Crowdsourcing and Crowdfunding in Latin America: Barriers and Opportunities

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One of the greatest legacies of internet culture is the return of trust and collaboration among people. Need proof? Consider Couchsurfing and Kickstarter, both of which are based on the notion of community.

From this collaborative spirit of Web 2.0, the concepts of crowdsourcing and crowdfunding have emerged – methodologies of open cooperation for the completion of projects that solve problems and create solutions for the world.

At the second edition of Founder Friday in Bogotá, Colombia today, crowdsourcing and crowdfunding expert Jennifer Pineda will be present. Pineda participated as co-leader of design, commissioning and operations at SENA’s TecnoParque Colombia and has in the past managed and organized Startup Weekend. She recently shared some of her experiences and expertise with PulsoSocial’s Aleyda Rodríguez.

Aleyda Rodríguez: How has crowdsourcing advanced in Latin America?

Jennifer Pineda: There are various obstacles for crowdsourcing projects in Latin America and Colombia. Cooperation is often too open, and the organizations and entities heading initiatives aren’t oriented enough towards collaborators looking to offer their support. Orientation, in this context, means educating collaborators about an organization’s past experiences.

Given that it is possible for many people to desire to participate in the solution of a particular problem, it’s necessary to determine some limits and understand who specifically is likely to be open to collaboration. Over time, crowdsourcing has become something like posting an open question on Facebook, a place where everyone can express an opinion. This is problematic because the volume of information can be difficult to process, and with so many opinions, the end goal is easily lost.

Another big problem is that businesses are fearful of opening their doors. There is a culture that fosters the belief that projects have a specific owner, that original ideas can’t be shared with anyone.

Many tools have been developed for the crowdsourcing methodology, but what’s most important is knowing how to direct initiatives. Crowdsourcing is a highly valuable tool. When I was managing TecnoParque, people credited me for creating various strategies. I often found myself explaining that many creative and innovative solutions weren’t mine alone but instead the results of teamwork.

AR: What has the crowdfunding experience in Latin America been like?

JP: Several crowdfunding methodologies and models exist. The one that became popular internationally is Kickstarter, which focuses on donation. This is one model, but it’s not the only one. Many companies develop crowdfunding strategies aligned with social responsibility or by way of humanitarian communities. Other models exist in which participants may receive earnings or that don’t involve gifts or donations.

In Colombia, there are regulatory limitations that have a big impact on crowdfunding. The laws surrounding these types of financing systems have become much stricter due to problems generated by DMG, an entity that functioned with a pyramid scheme. One of the biggest challenges is finding a way to manage a crowdfunding initiative that is viable and legal in the country. It’s necessary to define a model that does not imply impediments and that allows all participants to be part of the project beyond being donors. It needs to be something like what Ecopetrol does when it opens up its stock to the masses, making stockholders part of the company. It is important to take crowdfunding to a level beyond donation – for example, investment.

AR: What are the principal barriers in the advancement of crowdfunding in Latin America?

JP: The biggest obstacle, no doubt, is electronic payment, which we’re working to overcome as soon as possible. There are few e-commerce and payment avenues. Latin America makes up just 2% of world e-commerce, but as the market is growing, it’s an issue we’re looking to solve quickly. New projects and foreign businesses are arriving and looking to set up shop here. The other barrier is cultural.

AR: What industries will prove most successful in financing through crowdfunding?

JP: Cultural and creative sectors, technological or not, fare the best. They appeal to emotions, and crowdfunding deals with just that.

AR: What needs to happen for the crowdfunding and crowdsourcing markets to consolidate in Latin America?

JP: The ecosystem needs to be a little bit stronger, although notable advancements have already been made. Latin American entrepreneurs have developed a different kind of mentality, we no longer dread giving pitches or fear seeking finance. This is articulated more and more with the security that investing in projects is a worthwhile risk. Moreover, a moment needs to arrive at which the development of these platforms, solutions and tools result in legislation changes. Legislation can move through solutions. Lastly, people need to be aware of and confide in payment.

This text has been adapted into English from its original Spanish publication.