The walls are coming down. The #NewFinance ecosystem is alive. And in this post we are going to explore how Business Model Innovation (BMi) is driving the creation of a new generation of dealflow.

+ Time for BMi – Business Model Innovation

Rigid. Opaque. Vertical.

Would be a few of many possible words that would come to mind to describe the world of Finance as we know it today.

Fluid. Transparent. Horizontal.

Is how the Finance industry of tomorrow will look.

The shakeup has begun, and while we don’t know exactly what lies in between yesterday’s world of crony capitalism and tomorrow’s world of boundless entrepreneurship, big moves are already being made.

In recent blogs, we have looked at how BMi is reshaping the food (#realfood) and fashion (#sustfash) industries, today we are going to look at how #NewFinance is the beacon for BMi among the three.

Through a combination of digital platforms and network-as-market theories, Finance is being flipped on its head. Rather than going to a bank to ask for a loan or a venture capitalist for an investment, SMBs and entrepreneurs are logging into their laptop and tapping dispersed networks of investors.

+ DIGITAL Markets

It’s faster, it’s cheaper and it’s engaging. The wisdom and knowhow of those who make the deals flow is no longer being locked down in an investment bank or holed up on the 45th floor of a skyscraper. It’s being distributed and shared, becoming accessible for the average guy and girl with a dream to start their own company.

Not to say that the old grey hairs of Finance will be left on the sidelines; quite the contrary. It’s the mechanism that will change, as the real juicy deals will originate from outside of the traditional intermediaries and be packaged in simpler terms.

And the upside will be explosive. That’s what happens when you start to open the pipelines to previously unserved markets. In the same way that a spark can set a pool of gas ablaze, it only takes a shot of capital to set pent-up demand on fire.

Using BMi as the tool, a host of impact-driven entrepreneurs are bringing their scrappy, scalable upstarts to the global stage and collaborating with others in order to reshape the financial landscape.

What is Business Model Innovation?

A business model is defined as the rationale of how an organization creates, delivers and captures value.

+ The Key Components of a Business Model

Business model innovation is the process of reinventing the business model itself. Rather than being focused on end-product innovation, like derivatives and securitized debt, BMi focuses on changes in the process of exchange across the value chain, whether it be a new pricing structure, collaborative partnership or customer channel. In the end, it is the model itself that SHIFTS, rather than simply the product or service.

How do we bring BMi to the Finance Industry?

It’s already happening.

While most of the traditional finance institutions have gone on with business as usual on a debt-driven consumption model, others are opening the door to a new model of finance based on productivity and creation. Finance BMi is being driven from the bottom up – by entrepreneurs, customers and investors alike – while in the process, the old-school economic theories about efficiency and the free market are being torn to shreds.

Because the whole industry, as we know it today, is predicated on control and ownership, neither of which are conducive to economic ‘efficiency’ in a ‘free-market’ system.

How can markets be efficient when key information is controlled by a few?

+ see The Libor Scandal

How is our system free market when a few ‘own’ and disburse key resources?

+ see New Scientist’s analysis of the Capitalist Network

If we really wanted to have a system where entrepreneurship could thrive and ‘free-market capitalism’ could flourish, it sure wouldn’t look like this.

Governments would enable global currency exchange at fair-market value. Banks would lend to growing small businesses. Investors would take chances on high-impact entrepreneurs. Communities would ‘crowd fund’ cultural and social projects. People would loan money to one another to help make important purchases.

And so that’s how it’s going down. It’s distributed. It’s disintermediated. And most importantly, it’s driven by a collective.

How do we tweak the business model to make this happen?

Click here to download the PDF. View the larger image here.

The finance business model can primarily be broken down into two main categories: retail and investment banking. The retail banking business model is built off of scale, while the investment-banking business model is more centred around dealflow depth and securitization. There are many ancillary service providers who help fill the gaps in the market via partnerships and alliances with the banks.

The primary cost drivers are: staff salaries, real estate, compliance, back-end infrastructure and front-end systems.

While one business model is based on scale (retail) and another more on depth (investment), both are low-margin businesses. Retail banking profitability is dictated by the spread, the difference between the cost of borrowing versus lending, whereas investment banking is a fee-based business where profitability is more related to the bank’s brand and advisory services. So while one side focuses on scaling, the other is more focused on relationships. In the end though, both fall into the low-margin categories, with retail margins originating from the interest-rate spread oscillating between 0.5 – 5 % depending on macro factors, while investment banking fees typically ranging between 1 – 10 % depending on the type of service (M&A, IPO, etc), the amount of the deal and other factors.

Banks, whether retail or investment, can become extremely profitable if they can scale their brand across a number of different channels and create a diversified product offering. That’s why partnerships are so important. Retail banks partner with (or acquire) credit-card issuers, mortgage-origination entities, loan agencies and any other organization that can help them to extend their brand and add more volume. Investment banks build back-end partnerships to source dealflow, capital and advisory services, anything that will help them land the big deals.

