Amidst continuing bank crises and stock market woes, the number of new businesses registered in the UK reached 581,173 in 2014 – a record high. It’s a telling statistic not only for the UK, but for other parts of the world in which advanced technology, startup accelerators, and new funding options are empowering individuals to turn their ideas into companies more than ever before. A closer look at the forces behind this entrepreneurial surge reveals that FinTech – with its innovative options for raising capital, purchasing and payments, cashflow management, and general administrative tools – is a major enabler in the startup ecosystem.

Alternative paths to big funds

Before alternative financing options, founders could fund their ventures using several tried and true methods. Depending on level of traction and organization, they might go through family, friends, angels, bank loans, venture capitalists or some winning combination of them all. FinTech has added crowdfunding and peer-to-peer (P2P) lending to this list, both of which have already empowered plenty of companies to launch successfully.

One such company is Pebble. In 2013, the smartwatch startup made headlines when it raised more than $20 million via Kickstarter, shattering an original goal of $100,000. The company originally had trouble attracting substantial investors, so CEO Eric Migicovsky put his faith in crowdfunding.

“We spent about a month and a half working on the Kickstarter campaign – building a prototype, shooting the video, writing the text, taking photos, and designing the Kickstarter page and pledge levels,” says Migicovsky. “We looked at all the famous Kickstarter projects, the ones that were most successful, and took cues from their videos. Making a video that had a personal pitch and talked directly to your customers and viewers was really important.”

Pebble’s Kickstarter campaign ran for just a month and gathered nearly 69,000 backers. The smartwatch is now retailing in major chains around the world, and the company earned valuable publicity from the fundraising process.

While standard crowdfunding typically involves individuals giving money to a cause in exchange for rewards (in the case of Pebble, the reward was up to 30 Pebble Smartwatches depending on the amount of money invested), equity crowdfunding, another option, works in a similar way – the only difference is that backers receive equity in the company in exchange for their investment. CrowdCube has made a name for itself in the UK as a leading platform, helping young startups earn money and valuable word-of-mouth marketing.

But the list of options doesn’t end there. Founders can also crowdfund prototypes with platforms like LaunchLeader. The website, a “micro crowdfunding” system for raising money from family and friends, is a simple route to financing a minimum viable product.

While not yet a household name like crowdfunding, peer-to-peer lending is a valuable tool for many startups, especially in early stages. P2P lending has the potential to be more flexible and less volatile with lower interest rates than traditional lending from banks and credit card companies. LendingClub in the US and FundingCircle in the UK are leading marketplaces of this type, connecting borrowers and investors. The UK’s P2P lending sector is now worth over £2.1 billion – an incredible figure considering banks have historically controlled who can borrow money and at what rate.

A new standard for payment processing

The FinTech payments space is growing rapidly with over $5 billion invested in the past 5 years, increasing the number of options founders have for processing transactions. Stripe, an especially prolific disruptor offering a suite of APIs, has made a name for itself powering marketplaces (Kickstarter, TaskRabbit, Lyft, and FitBit are among them), SaaS companies, and other businesses of all sizes.

Stripe has also equipped companies with the resources to expand internationally, and was  along for the ride when Lyft and Kickstarter took their services abroad. Stripe successfully managed currency conversions and established central hubs in new countries – two roadblocks that, until recently, had been halting growth for many promising companies. John Collison, co-founder and president of Stripe, made it Stripe’s goal to simplify international payments for rapidly expanding global ventures.

“Before Stripe, Lyft were literally running their own banking department, like a bank of Lyft, with people who were responsible for doing driver payments,” says Collison. “That kind of thing in a fast-growing startup is not efficient.”

The option to pre-order

Sometimes payment processors alone don’t do the trick. That’s where startups like Celery come into play. With its simple, embeddable pre-order checkout page, Celery enables companies to accept orders even when they can’t ship them until much later.

Leaders at Celery believe their interface is particularly suited for crowdfunders who have already finished fundraising and are now moving on to readying their product. “A common solution is ‘Hey, we’ll just collect email addresses and we’ll get back to you with payment collection later,’” says co-founder Brian Nguyen. “We thought that was a really ineffective workaround and that’s why we wanted to push the concept of preordering.”

Using a pre-order tool allows startup to gather information about demand and required amounts of inventory. In the new crowdfunding economy – where businesses have potential to raise large sums of money with very little resources – numbers gathered from a preorder tool can result in important savings early on.

