Crowdfunding is a concept that most of us are familiar with. Put simply, it’s a group of strangers coming together for the common good of a project, like a charity fundraiser. A new business venture can be financed by pulling together small amounts of capital from each person. Utilizing social media and crowdfunding websites, crowdfunding brings investors and entrepreneurs together. Today, the internet has made it possible for anyone to become an entrepreneur or partake in exciting start-up ventures – thus, the pool of investors expands from the usual venture capitalists.
How does crowdfunding work?
Individuals looking to source funds for a project or venture generally use online crowdfunding platforms such as Indiegogo or Kickstarter to raise money, awareness and support for their business concept. There is even now a site aimed specifically at travel and tourism projects called TravelStarter.
Those who wish to pledge money fall into a variety of categories:
- The investors: who expect a financial return/shares if the project is a success
- The donators: who expect nothing in return and do it for the feel-good factor
- The lenders: who expect a reward or perk in return for their investment, such as a substantial discount on the end product or public recognition for their backing
For those who have a certain passion for crowdfunding, Kickstarter recognises users that have backed more than 25 projects with a ‘Superbacker’ badge giving them access to all new projects. I fall into this category where crowdfunding has become a sort-of hobby – I’ve invested in 50+ projects, with Bluesmart, Walli Wearables and mifold car seats being some of my more successful ventures. It is fun to get to try out products before they’ve hit the shelves, but, most importantly, there is a strong sense of personal satisfaction helping bring new concepts to life.
What makes for a good crowdfunding idea?
Unfortunately, the failure rate for crowdfunding is high: 2 out of 3 Kickstarter campaigns fail and in the case of Indiegogo, it’s 9 out of ten. To mitigate this risk, crowd-funders must have a polished marketing effort in place prior to launch. This should involve a professional video, a thorough explanation of the product details, clear rewards and regular communication with the project’s backers. And of course, it goes without saying, there must be a unique and exciting idea on the table.
How will crowdfunding impact the travel industry?
The travel sector, like many other industries, has the opportunity to benefit from the globalised exposure crowdfunding can offer. It is a very effective way of validating a concept with a larger audience, generating brand awareness and creating early product advocates, who have a powerful referral network thanks to social media. Travel agencies are the perfect marketing companion for travel start-ups as they have an established and trusted audience they can influence; whilst knowledge of niche travel services, products and experiences can in turn give agencies a competitive edge when it comes to servicing their customers. It’s a win-win.
Crowdfunding is on our radar
Amadeus is keeping a sharp eye on crowdfunding projects, particularly with Amadeus Ventures, a travel venture fund which invests in select start-ups. We have already invested in a range of companies which enhance the travel experience for business and leisure travellers, with the digital luggage company Bluesmart being one of these success stories. Amadeus has also recently supported Singapore Airlines’ App Challenge Hackathon by providing the Amadeus Travel Innovation Sandbox (API tool) to help young entrepreneurs create innovative travel apps.