But it’s all changing. As these vertical, debt-driven institutions are coming to a point where their business model will become unsustainable. There is only so much ‘free money’ that can be printed, mortgages issued and fees charged. Change is required from top to bottom.

In the Market Beacons section of our #NewEraBiz research on Finance, we analyzed three companies who are breaking away from the traditional mould and finding scalability through network and transparency strategies:

+ A New Era of Business: FINANCE

  1. Seedrs
  2. Funding Circle
  3. Triodos
  • Seedrs was the first regulator-approved crowdinvesting platform in the world. Built on a nominee model, they allow companies to raise up to £150,000 from everyday investors who have as little as £10, and just recently raised £750,000 through their own platform the fund their European expansion;

+ FT – Seedrs EU Expansion

  • Funding Circle is the pioneer of the P2B (Person-to-Business) Lending market and recently raised $37 Million to expand their presence into the US and build on their momentum in the nascent SMB P2P Loan market;
  • Triodos Bank is a Dutch-based entity who are building a ‘sustainable banking model’ on the pillars of transparency and ethics, and taking a lead in the impact and SRI (socially responsible investing) investment sectors.

On a macro level, there are three key areas of focus for sparking Finance BMi:

Given that borders and institutional walls make absolutely zero sense in the Finance world – capital needs to be able to flow – technology is acting as the bulldozer to break down the barriers.

There is a distinctive difference between what is happening in the ‘emerging’ versus the ‘emerged’ economies. Emerging markets are bringing in low-tech solutions to help money move within the boundaries of their country, while emerged markets are using high-tech solutions to remove restrictions on global capital movement.


  • Crowdinvesting, where companies like Seedrs enable anyone in Europe, no longer just the UK, to invest as little as £10 in any startup company looking for £150,000 or less in Europe

+ FT – Seedrs spreads across Europe target=“blank”

  • Money Movement, where companies like Transferwise, based out of the UK, facilitate global money transfers between bank accounts, saving customers from having to fork over huge fees just to make a wire transfer through their bank

+ Transferwise


  • SMS Money Transfer, where services like M-Pesa enable everyday Kenyans and other Africans to send money between one another using SMS on a basic cellular phone

+ Businesses with Bang! M-Pesa

  • Mobile Banking, where companies like CARD Bank, in partnership with the Grameen Foundation, take advantage of existing mobile networks to build banking service solutions for the previously “unbankable” in the Phillipines

+ How CARD Bank activated 480,000 poor Savers

Taking the ‘borders-are-silly’ analogy, #NewFinance is being driven by distributed networks who are connected via platforms, creating entirely new channels for driving dealflow and connecting with customers.

In the emerged markets, this can be seen in the form of crowd-based platforms, while in emerging markets, channels are being created to help impoverished citizens and communities form networks and access capital.


  • Crowd Lending, where companies like Funding Circle create an entirely new channel for SMBs looking for a loan, making the approval process much faster and the fees lower
  • Sustainable Pipeline, where companies like Triodos help finance businesses who meet certain ethical criteria and build a community of customers around those entities, creating a new channel for ‘sustainable’ businesses


  • Crowd Micro Finance, where organizations like Aliança Empreendadora in Brazil help micro-entrepreneurs in low-income communities access to capital through their Impacto crowdfunding portal

+ Impulso platform

The movement towards new forms of currencies is in motion. Part of the transition away from the current system is based on the need to move away from purely debt-driven, government-issued currencies and create new forms of exchange between people (P2P).

In emerged markets, new currencies are sprouting up to help spawn new digital ecosystems. In emerging markets, alternative currencies are being developed to help citizens spend their money in local businesses, as typically 90% of the money spent in low-income communities flows out to global conglomerates.


  • Digital Dinero, where currencies like Bitcoin are enabling a new method of peer-to-peer payment via a digital currency which can be exchanged for real money. Despite its overhyped valuation and flawed structure, it does provide a signal that bona-fide digital currencies will be emerging in the future.


  • Local Currency, where the Sampaio in São Paulo helps steer citizens in the urban neighborhood of Campo Limpo to spend their $Reais on local businesses and build a flourishing community

+ Catarse: Banco União Sampaio

Overall, if capital is going to flow, we can’t have a million barriers, a thousand fees and a few controllers. Thanks to technology and a growing realization of the need to redistribute dealflow, the #NewFinance movement has come to life. In both emerged and emerging markets, countless examples of BMi exist to show how a few tweaks of the BM can create big impact, both locally and globally. And the beauty is, this is only the beginning.

Have you seen any great examples of FINANCE BMi?

+ Time For BMi

PLAN – the Business Model

The New Era of Business reports are focused on the future of important industries and include examples sourced from around the world.

How will we finance the future?