Faster payouts = faster growth

For ad networks, publishers, and app developers who sometimes wait months before receiving revenue payments, FinTech steps in with easier options for cashflow. BillFront, for example, provides its clients with revenue advancements in the form of weekly payouts, enabling them to quickly reinvest in marketing and new projects. Through the BillFront platform, funds can be accessed without setting foot into a bank branch.

Art Lapinsch of BillFront says about the benefit of revenue advancement for app developers, specifically, “You can leverage your existing success from your revenues, reinvest in user acquisition, and in the best case scenario, also profit from organic downloads.”

Administrative hassle, be gone

Startups with small, busy teams can’t afford to get bogged down in administrative tasks, but it happens more often than not. Founders can now take advantage of FinTech to smooth out administration processes and office inner-workings, freeing up valuable time to work on ideas that matter.

For every common administrative issue related to finance, there’s a good chance FinTech has that base covered. Looking for a reliable payroll service that still feels in-house and takes care of everything, including taxes? ZenPayroll is an intuitive, full service option. How about easy expense management? Xpenditure eliminates the need for the classic expense report with its A to Z automated expense management. Tired of time-consuming invoice generation? Countless new services, such as FastBill and Invoiceable, provide quick, easy, eye-catching invoices. Finally, companies such as Wave and FreshBooks bring the ease of cloud accounting to startups and small businesses.

While there may not be a magic formula for startup success, FinTech offers plenty of options to help springboard the process.

(Photo sources: Heisenberg Media, Rocio Lara, World Bank Photo Collection, GotCredit via Creative Commons)

Crowdfunded data enrichment platform CrowdFlower, scooped up $12.5 million in Series C financing earlier this week. The round was led by Canvas Venture Fund and saw participation from existing investors Bessemer Venture Partners and Trinity Ventures, bringing the total amount raised by the company to $28 million.

Rebecca Lynn, the General Partner of Canvas explains their investment, “Having worked at P&G where every product and brand strategy is based on exhaustive analysis of data, I naturally gravitated to CrowdFlower’s vision to help companies realize the real potential of Big Data.”

“CrowdFlower’s platform takes the pain out of managing an on-demand workforce to deliver accurate and fast results so that organizations can base their important business decisions on data they can trust,” she added.

Founded in 2009, CrowdFlower essentially assists data scientists through its data enrichment platform. CrowdFlower’s five million on-demand contributors assist by helping enterprises in maintenance, organisation and cleaning up of the data, delivering up to “seven years of work in a single day”.

Their clientele includes the likes of eBay, Edelman, EventBrite, The Home Depot, VMWare and Venuelabs, to name a few, which utilize CrowdFlower to address a spectrum of projects like search relevance tuning, data categorization, image annotation, content moderation, sentiment analysis, metadata creation and real-time transcription.

The financing will help with the fierce growth the company is faced with. A separate statement on the same day CrowdFlower revealed its intention to free data scientists from cleaning incomplete, messy data. More information can be found here.

Read more here

(Image Credit: Nick Ares)

Warning: The following post contains moments of wild speculation. You have been warned.

Right now is an interesting moment in the history of civilization. In the past technology has molded itself to the needs of society, but we’ve passed that point. In the last 15 years we’ve started to see society molding itself to technology instead.

TL;DR Distributed proof of ownership, anonymity, crowdfunding, the subscription economy, and location-based services–taken together, at the intersections–are going to rock your world.

We’ve reached a saturation point where technology is so pervasive–mostly due to smartphones, little computers we carry around with us–that what used to be wild speculation now seems just around the corner. Society has pretty much absorbed the change inherent in a global network connecting every person to every other person, and the main behavioral changes can be summed up by looking at Facebook and Twitter. (Clearly business has been impacted substantially as well, but I’m talking mostly about changes to day to day life.)

Here are five technologies that seem poised to break out on the world in the next few years, and how they will change our lives. The most interesting aspect of these to me is how they interact when used together–the intersections of these disruptive technologies are where you can start really understanding how these will change the world in concrete ways. Like layer cakes, they get even more delicious when you eat them together.

1. Distributed Proof of Ownership

If you’ve followed Bitcoin, you know how disruptive this can be. (By the way, there’s nothing like an unauthorized demo to convince people of disruptive technology.) But Bitcoin is one implementation of a distributed proof of ownership protocol which results in the a blockchain: a distributed ledger that says who owns what.

