untapped markets. How do companies create blue oceans of opportunity?

Read: 10 innovations that are transforming the sharing economy

Not through tightly regulated corporate structures and regulation. This is possible through technology of course but also through a democratic approach to business that hands-off more power to users and consumers - a key feature found in the collaborative platforms like Airbnb or Uber that are easily expanding into regions projecting huge markets for growth.  

What is the "long tail" demand?

The long tail of demand refers to the unique, uncommon but numerous instances of specific consumer demand that emerges when consumers are offered almost unlimited choice and personalization.

With the new collaborative and crowd economy, business platforms are catering to individual needs, choices and demand and focussing on this long-tail demand, previously restricted because using limited retail space to cater to short instances of unique demand did not make economic sense. This long tail demand detailed in Chris Anderson’s book 'The Long Tail', is fueled on the supply side by democratically availability of assets, time and finances.

Here’s how crowds are building capital and laying the foundation for a different but more democratic economy.

1. Crowd capital through crowdfunding

As I’ve written many times in my publications, the crowd has more money that Carlos Slim or Apple. The crowdfunding initiative on Greece bailout is a sneak preview of what a concerned citizen can do to empower the crowd to participate in solving a political-economic problem.

Read: A brief history of crowdfunding

Crowdfunding isn’t just a trend or movement or initiative. It is a disruptor that’s empowering even the average citizen to manage and seek finances without banks for credit, angels for seed funding or VCs. According to the latest report on global crowdfunding, Asia has slightly surpassed Europe in terms of crowdfunding volume. And Europe’s alternative finance market could reach €7 billion in 2015. Incumbent finance and banking sectors and policymakers across Europe are being prodded to take action. Once again, innovative business and people in need of credit (long-tail of demand) that were not previously on the target list for banks and VCs are meeting the "blue ocean" of opportunity through crowds.

Crowd capital through blockchain

Quoting Stacey Higginbotham on Fortune, "..as our economy becomes more digital and distributed, we need tools that can scale and still offer accountability. Blockchain does that." Bitcoin is powered by a recordkeeping system, known as the blockchain, a distributed ledger that can be used to track transactions.

Crowd currencies, powered by democratic protocols like Blockchain will become part of Europe’s financial systems in the future because of the value they bring in terms of transparency and innovation. The Euro Banking Association (EBA) says blockchain technology has the potential to reduce costs, improve product offerings and decrease transaction time for banks, even saving them up to $20 billion a year. In the case of blockchain, again, the "long-tail" demand of banking access and almost real-time transactions is powered and verified by distributed entities, a "blue ocean" of resources.

Crowd capital through asset sharing

Global populations are interacting and creating value on collaborative platforms creating value, providing access and sharing resources. This is crowd capital. The crowd economy is a dynamic ecosystem of productive people who participate through a platform with a purpose to achieve mutually beneficial goals. Barbara Gray points out that hugely successful companies on the collaborative economy are bringing together the "long-tail" demand and “blue oceans” of opportunities - and this again creates crowd capital that boosts economies. Local economies do not need an Uber or Airbnb to create crowd capital. Home-grown solutions can create impact, with the right support from innovators and buy-in from government.

Crowd capital needs to be considered as an economic stabilizer

2.5 Billion people will connect to the Internet in the next five years. Connectivity can help fuel crowd capital as more people get online. This a no-brainer. But are we ready? Discussions on the crowd or collaborative economy that include innovators, policymakers and regulators must perceive crowd capital emerging from the on demand, digital platforms and adopt a long-term view of the benefits. 

Crowd capital is democratic capital that helps billions take ownership at the macro level. Rather than relying on the top one per cent for economic stability, we are looking at billions helping to create a more robust financial ecosystem through collaboration.

Epi is actively involved in bringing the most relevant content on the crowd economy, social enterprises, start-ups to Crowdsourcing Week’s European Conference, CSW Europe 2015, taking place in Brussels from Oct 19-23. Follow all the action #CSWEurope15

This is a guest blog and may not represent the views of Virgin.com. Please see virgin.com/terms for more details. Thumbnail image from gettyimages.


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