That’s the question driving the research behind this report on New Finance, as we take a deeper look at how finance is driving the New Era Business. As Finance is at the heart of the #NewEraBiz – no business can even get started without capital and not everybody is bullish on BitCoins – we wanted to scan the panorama and look at emerging ecosystems in the (new) financial landscape. The goal of next-gen finance platforms is to help entrepreneurs and small businesses (SMBs) avoid using credit cards to finance their entity; instead, they can source capital via these platforms that leverage technology to cut out middlemen and lower fees.

What is New Finance?

If traditional finance is a vertical, competitive and rigid hierarchy dominated by a small group of financiers and industrialists, then New Finance is the opposite. Horizontal, collaborative and fluid, it is an industry that is inclusive and takes advantage of collective actions to drive dealflow.

We’ve talked about New Finance before over the course of the last couple of years.

The first real research down this avenue happened with My Crowdfunding Stud in Latin America, as the advent crowdfunding was the catalyst for many of today’s New Finance platforms. That was followed up by a trip to see what Seedrs and other early movers in the crowdinvesting industry were up to in London.

+ Finance 2.0: Wall Street Meets the Web

Then at the end of 2012, we did a small case study on what’s happening in the UK to demonstrate how the SMB Finance ®evolution is in full effect.

+ The SMB Finance Revolution

More recently, we dissected how New Finance startups like Circle Up were helping to Redistribute Dealflow to the areas of the economy that need it the most; we used Food as an example of an industry that has been chronically underfunded at certain tiers.

+ The Redistribution of Dealflow

Now we are going to take a look at this from the bigger picture and see what the next step is in the evolution of Finance. To put it in perspective, we have embedded a video by Bridgestone founder Ray Dalio to outline ‘How the Economic Machine Works.’

To summarize, the economy is essentially governed by three forces acting simultaneously – the short-term debt cycle, the long-term debt cycle and productivity growth. Together, they work to drive the economic machine that powers the global economy.

Since the financial crisis, governments have resorted to printing money as the strategy to ‘stimulate’ the economy. This stimulus drives the short-term debt cycle, which usually lasts for about 5 – 8 years. When the Central Banks lower interest rates to rock-bottom levels and turn on the money-printing taps, they create an expansion of credit and we move up the short-term debt cycle curve.

The short-term debt cycle, the oscillating squiggly line, is a subset of the long-term debt cycle, the large oscillating line, which operates in periods of roughly 50 – 75 years. When the cumulative debt in an economy builds up to a point where it is no longer sustainable, the peak of the long-term debt cycle, then we begin to enter a period of deleveraging. If done correctly, and inflationary and deflationary measures are balanced, then we can have what Ray calls a ‘Beautiful Deleveraging,’ or an orderly unwinding of a debt bubble.

Thirdly, we have productivity growth, which is the straight line on the graph that increases steadily over time. Productivity is a function of how efficiently we utilize resources to achieve outcomes that boost the economy. The key to the long-term growth of any market economy is increasing productivity.

While the video doesn’t overlay our current economic environment into the model, it appears that we are entering a period of deleveraging when you take into account that:

  • Central Banks are printing money at an unrelenting pace;
  • Consumer Debt has reached unprecedented levels;
  • Underlying inflation remains low;
  • We have rock-bottom interest rates and sky-high sovereign debt.

The ‘stimulus strategy’ has been focused on expanding consumer credit, which is administered by the banks, who have made enormous post-Crisis profits off the spread between what it costs them to loan versus what they charge customers to borrow. Unfortunately, however, much of that cheap credit has failed to reach SMBs, creating a large chasm in the SMB Finance market.

The problem is that, as many studies have shown, it is only (or at least primarily) new firms who create long-term jobs in an economy; therefore, if the required capital is not reaching the SMBs who need it most at an early stage, then a full economic recovery cannot occur. In the UK, for example, the 2012 Breedon report showed that there will be a £84 – £191 Bn gap in SMB loans if significant changes were not made.

Thus, to restore the global economy to an era of robust (and sustainable) growth, the SHIFT should be to measures that boost productivity and increase businesses access to capital, rather than giving consumers credit for consumption. And that’s where New Finance comes in.

Because it’s the SMBs (small & medium businesses) who can reignite the economy in a sustainable fashion – delivering economic, social and environmental benefits to all tiers of society – and bring full-time jobs to their respective nations.

In this light, we have seen several trends emerge in the last few years to provide businesses with the access to capital they need to startup, grow and expand globally, including: crowdinvesting, P2B Lending and sustainable banking.

Crowd Investment

Crowdinvesting is an offshoot of crowdfunding, which was sparked by the launch of Kickstarter in 2009. The crowdfunding model is a donation-based model that uses technology to efficiently enable members of a given community to each contribute small amounts of money to fund a project.

+ Business Model Breakdown: Crowdfunding

With crowdinvesting, ‘the crowds’ are able to actually invest, or take an equity position, in a seed-stage enterprise, rather than simply donating for a reward. While it sounds conceptually simple, it is a complex to implement because it requires national/state security regulators to rewrite security laws to allow for ‘crowds’ of unaccredited investors to buy shares in companies that have not filed a prospectus.

