Crowdfunding is a term used when individuals network and pool their money to support efforts initiated by other people. This is the story of two young INSEAD MBAs and entrepreneurs, Nicola and Leo, and their quest to adapt an established American business model to Asia. Leo Shimada has worked for McKinsey & Co, earned an MBA degree at INSEAD, and then led the Asia strategy team of a large multinational corporation. He is passionate about innovation and started looking at crowdfunding as a way to support promising entrepreneurs and innovators. Nicola Castelnuovo worked at Accenture, did his MBA at INSEAD, and then worked several years as a trader for Standard Chartered Bank in Singapore. After leaving Standard Chartered, he started investing in start-ups as an angel investor. He then asked himself whether there was a better and more sustainable way to support start-ups. In particular, he saw potential in opening up investments in early stage companies to a larger audience. Leo and Nicola joined forces in 2013 to run Crowdonomic. Crowdonomic (www.crowdonomic.com) is one of the leading crowdfunding players in Asia. Its mission is to empower innovators. Crowdonomic runs its own crowdfunding platform but also works closely with large organisations to provide crowd-powered solutions for enterprises. As the economy is switching from a corporate centric model to a collaborative model, consumers want to participate more and more in the product creation process. Organisations seeking to innovate and gain mindshare in this context need to learn how to leverage the power of the crowd. Crowdonomic powers the full cycle of innovation for established organisations looking for new ideas by connecting them to the limitless resources of the crowd (www.crowdonomic.com/enterprise). Why Singapore as a starting platform Growth in Asia is a massive force, driven by a growing regional consumer base, and there is a very big market that needs to be discovered and understood. “Starting up a business in Singapore is easy,” says Nicola. “The local environment here is very supportive to entrepreneurship. The infrastructure is very efficient, and Singapore is a good spring board to expand out to the broader region”. A recent Venture Beat Article (20 December 2013) reported that “the Singapore government has just invested $500,000 in funding in a new health care startup called Ring.MD.” Its founder, Justin Fulcher said that: “I chose to base the company in Southeast Asia rather than Silicon Valley to escape the “ ‘bubble’ ”mentality” . Singapore is proving more and more to be a very good start-up platform for entrepreneurs targeting Asian growth. However, though everybody speaks English and has a very high level of education, doing business in Singapore is not like doing business in the West. Business models that work in the West do not necessarily work in the East. Ideas have to be localised. “You have to know very well the market you are entering,” says Nicola. He takes the example of e-commerce consumer behaviour; the market in Singapore is very different, for example, from the market in Jakarta, which is just over an hour flight away. Yet in Jakarta, the majority of consumers access the Internet using their mobiles and not on desktops. The on-line payment systems are also different; few people use credit cards. Thus, what works in Singapore does not necessarily work in Jakarta. The region is as diverse as it is vast. South East Asia is a very fragmented market, with different cultures and languages. It is not so straightforward to branch out into other Asian countries after starting up a business in Singapore. Singapore can still be considered as a starting platform to get accustomed to a different continent, but businesses should keep in mind that models vary from region to region. Crowdonomic adaption to the local market Though the crowdfunding market in Asia is still in its infancy, it is growing at a triple digit pace in value. World Bank estimates that by 2025 the World’s crowdfunding market size will be between 90-96 billion USD, of which the South East Asian market will be worth about10 billion USD, while China will be between 46 -50 billion USD (source Crowdfunding Potential for The Developing World). As the Asian crowdfunding ecosystem is not yet fully developed, Leo and Nicola understood that they needed to adjust their initial business model. In the US, crowdfunding is a market place that drives innovation by connecting the crowd and innovators. In Asia, large corporates have a large role to play in crowdfunding. Through market research, Leo and Nicola realised that crowd-powered solutions can be a powerful tool to help organisations to drive their innovation strategies. “We then understood where the market really was: providing crowd-powered solutions to large organisations” says Nicola. “Corporates come to you with a specific need, e.g. we need to get in touch with innovators in this particular region or of this specific technology field. Crowdfunding helps them to leverage the power of the crowd to discover and validate new ideas.” The main goal is to promote innovation. Who does it in Asia? Corporates do it. They know that the next big innovative idea can come from outside their corporate boundaries, maybe from local start-ups in Vietnam or Indonesia. “When talking to corporates, the question is: how do I get in touch with innovators and start-ups? Crowdonomic helps them to get in touch with the innovation ecosystem in their region” says Nicola (describing a business model that also we at Startupbusiness use to facilitate the collaboration between start-ups and consolidated companies, including SMEs). “The corporate’s R&D becomes open source. It becomes Connect & Develop. Crowdfunding allows corporates to play an important role in the new collaborative economy”. Nicola is developing a new market and is educating the market to crowdfunding. In order to do that he is working more where the demand is (corporates) to grow much faster. Future Trends Nicola foresees two main trends in his sector. Crowdfunding and crowdsourcing will converge, and the model will embrace other asset classes (equity, lending, real estate, etc.). Eventually the crowd will interact with all the steps in the innovation process: from ideation to commercialisation. There is no indication whether crowdfunding in Asia will ever reach the stratospheric heights of the US. However, as we have seen, the market potential is there. We wish Leo and Nicola good luck and we thank them for sharing with us their story and insights on how to adapt a western business model in Asia.
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