Category: Digital Disruption

From The Conversation.

Crowdfunding, as a way of raising money for a new venture, has become big business. From a small start in 1997 it was estimated to be an industry worth more than US$34 billion in 2015. But crowdfunding is still in its infancy and – as with any tool – it can be misused so that its potential for bringing innovations to the markets could be hampered.

We set out to research what distinguishes successful crowdfunded projects from those that do not achieve their goal. Our team from Anglia Ruskin University looked at 9,652 projects – both successful and unsuccessful – from the crowdfunding platform Kickstarter. Kickstarter is one of the largest reward-based crowdfunding platforms, having raised more than US$2 billion (£1.6 billion) since its creation in 2008.

Because all applicants for funding through Kickstarter are required to post specific and detailed information, it meant we were able to drill down into each separate scheme and develop an overall understanding of the traits each had or hadn’t got in common that enabled them to attract crowdfunded investment. We isolated six main traits that successful crowdfunding campaigns had in common.

Keys to success

Timing: Early funding and backing is key to successful crowdfunding. The more backers and funding received in the first few days of a campaign, the more likely it is to succeed. This suggests that designing a campaign to reward the early backers will lead to it being more successful. Successful projects on average raised 39% of their funding goals by the end of the first sixth of the campaign – with many securing their funding before this early limit was reached. This compares to failed projects which managed to raise on average less than 4% of their funding goal in the same time period.

Networks: It probably comes as little surprise that having large online social networks helps entrepreneurs achieve success when it comes to crowdfunding their ideas. When project proposers add an online social network link to their project’s pages, they indicate that they are intentionally using their social network in order to boost their crowdfunding campaigns. The successful campaigns on our dataset had an average of 1,024 Facebook friends.

Temper your ambition: Ambition is usually perceived as a key to success for innovators – after all it takes ambition to launch a crowdfunding bid. But we identified many projects which were simply over ambitious – as shown by the negative impact that a high funding goal has on the chances of a project’s success. Projects which failed on average received less than 6% of their funding goal, with some raising less than 0.0001% of their funding goals.

Funding goals, early funding and probability of success.

Impatience: Being impatient to get off the ground increases the probability of a project‘s success. This may seem counter-intuitive – as one would expect that giving a campaign more time would help it succeed. But when it comes to crowdfunding, backers are impatient – they want to get the projects they support off the ground as soon as possible. In fact, they are so impatient that the shorter the declared duration of the campaign, the more likely the project is to succeed.

Pebble raised US$500,000 to launch its smartwatch in 17 minutes. Altogether the company has raised more than £20m on Kickstarter. Kickstarter

Reputation: We identified a number of projects from entrepreneurs who had already successfully launched campaigns. This experience improved the chances of a project’s success, as it increased the reputation of this creator generating trust. This is very important in an environment such as crowdfunding where the entrepreneur knows much more about the characteristics of the new product or service to be launched than the potential backers.

Reciprocity: In a virtual community, such as that created by crowdfunding platforms, we found that supporting other people’s projects could be a good way to attract support for one’s own. The positive impact of reciprocity indicates that crowdfunding platforms are virtual communities – where altruistic behaviour makes innovators more likely to succeed.

Crowdfunding matters

Every single one of these characteristics was found to be significant in affecting the success and failure of the projects we looked at. We developed these features into a model which enabled us to correctly predict the outcome of more than 87% of Kickstarter campaigns.

Why does all this matter? Why should we care about crowdfunding? Crowdfunding is now a global phenomenon – around the world more and more people in more countries are using this method of raising funds to support their ideas. The map below shows the geographic distribution of the projects analysed.

Crowdfunding: a global perspective. Author provided

From this map two major points emerge. Crowdfunding is a global enterprise with a single crowdfunding platform raising funds in more than 100 countries. But it also demonstrates how crowdfunding is still limited in Africa and South America – the areas which may most benefit from using crowdfunding to get a good idea off the ground.

Many a massive enterprise has started small – and in a modern post-industrial landscape, using crowdfunding to bring a brainwave to life will be increasingly important in providing jobs and creating wealth.