Seedrs, based out of the UK, was the first regulator-approved crowdinvesting platform in the world and uses a nominee model to enable companies to raise up to £150,000. Countries like the US, on the other hand, are trying to roll out nationwide regulations (the JOBS Act) to enable multiple platforms to work within the same framework.

While each country, and the strategy of each platform, is different, the goal is the same – use technology, and the wisdom of the crowds, to capitalize upstart companies. According to Crowd Valley, the market for startup crowdinvesting was approximately $112 Million however, the market is only just beginning and the growth will ramp up exponentially as laws are changed to facilitate crowdinvesting globally.

P2B (SMB) Lending

P2B Lending, in a New-Finance context, is an offshoot of the P2P industry, which was estimated to be a $1.2 Billion industry in 2012 and growing fast.

P2B Lending happens when one business receives a loan from an individual, group or institutional ‘peer’ rather than a bank. In a similar vein to crowdinvesting, P2B Lending leverages technology to create an efficient debt market and remove the middleman, in this case the banks. Rates are typically set using an auction or bid system, and the industry is, similar to crowdinvesting, subject to regulatory laws within each country it is based out of.

Zopa, started in the UK back in 2005, was the pioneer of the P2P Lending market and has facilitated $400 million worth of personal loans since its inception.

Now, the P2B Lending marketplace is starting to get hot, with companies like Funding Circle stepping up to give businesses access to expansion and working capital, plugging the gap left by banks. Since the company’s launch in 2010, it has facilitated $158 Million worth of loans to SMBs at an average rate of 5.8% and loan size of £65,000.

Other sites are popping up globally as well, as the market starts to take shape to start the capital SHIFT to the companies that need it. While the market is only estimated to be worth about $120 M globally, expect rapid growth in the next 5 years.

Sustainable Banking

Sustainable banking is an offshoot of traditional investment banking, with one key difference – it matters how profits are made. Rather than being a black box that bankrolls dictators and unsustainable enterprises, the goal of sustainable banking is to foster a vibrant economy so that there are markets left to bank in the future.

The essence of sustainable banking is that these banks actively fund enterprises that generate a positive impact for society. While a bank like Goldman simply acts as a ‘market maker’ and don’t limit themselves with ethical concerns, sustainable banks look to loan to and bankroll businesses that play a real role in the creation of a flourishing society.

Recently, a few studies have been conducted to compare the performance of ‘sustainable banks’ to ‘too-big-to-fail’ banks. One such study, which analyzed data between 2003 and 2012, comparing Global Systemically Important Financial Institutions (GSIFIs) versus ‘sustainable banks,’ revealed some interesting insights.

While global return on equity was greater for the traditional banks, it’s clear that it comes at the risk of depositor’s savings and assets. A breakdown of individual CAGRs in different banking categories, however, showed that sustainable banks outperformed in all categories.

It goes to show that there is a business case for sustainable banks, and that it goes beyond just ‘ethical’ rhetoric. While traditional banks will be able to maintain immense profitability for the interim, the whole banking business model will need to evolve to become more sustainable in order to bankroll the #NewEraBiz to grow globally in the decades ahead.

Market Beacons


Seedrs, who we alluded to earlier in the ‘Crowdinvesting’ section and have talked about in several previous blog posts, continue to be the beacon of crowdinvesting in our opinion.

While they have not generated the same volume as their closest competitor CrowdCube, who had about a year head start, their nominee structure and everyday-investor attitude make them the model to study for long-term crowdinvesting success in our opinion.

In addition to offering everyday UK citizens the opportunity to invest as little as £10 in startups, they also have worked with the UK Government to create the SEIS program and other seed-investing schems.

With Seedrs ramping up growth, they recently broke the £2 Million pound mark and have started opening innovative fund mechanisms, such as the recently funded WebStart Bristol, which raised £150,000 on the platform to launch their incubator.

Funding Circle

Funding Circle, who we alluded to in the P2B SMB Lending section, is pioneering the loan market for SMBs. The company is ramping up growth, developing new partnerships, and has a bad-debt rate of only 1.4%.

Beyond the numbers, they are meeting their market’s demand. A study conducted by Nesta showed that 77% of businesses would return to Funding Circle as their source for future financing. 75% of lenders, on the other, stated their willingness to increase lending in the next 12 months.

The strength with Funding Circle, other than general satisfaction and lower interest rates, is the speed. New applications are reviewed with 48 hours, and the average funding period is 12 days, compared to 15 to 20 weeks with the banks.

The company just raised $37 Million and is expanding into the US.


Triodos is one of the best of the sustainable-banking bunch. Founded in 1980 and based out of the Netherlands, Triodos is gaining traction in a banking world for a characteristic not typically associated with financial institutions, transparency.