That may sound boring, but think of all the intermediaries that exist today only because they’re a trusted third party for proving ownership: DNS registrars, stock exchanges, title registrations with governments, central banks, and so many more. Many of the most powerful organizations in the world exist because you need some way to prove who owns what.

Now you can start trying to wrap your head around what blockchains will do in the future when they’re used for more than just Bitcoin. To name a very specific example that you can look at today, Namecoin is a new way to prove ownership of a domain name, which makes obsolete ICANN and domain registrars (at least, as they exist today). It’s still early, but more are on the way.

2. Anonymity

The Internet has never really been anonymous, as Edward Snowden recently showed us. But there are technologies emerging that make it anonymous. Tor is the best known, but there are others as well such as I2P that improve on Tor–a healthy sign for any new technology. These are still very cutting edge, which means they’re not usable by the average consumer and we haven’t truly seen their impact yet.

The change brought by online anonymity thus far has been very politically-oriented. It has allowed whistleblowers to anonymously share documents with reporters and Wikileaks as well as let people anonymously buy drugs online.

The use of anonymity is spreading, and although I’m sure this will be fought tooth and nail by many lobbyists I don’t believe it can be stopped. It will be an interesting legal battle I’m sure, although I have no idea how you’d enforce any kind of illegality.

2.a. Distributed Proof of Ownership + Anonymity

Now that we have proof of ownership, and anonymity, you can own something anonymously. This is what has people concerned about Bitcoin–the fact that you can anonymously own lots of money. But when you extrapolate that out to everything else that you can now own anonymously, things get interesting.

You’ll be able to anonymously own stocks, cars, houses, and creative works. Obviously there will be a clash with some of the more highly regulated industries–for example anonymously owning a house is a long way off, but I can certainly forsee a time when you could anonymously own a copyright and even collect payment on it anonymously.

3. Crowdfunding

The concept of crowdfunding is still young. So far you’ve seen individual ideas being funded on Kickstarter, and to a smaller degree you’re seeing companies funded in this way as well on Angel List. But because it effectively breaks down large investments into smaller chunks, thus spreading the risk around, it completely changes the way an average person will start to think about risk. And it’s changing everything from investing to philanthropy (see Kiva). You’re even starting to see instances of crowdfunding medical treatements–talk about a different kind of healthcare system.

3.a. Crowdfunding + Distributed Proof of Ownership
Now things start getting interesting. You’re already seeing crowdfunding for ownership in limited doses such as the AngelList mentioned earlier. But that’s still a middle-man. Imagine instead that you could instantly buy shares in a company and those shares would be put in your ledger on the blockchain, and the money would flow straight to the company’s account. And dividends straight back to you. Or, for a more pedestrian example, you’d be able to quickly set up a timeshare by offering real estate as a crowdfunded project with the blockchain providing the record of ownership.

3.b. Crowdfunding + Anonymity
This is going to absolutely revolutionize fund raising. Money talks, and who you choose to donate money to says a lot about you. Many people who would otherwise donate to controversial movements and figures (think Wikileaks and Edward Snowden, for an immediate example) hesitate because of potential blowback in the form of ending up on a watch list and being patted down extra-vigorously every time they travel. Want to help fund the resistance in some other country? There you go.

3.c. Crowdfunding + Distributed Proof of Ownership + Anonymity
With this potent combination you could instantly own a tiny part of something without anyone else knowing. Want to silently take over a company? Anonymously buy up their stock. Want to buy an oil field in Iran without the government knowing? No problem.

4. The Subscription Economy

This is more of a societal change enabled by technology, but it touches a lot of things. You’re starting to see people buy everything as a subscription from diapers to clothing. This is a big change in behavior and it has yet to touch a few important industries. For example, you’ll be able to subscribe to monthly dinner clubs and resort experiences.

4.a. Subscription Economy + Distributed Proof of Ownership
This is going to completely disrupt how debt works because it doesn’t require banks in order to break down large purchases into palatable chunks. People could easily own a small fraction of a house and create pools of ownership that allow people to buy things on a subscription basis. You could, for example, buy $500 worth of a house and then get $15 a month in return for a rental, or $5 a month in exchange for a small percentage of your ownership stake.

4.b. Subscription Economy + Anonymity
This might allow people to anonymously own something and sell portions of it on a monthly basis, just like a house. For example you could own a small percentage of a helicopter or tank that’s sold to one side of a civil war. Or, you could buy your drugs on a weekly or monthly basis.

