How The Sharing Economy Has Turbo Charged The Growth Of Entrepreneurship
28th November 2014
At Crowd2Fund, we believe that this shift is symptomatic of a wider cultural trend whereby individuals are realizing that large corporations are riddled with inefficiencies. This transition has been facilitated by technological changes which have resulted in the mass adoption of social software which empower individuals by allowing them to trade with one another, with the added benefit of minimal transactions costs. In addition, we believe that crowdfunding platforms are boosting the sharing economy by helping micropreneurs raise capital to start new businesses, and allowing citizens to democratically access investment opportunities which were once only accessible to the establishment.
Sharing Economy companies allow individuals to transact with one another by sharing resources, time and skills. Examples of such businesses include Airbnb (short term property rentals), Task Rabbit (skill sharing) and Go Car Share (lift sharing).
These platforms enable citizens to generate additional cash flows and utilize their assets more efficiently. For example, in her 2010 book, How Collaborative Consumption Is Changing The Way We Live, Rachel Botsman pointed out that on average power drills are used for around 12 minutes over their lifetime. Websites like RentMyItems solve this problem by allowing individuals to monetize such assets by renting them out to other people within their community. These platforms are indicative of a shift away from an economy based on ownership to one based on access and utility.
Sharing economy companies are allowing citizens the independence and freedom to become micropreneurs, giving them the ability to create additional revenue streams in addition to their day jobs. In many cases people are using these services to leave the corporate world altogether. It is our belief that this is having a knock-on effect with blue-chip companies whereby they are failing to attract the best talent and are also struggling to compete in an economy with plucky upstarts disrupting the status quo, with decentralized managerial structures.
The forceful behavior of big industry attempting to protect their business models from being disrupted by Sharing Economy companies is best represented by the behaviour of the hospitality industry. In 2012 pressures from some of the market leading hotel chains effectively tried to make Airbnb illegal in New York.
Another reason why the Sharing Economy sector has grown is due to individuals seeking a more equitable and sustainable way of doing business. Industries such as the banking and finance sector have suffered a spate of bad press over the last couple of years due to Libor and foreign exchange rigging, and mis-selling of PPI.
This has aided the growth of crowdfunding, which has become the Sharing Economy poster child of the finance industry. Crowdfunding companies serve a dual purpose of allowing the average person to access early stage investment opportunities in high-growth companies, and for innovative new companies to access seed and growth capital.
Subsequent a successful raise these new companies have a responsibility to conduct their business in a transparent and sustainable manner, due to the vested interests of their new micro investors and shareholders. Unlike traditional corporations, there is nowhere for these disruptors to hide. Additionally, in many cases these investors are also users of the product or service which means that they also become brand advocates.
In order to counter the protective nature of corporates, and for the Sharing Economy to thrive, it is imperative for crowdfunding companies to continue to fund these new companies and empower the entrepreneurs of tomorrow.
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