On one side, they offer their customers the unprecedented opportunity to see where their money is being invested by acting as a ‘sustainable fund manager.’ Beyond simply offering feel-good investment opportunity, these ‘sustainable funds’ also offer a solid return. As an example, they have setup the Triodos Microfinance Fund, which helps to develop financial services for low-income people in developing countries; it has achieved an average annual return of 7.1% over the last three years.

For business financing, they only ‘finance organizations working to build a sustainable future for individuals, the community and the environment.’ Their criteria enables both charities and businesses to borrow money, with loans ranging from £25,000 to £15,000,000 and up. They offer a range of business credit products, including working-capital loans, commercial mortgages and cashflow lending.

End to end, Triodos strategy is based on openness, as they show full transparency on their loan portfolio and banking fees across the gamut. And the results are there to back their strategy. In 2012, they grew their balance sheet by 23%, increased SMB Lending by 16%, upped their customer base by 23%, and reported a 31% increase in net profit (€22.6 Million) from the previous year.

Overall, the New Era of Finance is focused on building a balanced and sustainable economy around impact-driven SMBs. Rather than traditional banking, where profits are derived at all costs and very little money actually circulates into the real economy, the new frontier will be built on the bedrocks of technology, collective wisdom and transparency.

How do you see the future being financed?

+ Time For BMi

PLAN – the Business Model

New York. New York.

Over the years New York has built up a larger-than-life repuation: from Broadway to Wall Street, the Yankees to the Juilliard, chances are if something big is going down, it’s happening in New York.

With that in mind, we recently headed there to see how the #NewEraBiz was blossoming in the Big Apple.

By #NewEraBiz we mean the new-era business, the one that’s designed to be open and collaborative in nature and make things move. The type of business whose collective spirit inspires others around it and ultimately helps form an ecosystem of brands and partners who are united by a common thread.

After doing several trips last year to explore a series of exciting new developments in the collaborative economy (yet to be defined), it was exciting to get back on the road and experience what’s happening first-hand.

If you have read any of our blog in the past, you will have maybe noticed that there are three key industries we have been focused on for industry-specific posts:

  • Finance: which includes crowdinvesting and the #NewFinance movement

+ The Redistribution of Dealflow

  • Food: which relates to organics and the #realfood revolution

+ A New Era of FOOD

  • Fashion: which relates to next-generation materials and #sustfash

+ Avant Garde: Moving Fashion Forward

Why these three?

Part of it is personal preference and part of it is collective importance. Of course there are numerous other exciting industries and important trends happening at the moment, but these three in particular really need to be redefined and reinvented before we are going to see real progress and ‘economic growth’ again.

That’s because everyone needs to eat (well!), (almost) everyone gets dressed in the morning and everyone needs to be bankrolled if they want to start a business. In a system where Big Ag dictates what we eat, Haute Fashion defines what’s stylish and Big Banks decide who gets money, you get big problems.

So what’s moving and shaking with the #NewEraBiz in New York?

FOOD is happening, and in a big way. It was certainly the focus on this trip.

#RealFood NYC

Whole Foods

There are several Whole Foods located in Manhattan (probably 5 or 6), all of them huge, and all of them are packed. The most reputable real-food market in the big-grocery business recently made headlines when they announced that all products in their stores would be GMO-labeled by 2018. Evidence that people are becoming increasingly conscious about what they eat can be seen right away when you walk into a Whole Foods in NYC:


While Whole Foods (many times referred to as ‘Whole Paycheque’) is great if you fit into the affluent-urbanite category, the reality is that the majority of people just can’t afford to pay those types of prices for their food on a daily basis. Which is why it is exciting to see Food Cooperatives (Coops) emerging in many middle-class neighborhoods. One in particular, the Park Slope People’s Coop in Park Slope, Brooklyn was full of everything you could imagine when it comes to real food – local produce, organic ingredients, whole-grain baking, etc. – and the prices on several items were about half of what you would find in a Whole Foods.

Coops function differently than traditional grocery chains. To be a member, and therefore purchase goods at the Coop, you must put in a volunteer shift every month and pay an annual membership fee. Thus Coops don’t pay the same labour expenses as a traditional grocery chain. They also markup their items at a fraction of what traditional chains would, and in many cases, depending on how the Cooperative is setup, will redistribute profits to the members.

The Coop structure is a very promising development in the #collaborativeco and something we will be researching in greater depth during the months ahead.

Outdoor Markets

Outdoor markets were everywhere. In Manhattan, in Brooklyn, everywhere. And they were packed, everywhere.

The reason for this is simple, as the real-food revolution is all about bringing the farmer’s food directly to the table.

Farmers and food vendors are able to take their product directly to the consumer, which helps the farmers cut out the middleman. From a consumer’s perspective, it is very reassuring to not only see the people making the food, but to hear their stories. In a world where food has been commoditized, among other things, outdoor markets bring everything back to earth.