Authors: Emanuele Giovannetti, Full Professor in Economics and Deputy Director of the Institute for International Management Practice, Anglia Ruskin University; William Davies, PhD researcher, Anglia Ruskin University

From The Conversation.

The vast majority of Australian companies are privately held. There are many advantages for this. Private companies face fewer regulations and lower requirements than public companies when it comes to reporting to shareholders, for example.

But new sources of funding are starting to blur the lines between public and private companies. As a result, we should consider introducing an intermediary form of corporation that sits between the two.

The difference between public and private

Private companies are not designed to raise funds from a large group of shareholders. In fact, two of their key characteristics are that they cannot raise capital from the public and they are limited to having 50 non-employee shareholders.

This is part of the reason why private companies face fewer regulations – they provide very little protection to shareholders. They are not required to hold an annual general meeting, for instance, and do not need to provide their shareholders with financial statements or comment on the company’s performance. Further, a shareholder might find it very difficult to sell their shares in a private company as this may require not only finding a buyer but also getting the board of directors’ approval.

Historically, when a company required more funds than 50 non-employees could provide, they would convert into a public company. Counting on a wider base of investors and owners, public companies are more heavily regulated, addressing many of these concerns.

In comes crowd equity funding

A new form of funding has come on the scene – crowd equity funding (CEF). It allows companies to raise funds from a large range of investors through an online portal. Investors receive shares in the company in return for their investment.

CEF has the potential to bridge the gap between private and public: it enables companies to access funds from many investors without going through the traditional fundraising regulation. But the current framework, with restrictions like the prohibition on private companies raising funds from the public, creates a roadblock to accessing this type of finance.

Recognising this, in 2015, the government introduced a bill to enshrine CEF in legislation. The bill limited CEF to a select group of public unlisted companies. Ultimately the bill lapsed and a new bill is expected to be introduced this year.

Limiting CEF to public companies does not take into account the important role private companies play in our economy. So the government is also assessing whether CEF should be introduced to these types of companies.

But simply extending CEFs to private companies may not be ideal either.

Why we can’t just extend CEF to private companies

If the introduction of CEF to private companies is accompanied by raising the ceiling for investors and introducing more accountability in the system, the issue of investor protection will be moot. However, this could mean the death of private companies as we know it. With increased regulation, the cost of running a private company will rise. This type of business may no longer meet the need of people who are currently running closely held companies – which form the bulk of private companies.

Further, there is a need to distinguish between two types of private companies – the one that may never be interested in accessing CEF and the one that may in the future. For instance, a private company may be a useful engine to set up new general, social and environmental enterprises as this type of company is cheap and cost effective to run. However, with the growth of such businesses, access to finance may be problematic and conversion to a public company may not be an ideal either. Something in between could be the solution.

A new form of company

Any consideration of CEF should be accompanied with discussion on how to promote small and medium enterprises, and whether to do so may require the establishment of a new form of company. One that allows entrepreneurs to access CEF when they outgrow a private company, while also providing some protection to investors.

Designing such a company form will ensure Australia does not fall behind the rest of the world, and will promote a different type of entrepreneurship.

Author: Marina Nehme, Senior Lecturer, Faculty of Law, UNSW Australia

From The Conversation.

Despite suggestions that young people are losing interest in the platform, its 1.5 billion users still puts Facebook at the centre of social media. The site was launched in 2004, and so those meeting Facebook’s minimum age requirement of 13 will, in 2017, be the first generation for whom Facebook has always existed.

We are now able to reflect on the long-term use of Facebook, which has enjoyed unrivalled longevity and growth. Those who joined in their early teens are now in their twenties and have “grown up” on Facebook, documenting their life through text, images, videos, and geo-location data such as “check-ins”. We spent two years interviewing these twenty-somethings to explore how they had documented their experiences of growing up on Facebook.

Their Facebook profiles have become effectively an archive of their lives. As our participants scrolled back through their Facebook timelines with us, they recounted the experiences they had posted to the site: exam results, new romantic relationships, breakups, losing a job, travel, and so on. Sometimes seemingly banal disclosures would remind them of more complex stories that were not immediately obvious. A photo of one participant sleeping on her father’s couch, for example, reminded her of a painful breakup with a partner. For another, the gaps in his timeline elicited stories about his gender transition that led him to switch to a new profile.

