Tuesday, July 28, 2009

Crowd Funding: Customers as Investors

I came across this...There's a new business model in which the customers play an unaccustomed role -- as investors. It's called crowd funding. Customers invest sometimes as little as $1 in a product -- often an album by a new musician, or clothes or jewelry from an aspiring designer. The customers then help promote the product by posting messages on the Web. Their incentive: a cut of the profits in proportion to their investment. They share in the risks as well, but each person's risk is low because he or she is part of a crowd of investors. A similar concept exists in charitable giving, in which people pool contributions, usually via the Web, to support various works and initiatives. But now some online companies have shown that such an approach may be fruitful for businesses, too.
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