The hallmark of the NYC outdoor markets is organic everything – from slushies to sandwiches – and an increasing array of biodiversity in crops like beans, tomatoes (heirloom tomatoes to die for) and others.

Artisan Vendors

Artisan is a buzzword that food-marketing mavens have definitely caught onto, so watch out. At the core, however, it relates to the craft of making or manufacturing the food to the highest of its potential.

One example is chocolate. Thanks to the whole industrialization and globalization of food, many ‘chocolate bars’ on shelves aren’t actually chocolate anymore. They have been cut with every filler, sweetener and artificial flavour imaginable and labeled chocolate bar. That’s why companies like Mast Brothers have come to fruition:

In the heart of Williamsburg, Brooklyn, they handcraft chocolate bars using the best beans from around the world.

Artisan is about bringing food from the source to you. So the story is a key part of every artisan vendor’s strategy – if they don’t have a story, they aren’t artisan. Luckily NYC is teeming with artisan vendors like Mast who are the real deal.

#SustFash NYC

After spending quite a bit of time Europe last year researching the New Era of Fashion, it was quite an interesting to contrast the action over there to New York.

+ A New Era of Fashion

While New York is a big and very important fashion market, they are definitely far behind Europe when it comes to ‘sustainable fashion.’

This can be seen not only in the lack of consciousness about #sustfash for the average New Yorker, but also by the lack of marketing initiatives on the businesses part, meaning it’s not top-of-mind for consumers (yet). After a long stroll through the Fashion District, there was very little evidence of any ‘sustainable fashion’ marketing and whatever we came across was put up by brands we were already familiar with. Certainly there are no brands targeting the young generation, a big missed opportunity, especially when you compare the ‘sustainable fashion’ movement to organic food.

On the other hand, there are many young artisan and upstart designers who are coming to market in the US with a ‘sustainable’ focus. Additionally, there are a few cool initiatives being done to knit together these emerging designers and give them more resources to move to market. Overall though, it looks like NYC has some work to do in the #sustfash market, especially compared to #realfood.

#NewFinance NYC

Only this year did we start writing a little bit about #NewFinance in the US.

+ Funding the Niche

That’s because the big story was, and continues to be, the rolling out of the JOBS Act, which will effectively legalize everyday Americans to make equity ‘crowd’ investments in early-stage American startups and small businesses – at least that’s what it set out to achieve.

Undoubtedly crowdinvesting is the future frontier for finance, but each country is taking their own approach to it. While the UK has focused more on a case-by-case basis (ie. Seedrs), the US has opted for a full-legalization approach, which is causing delays and a lot of ambiguity.

+ The Seedrs Report

Now many are saying that the JOBS Act is so watered down that it will be up to States to come up with their own regulations to legalize true crowdinvesting. Until something moves in one direction or another, however, the real stories related to #NewFinance will be happening outside of the Big Apple.


NYC provided a great opportunity to see the #NewEraBiz coming to life, in food anyways. To actually see and feel this change is very exciting because a of its magnitude, which will eventually flip ‘business’ on its head. The tides are turning and the Bull is no longer behind Wall Street.


  • While major fashion brands continue to plunder ecosystems and drive species to extinction to make designer clothes & handbags, we need to wear our values on our sleeves.

  • While major banks continue to hide behind their bodyguards and funnel money from public sources into private ventures, we need to put our money where it matters.

  • While mega food brands of the world continue to pump hormones and chemicals into our food and call it wholesome, we need to pull up our chair to a different table.

Because like Socrates said:

“The secret of change is to focus all of your energy, not on fighting the old, but on building the new.”

By focusing on the new, and truly collaborating, we can create a whole new era of business and make it an unforgettable journey in the process. It will take new business models, strategies and everything else, but there’s no use trying to pretend anymore that the old way still has legs.

The summer months provide a great time to chill out, sit on the patio and think things through. So take advantage because September, the time to start fresh, will be here in a heartbeat.

+ Time For BMi

PLAN – the Business Model

+ BMi Services

The Year of the Crowd is in full swing; crowdfunding is taking off in 2013. While some industries are tapping into the crowd #momo with full force, others, like fashion, need to pull up their proverbial socks. The time has come for fashion designers and enthusiasts alike to start crowding the runway and funding designers of the future.

What is crowdfunding?

Crowdfunding is a collaborative funding process where individuals/entrepreneurs can raise funding for their projects/businesses from their networks through online platforms. Project creators make a short video and launch their project online, and project backers (the crowd) each donate different amounts of money until the project is funded. What started off as small experiment in 2009 with Kickstarter has now become a red-hot industry with an expected transaction volume of $5.1 Billion in 2013.

+ Funding the Niche

How is crowdfunding relevant to the fashion industry?

Crowdfunding is helping to move capital to the industries that need it most, and fashion is definitely at the top of that list right now. With the industry in need of a radical shift, crowdfunding can spur a new generation of fashion designers and help democratize the way clothes are created.