As our participants delved into their past many reflected on points in their lives where they were making critical decisions about their futures such as graduation, launching their careers and starting their own families. Some were in their final year of university study and were looking for a job. Today, Facebook profiles have become almost as important as a CV. And, much like the preparation and polishing of a CV, young people are cleaning up their Facebook profiles – prioritising stories about travelling or voluntary work and making the embarrassing details about nights out with friends private or erasing them altogether in an attempt to present a more professional, measured, mature identity.

Job-seekers now perfecting Facebook timelines, not just CVs. Antonio Guillem/Shutterstock

Putting the best face forward

For many, Facebook has shifted from being the site on which to document carefree student days to a space where a more professional identity can play out. Recruiters have for some time examined social media profiles, something that raises important privacy questions. Facebook even now offers its own, work-focused Facebook app, Workplace, showing the company’s desire to expand into more areas of our lives.

Two participants in our study were final year medical students. Coached in a job-seeking seminar, they were told that the recruitment team would carry out web searches on the candidates, including Facebook pages. This was an incentive for them to tidy up their profiles, and reflect on how many years of Facebook posts might be interpreted by potential employers and patients.

The sociologist Anthony Giddens uses the expression “the reflexive project of the self” to explain how personal identity is not fixed in stone, but an ongoing project that we constantly work on. This concept is particularly applicable to social media such as Facebook, Instagram and Twitter because it captures the way these services are embedded into young peoples’ lives, and their professional development.

By polishing their Facebook profiles they can revise their past – removing pictures or posts that no longer play a role in who they are, or who they wish to portray themselves to be. Entire events that once seemed significant can be removed, having since been diminished into the realm of teenage naivety as priorities, networks, and identities change.

Competing versions of identity

These erasures raise important questions. When in decades to come those who have grown up using Facebook are running for public office or moving into positions of power, how might we think differently about what constitutes a professional identity, and its relationship with our younger selves? Will future prime ministers be embarrassed by a love-struck selfie documenting a one month anniversary of their first relationship? Will future CEOs be deemed inappropriate for their jobs because of a flippant post made decades earlier? Should they?

Sports stars and politicians are often shamed and sometimes ruined for things they say on social media. Gymnast Louis Smith and footballer Joey Barton have found themselves in trouble for their questionable social media posts. Cheerleader Caitlin Davies’s career was ruined after a photo of her drawing offensive graffiti on an unconscious man was shared on Facebook.

The issue is that the hundreds or thousands of posts that make up twenty-somethings’ social media profiles are disclosures written and shared in the past, often forgotten and buried – until uncovered by someone scrolling back through them. In another case, the UK’s first youth crime commissioner Paris Brown resigned following the uncovering of apparently racist and homophobic comments posted on Twitter as a younger teenager.

Might this kind of scrutiny intensify as entire lives recorded on social media are dredged up and put under the microscope? Or perhaps our attitudes will change, and they will be appreciated for what they are – moments in time, often from long ago.

For either the carefully edited approach to Facebook or the forgotten posts that come back to haunt their creators, it will be interesting to see the impact on future generations. What, for example, will a child think on scrolling through the Facebook timelines of parents who grew up using social media? Might the edited, polished version of their lives that they have put forward on Facebook stand in place of memory, and so eventually become the recorded story of their lives, however carefully curated and managed?

Authors: Sian Lincol, Senior Lecturer in Media Studies, Liverpool John Moores University; Brady Robards, Lecturer in Sociology, University of Tasmania

From The UK Conversation.

When the much anticipated Uber judgment on the self-employed status of two drivers came in, the victory was described by their union, the GMB, as “monumental”. Respected commentators including the lawyers, Leigh Day, and the Guardian newspaper described the judgement as “historic” and “a landmark”.

There is no doubt that the judgement delivered by the London Central Employment Tribunal on October 28 was an advance in the campaign to provide workers’ rights to the hundreds of thousands that are wrongly classified by their de facto employers as “independent contractors” or “self-employed”. But this is no triumph. It is only a small victory in one battle that is part of a much larger and more protracted war. There are five principal reasons for this.