4.c. Subscription Economy + Crowdfunding
People already make investments on a monthly basis, and have for a while. However, you could now directly fund small business’ cashflow in return for equity. This may result in companies making stock offerings on an as-needed basis to cover short-term funding gaps–in return for a high-risk investment you could get into the earliest stages of a company. Mutual funds and investment funds become very interesting in this context as they could easily turn into pure risk management vehicles.

This combination is also interesting because if set up properly it could enable groups of people to jointly purchase something expensive (say, a group of patients with cancer to buy an MRI machine or a neighborhood to buy a truck) and make use of it on a periodic basis. Just like timeshares it would spread the cost around, but for other expensive items which aren’t used constantly.

5. Location Services

Apple once again (for the last time?) introduced a nascent technology to the general public when they unveiled iBeacon, an implementation of accurate, location-aware technology. I’m fascinated by this technology because of the new possibilities it opens up in meatspace (face-to-face) interactions. For example, I’m working on skunkworks project right now that would allow a restaurant to greet you by name and offer you your favorite cocktail when you walk in the door.

You’re just now starting to see the first public uses of this technology–it was recently used at the Superbowl, for example. I expect this one to take off quite soon.

5.a. Location Services + Proof of Ownership
I struggle to think of solid practical uses for this, but you could prove how much of the ownership of a (house, car, political party, senate) is present in any one location. Or, you could potentially pass ownership of something to someone just by knowing their location.

5.b. Location Services + Anonymity
If you thought Twitter was disruptive for organizing events in real-time, this should be really interesting. You could anonymously prove membership in an organization using distributed proof-of-ownership and conversely you could prove LACK of membership. Subverting movements like Occupy Wall Street by infiltrating them will become much more difficult.

5.c. Location Services + Subscription Economy
You could subscribe to either products, services, or experiences, and pick up your product from whichever supplier is nearest to you when it’s convenient. This would be very disruptive to delivery services in general. Subscribe to a daily cup of coffee and pick it up from whichever Starbucks you’re closest to. Or subscribe to a daily lunch and pick it up from a number of different restaurants you walk past.

Summary

These are the five technologies that I believe have the most immediate potential to change our daily lives. I could easily add predictive data mining to this list but I’ll save that for another series of blog posts.

What did I miss? Email me at jason.kolb@gmail.com or tweet at me.

Follow @DataconomyMedia

Jason Kolb is a big data architect who combines hands-on experience with big data and distributed architectures together with solid cross-functional business experience in some of the biggest companies in the world. He is the founder of Applied Data Labs and previously co-founded Latigent, which has been acquired by Cisco. He’s also working on a book on data strategy, which you can find out more about on his personal blog here.

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Kickstarter is using big data to simplify its approval policy for new campaigns. As well as shortening its list of rules and requirements, the Kickstarter team have announced the beginning of ‘Launch Now’ button, bypassing the human approval round normally required to launch a Kickstarter campaign.

Instead, illegal and ill-thought-out campaigns will be filtered out by an algorithm, which uses thousands of data points to determine a project’s legitimacy. Using metrics such as project’s description, rewards, funding goal, and the creator’s past successes/failures on campaigns, the algorithm compares the proposed campaign to previous initiatives, and whether those initiatives have been approved, rejected, or removed.

A statement from Kickstarter expands: “The longterm health and integrity of Kickstarter drives everything we do. We’ll continue to actively govern the site with thought and care. Projects will be reviewed by a sophisticated algorithm we developed over the course of years that looks at thousands of data points. And our Moderation and Trust & Safety teams are focused on making sure everyone on Kickstarter is following the rules.”

‘Launch Now’ will roll out in stages, initially handling 60% of applications. The rest will be submitted for traditional human review. Projects that qualify for ‘Launch Now’ also have the option to submit their application for human review, and receive feedback and advice from the Kickstarter team.

Although Kickstarter and crowdfunding have become synonymous in any of our minds, Kickstarter are far from having a monopoly in this field. Indiegogo, whose acceptance policies are much less stringent than Kickstarter’s, raised $40 million in investment earlier this year, the largest financing round for any crowdfunding startup. It is hoped that the ‘Launch Now’ feature will mean more Kickstarter projects are accepted, allowing them to keep pace with their open-door competitors.

Read more here.
(Photo credit: Scott Beale)

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