+ Avant Garde: Moving Fashion Forward

What’s happening right now?

Fashion designers and next-generation brands from all over the world are beginning to experiment with crowdfunding as a way to bring their new clothing lines to life.

Here are three examples of how clothing designers are starting to crowd the runway:


Wowcracy went of its stealth mode on Sunday and opened up the site to start accepting projects. The Italian-based entity has been promo’ing their launch since late 2012, and it looks like the veil is about to be lifted on the crowdfunding portal that promises to bring ‘Endless Fashion Week’ to its collaborators.

Wowcracy will function using what’s known as the ‘pre-buy model,’ where project backers can collaborate to help bring new collections to life. Essentially, backers will pledge to pre-buy the garment or accessory of their choice, and if the entire campaign is funded (all or nothing) then they will (technically) donate the money to the designer and receive the specified garment when the collection is finished.

Expect to see live projects on Wowcracy in the coming weeks.



Kickstarter is the original crowdfunding platform that sparked the global crowdfunding movement in 2009. After having helped project creators raise millions of dollars globally, the platform is now being used by fashion designers in selected countries (US and UK) to help get new collections off the ground.

One duo in New York recently decided to launch a crowdfunding campaign for their sustainable line of activewear, made using Merino wool.

To create Opus Fresh and start re-defining adventurewear, they were hoping to raise $15,000 USD over the 90 day time period. Well as you can see, they have blown that target out of the water and raised more than 300% of their original goal; and they still have a month and a half to go!

+ Strategies for a Successful Crowdfunding Campaign

Kickstarter is built to help get projects like this off the ground. While it’s not strictly a fashion-focused funding portal, like Wowcracy, it is another great option for aspiring fashion designers to bring their ideas to life.

+ Kickstarter: Fashion Projects


Everlane is a US-based fashion retailer committed to shaking out the middleman and helping bring fashion back to its roots. When the company was thinking about how to approach the Canadian market, one of the engineers in the company came up with the idea to crowdfund their market entry to see if the demand was there. And so the #CrowdFundCanada campaign was born.

#CrowdFundCanada campaign

So the company created their own branded crowdfunding campaign with the goal of raising $100,000 to break into the Canadian market.

And they succeeded! By raising $118,000 through their #CrowdFundCanada campaign, Everlane showed that not only can crowdfunding be used to get off the ground, but also to enter new markets.

We talked about this strategy last year, in our Building Blocks for the #NewEraBiz series.

+ BB: Test Demand via Crowdfunding

Everlane is the best example we have seen of actually executing this strategy, showing how brands can use the collective crowd power to their advantage to blaze new trails and enter new markets.

Overall, the time to crowd the runway has come. With an abundance of creative talent and a shortage of capital, crowdfunding can help connect the dots between aspiring designers and would-be backers. Suit up for a spring full of crowdfunded fashion!

+ Time For BMi

PLAN – the Business Model

As the ground underneath the global economy continues to crumble, new markets and ecosystems are emerging to fill the gaps. The crowdfunding ecosystem, in particular, is evolving at a rapid pace – and we have only just begun. Far from a fad, crowdfunding is reshaping the global financial landscape, which is why today we are going to talk about the evolution of the crowdfunding ecosystem and what it means for the everyday entrepreneur.

The modern day crowdfunding era began in 2009 when Kickstarter launched their platform to allow the public to ‘Fund and Follow Creativity.’ It wasn’t the first official platform ever invented, but it was the first to demonstrate real traction and create some buzz. It hit our radar for the first time in August 2010 (see link below), a little over a year after it launched, and since that time an entire new market has spawned.

+ Businesses with Bang! – Kickstarter

The crowdfunding ecosystem is fully global – platforms are sprouting up in every part of the world, from off-the-beat countries such as Cuba (ex. Yagruba), to emerging economies in Africa. What’s amazing to watch is the way the ecosystem evolves, as a plethora of platforms are born to serve specific regions, fill niches and create new communities.

We were on the road at the beginning of the year to study crowdfunding in Latin America, where we believed (and still do), that crowdfunding would operate in its purest form. Following that trip, we made stops in London and Toronto, all in an effort to piece together one of the most rapidly developing ecosystems in human history.

+ My Crowdfunding Study

So let’s start from the top down and see how the platforms are evolving to create this globally integrated ecosystem:

Crowdfunding Ecosystem

Global – Indie Gogo

‘An International Crowdfunding Platform to Raise Money’

Indie GoGo, who actually launched before Kickstarter, has been successful at establishing itself as the ‘go-to’ global crowdfunding platform. The main reason they have been able to achieve this, ahead of Kickstarter for example, is because you do not need an American Amazon account (as you do with Kickstarter) to register a project, and there is no waiting process to launch a project. Projects on the platform can be seen from countries around the world.