First, Uber will appeal to the Employment Appeal Tribunal, and if unsuccessful there, go to the Court of Appeal and maybe all the way to the Supreme Court. As its business model and, thus, profits, are fundamentally based upon using what the Employment Tribunal regarded as a “bogus” form of self-employment, it will expend a huge amount of energy and resources to overturn the ruling.

Campaign plans

There is a second, more quintessential reason. The nature of the Employment Tribunal decisions means that if many more Uber drivers wish to be availed of workers’ rights – minimum wage, sick pay, holidays, pension enrolment and so on – then they will have to take Employment Tribunal cases as well. Therefore, it was wrong for various commentators such as lawyers and personnel professionals to imply that the rest of Uber’s 40,000 drivers in Britain will be now suddenly be entitled to workers’ rights.

Shoot for the moon. Finding justice. Steve Calcott/Flickr, CC BY-NC

Sure, the Tribunal’s finding does intimate that idea but it is no more than that. The ruling is not binding upon how Uber treats its other drivers – something Uber itself is clearly aware of. The other drivers were not joint plaintiffs in the case. The only way the GMB union can make Uber cave in on all of its drivers is not only to take many, many more ultimately successful cases (as it seem intent upon doing), but also to use various non-legal avenues to pressurise Uber into changing its ways.

Organising consumer boycotts, investor strikes, industrial action of the Deliveroo sort are all viable options. This would be most effective if deployed, along with the legal means, against Uber in a form of pincer movement.

Another important tool available to the GMB at the moment is to use the statements of the prime minister, Theresa May, concerning an economy that “works for all”. If it can get other Employment Tribunals to see which way the political wind is now blowing, this will increase its chances of success.

Will the Prime Minister be an ally? EPA/ANDY RAIN

One case at a time

A third reason to avoid jubilation is that even a final victory after appeal in the Uber case would not automatically mean success for the host of other self-employed workers bringing similar claims against the likes of Addison Lee, Excel, City Sprint and eCourier and backed by their GMB and IWGB unions – or any others that might come in the future elsewhere. This is because each is treated in law as an individual case. Even where there are class actions of multiple plaintiffs in a coordinated series of cases, the judgements only apply in law to them.

So the plaintiffs’ cases against Addison Lee, Excel, City Sprint and eCourier will have to pass the same stringent tests that were applied in the Uber case and show that in different settings that their work – and the organisation of it – was effectively controlled in a conventional managerial method. Moreover, cases take time. The process of gaining the Uber ruling started in the summer of 2015.

Next cab off the rank? observista/Flickr, CC BY-ND

Fourth, even if those other cases are successful, Employment Tribunal rulings are no substitute for a legislative solution. Ultimately, case law precedents can be undermined, overturned and superseded by other case law precedents. Legislation – along with robust enforcement – is the only way to outlaw the bogus use of self-employment. Anything else means that the war to do so means fighting on a piecemeal, incomplete basis.

Fifth, and crucially, employers will undoubtedly find new ways to introduce and embed self-employment. We have seen it already in the construction industry. New rules in 2014 sought to stop employment agencies falsely providing workers on a self-employed basis, but all that happened was that workers were shifted over to so-called “umbrella” companies where workers can be employed legally on a temporary basis and many on zero hours contracts. The practice is now spreading elsewhere. As employers have both the means and the motivation, they will develop new methods to get around any legal challenges. Again, this flags up the need for legislation to provide a blanket ban on bogus self-employment.

The two Uber plaintiffs, James Farrar and Yaseen Aslam, along with their union, the GMB, are to be congratulated on pushing open the door to the legal possibility that self-employed workers might gain worker rights. But it will take much more than this to turn the possibility into a probability, let alone an actuality. Political and legislative change is needed to make sure that their victory is neither Pyrrhic nor temporary. Unless that happens, the Uber ruling will not even be the end of the beginning for bogus self-employment.

Author: Gregor Gall, Professor of Industrial Relations, University of Bradford