Kickstarter and Crowdfunding

When we study growth of civilization over the last several centuries, we come across contributions of several people in the form of inventions. These inventions rendered difficult tasks simple, provided resources for further research and development, and thereby enriched human lives and surroundings. There are indeed big names remembered for their contributions. They have got their right of place in the annals of chapters of development. Yet there are thousands of others who toiled as much as the famous ones, but never got the recognitions they richly deserved. Then there are innumerable unsung heroes whose names never came out, but their contributions are used in many applications and inventions. What we have today is a sum total of the contributions of all three such groups.

It is possible that many contributions lapsed before taking a concrete shape which resulted in great loss to mankind. They might have subsequently come in some other shape or form. But the loss of time would have been a significant factor. This was all the more true of times when documentation and communication had not yet developed to the desired level. Nor there was an efficient system of publishing and recording rights of individual inventors. There could have been instances when the inventors themselves did not know the value of their own contributions. Thanks to the present day technological advancements, there are abundant opportunities for ideas to germinate, take shape and reach their logical conclusions. The pace of growth is now in geometric progression due to these factors.

When we analyze the reasons for many ideas and inventions to lapse before reaching an ultimate level, three factors stand out. The first was failure of recognition of the ideas by the ones who had them in their minds and initial actions. The ideas or actions were forgotten before their importance was noticed to the fullest extent. Then there were others that were identified by their owners, but did not receive support from the surroundings. The concepts could not sustain due to lack of encouragement from concerned authorities or society at large. License and permits, and clearance from governments did not come speedily enough as the promoters did not have the requisite muscle or money power. The third reason is due to lack of resources to expand the ideas and give a final shape to the products. Among all the resources required, financial resources is the most important. Many brilliant ideas never took final shape for want of funds for their development.

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Gopalaswamy Doraiswamy Naidu (1893 -1974) was an engineer and inventor and is often referred as Edison of India. Popularly known as G D Naidu, he made invaluable contributions to various fields of technology. A self-taught man, he was a genius in the real sense of the word. His life story is a very interesting study in the background of the events in the country during his lifetime. His inventions are visible in many areas; industrial, electrical, mechanical, agricultural and automobile engineering. He never had education beyond primary level, but rose to the position of principal of a polytechnic! He was an outstanding example of achievements of a man without formal education.

G D Naidu did not like to go to school. He was a very mischievous boy at school and was throwing sand and stones at teachers, and sent out of school. His education ended there. He worked as a waiter in a hotel in Coimbatore and saved money from the meagre earnings. From the funds so saved, he bought a motorcycle, which was very rare in those days. Picture of the motorcycle is given here. He dismantled and assembled it repeatedly and became a mechanic. From the earnings as a mechanic, he started Universal Motor Services (UMS), purchased a bus and ran it between Pollachi and Palani. In a few years he had one of the most efficient fleet of buses for public transport. He started National Electric Works (NEW) and brought the first electric motor in India. 

Naidu did research in the field of agriculture as well and identified new varieties of cotton, maize and papaya. He started production of cheap radio and television sets under the brand UMS. I have seen UMS radio and TV in my uncle's house. He built cheap cars but could not go for mass production due to not getting license from the government. It is said that he started construction of a house at 6 AM in the morning and finished by 5 PM. The house was ready in 11 hours! He started Arthur Hope Polytechnic (named after the then Governor of Madras) and became its principal. The polytechnic is now known as GCT (Government College of Technology) in Coimbatore. His inventions and prototypes are kept in the G D Naidu museum in Avinashi Road, Coimbatore. The museum is now celebrating its 50th year.

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The concept of Venture Capital has taken off during the last few decades. During the first half of 20th century, financing new ideas was an exclusive domain of a few wealthy families. The Rockefellers was one such family that encouraged funding new ventures. After World War II, efforts for institutional financing framework for ventures which had high growth potential but highly risky, gathered momentum. During the last three decades Venture Capital Funds have come up very well providing a robust structure for finance at different levels to upcoming business ideas and plans. Today Venture Capital funding is available in millions of dollars. Many ventures thus financed have become success stories and encouraged both entrepreneurs as well as VC funds in their respective pursuits.  

For ideas to germinate and reach VC funds is still a difficult task. Big ventures are able to reach these required levels. What about very small projects which do not measure up to the standards expected by VC funds? There are innumerable start-ups which do not need big finances, but resources of the promoters are not sufficient to fund them. At the other end of the spectrum are people who are prepared to invest small amounts to back ideas that interest them. Thus we have a scenario in which ideas requiring smaller funding stand on one side whereas a large number of people (the crowd) are ready on the other side to stake small amounts on such ventures. This type of situations have led to an era of Kickstarting and Crowdfunding. There are intermediaries that bring together the two groups so that the ventures can take off. 

Kickstarter is an American Public Benefit Corporation based in Brooklyn, New York. The goal is to "Help bring creative projects to Life". We old timers are familiar with kick-starters, a pedal used to start a machine by kicking it. Most vehicles, especially motorcycles, had it by kicking which the vehicle's engine came to life. We have seen Motors (buses were thus called then) in our childhood which had an iron rod used for starting its engine until modren touch start engines arrived. Crowdfunding is an activity or process of raising money from a large number of people, typically through a website, for small business projects. Kickstarter, launched in 2009, has so far generated more than 2 billion US Dollars from over 10 million backers to fund over 2,60,000 creative projects.

The ventures cover a variety of ideas like stage shows, comics, films, journalism, video games, technology and food-related ideas. People with business ideas place their offers on the website giving details of their plans and a minimum funding target before a fixed deadline date. Funds are collected only after the target amount is subscribed by the crowd. If the target is not reached, the project does not take off. Anybody anywhere in the world can contribute to the projects. The website gets a fee from all successful projects and payment processor also charges a fee for the services rendered. The website has no role after funding process is completed. Investors are offered the products or dividends if the project succeeds and it is between the promoters and the crowd. It is said that people from more than 20 countries are now actively participating in crowdfunding. There have been many success stories as well as failures. Each investor invests a small amount and does not mind taking the risk for that amount. They may get good returns as well if the venture succeeds. It is said that there are ventures that have raised more than a million US Dollars in 24 hours!

Crowdfunding is catching up and there are many websites providing similar services now. This is another diversification of fundraising and utilizing activities today.

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G D Naidu suffered from licensing and permit raj. He struggled due to lack of support from the surroundings. He was choked due to shortage of funding opportunities. Things have changed in the present times. Make in India has said goodbye to License and Permit raj. There is a large crowd around the world ready to invest in new ideas. Environment is pregnant with new ideas and opportunities to promote them in the light of success stories of modern entrepreneurship. Times have indeed changed the very look of things.

G D Naidu would have loved to be active in the present times!