Regional – (Latin America)

‘The platform in Latin America for Collective Financing’

+, which came to fruition in mid 2011, is working to become the regional crowdfunding platform for Latin America – Joel visited the company during My Crowdfunding Study in Buenos Aires earlier this year. They started off in Argentina, Chile and Mexico, but now are spreading their reach into other Latin countries, especially Brazil, where they made a big splash by acquiring the number two ranked crowdfunding platform Movere. is continuing to gain traction in LatAm, but the growth curve is vastly different from one country to the next, so it will be interesting to see how the platform evolves to meet the different needs of each country.

+ My Crowdfunding Study – My Day with

National – Goteo (Spain) + Catarse (Brazil)

‘Crowdfunding the Commons’


‘The premiere platform for collaborative financing of creative projects in Brazil’


We are breaking the one-example rule here because both these platforms are world class, much to the benefit of their respective countries. Both are mission driven, subscribe to open-source principles, and curate all projects launched on the platform to ensure they meet a specific social and cultural mandate; therefore, it is no surprise that the best projects in the world (in our opinion) are being launched on these platforms. They have both been very effective bringing projects to life that meets the needs of their respective countries. Catarse, in particular, is pushing the limits on social innovation like no other platform.

+ My Crowdfunding Study – a Chat with the Cara from Catarse

CrowdInvestment – Seedrs (UK)

‘Invest in Startups’


Seedrs is the first regulator-approved crowdinvestment (the equity-based model of crowdfunding, where shares of the company are received) in the world. Companies can launch their pitch on Seedrs and raise up to £150,000 in equity capital. At the moment of writing this, four companies had successfully been funded, not bad considering the platform just launched in July. Look for Seedrs to grow rapidly as the economy continues to deteriorate and more entrepreneurs turn to this brilliantly-designed platform to get off the ground.

+ Finance 2.0 – Wall Street Meets the Web

Local – (Kansas City)

‘Invest in civic projects you care about’


We came across this little gem last week, and think it perfectly represents the power of crowdfunding in communities. There is a lot of action on this little site, as citizens of Kansas City collaborate to bring important projects to life. This site shows the power crowdfunding has to transform the urban experience for its citizens and bring important projects to life that municipal governments can no longer afford.

Niche – Credibles (Cali and NYC)

‘Prepaid crowdfunding for local food businesses’


We are really excited about crowdfunding for two reasons:

  • because we love food (see post A New Era of Food)
  • they bring another element to the crowdfunding process, a local currency

The crowdfunding part of the Credibles model is straightforward, as the idea is to contribute funds to help local food businesses launch. But rather than just a straight prebuy, or demand-testing function (see post Building Blocks – TEST – demand via crowdfunding), Credibles has created a currency system, whereby the dollars donated to each local food business can be redeemed using a custom currency (called Credibles) at any of the food vendors who are funded on the platform. In other words, if you donate $10 to a local baker to start his bakery, you can redeem $10 worth of Credibles at his bakery (when launched) or any of the other food businesses in the Credibles system. The idea is to create a new food ecosystem, rather than a crowdfunding platform for food businesses. The project is currently in private Beta mode in San Francisco and New York, but look for similar models to emerge globally in the near future.

+ A New Era of Food

So that gives an overview of the platforms that have emerged to fill various roles in the global crowdfunding ecosystem. Now the question is, what does this all mean?


While it is fascinating to observe how crowdfunding is evolving, there are three core takeaways for any entrepreneur or organization who is looking at crowdfunding as a potential funding option:

Business model innovation

The big platforms will generate their revenues off of volume, and likely only one or two platforms will achieve long-term profitability in each of the major categories; therefore, business model innovation is required. We wrote about this in our original Business Model Breakdown post (see below), but what needs to happen is that local and niche platforms will have to offer a suite of customized services in order to survive. While the bigger crowdfunding platforms focus on creating volume to generate their commission (4 – 7.5% average), the smaller platforms need to offer services to increase that percentage (ie. video, campaign strategy, etc.) and find ways to leverage their niche focus. This will have big implications if you are an entrepreneur or organization looking to launch a campaign, as the service level from platform to platform will differ greatly

+ Business Model Breakdown – Crowdfunding

Campaign valuation

One of the biggest problems for failed crowdfunding campaigns is valuation. Many organizations and project creators simply ask for an unreasonable amount given the context of their project. Now, with so many platforms covering so many different areas, entrepreneurs can look around at what similar projects in other markets are asking for and how successful they are at reaching their goal. It gives instant context and offers a quick comparison for how to price a campaign at the outset, very valuable information for new project creators.

New Network Demographics

With so many options, and a limited attention span, people and organizations will start to become loyal to certain platforms. While it may make sense for an ambitious entrepreneur to launch a new product on Indie GoGo or Kickstarter, it wouldn’t make sense for a small community organization to do the same if there is strong niche/local alternative. The success of crowdfunding campaigns is contingent on bringing together enough people from a specific network/market/demographic to fund the project. With so many platforms coming online, entrepreneurs and organizations need to be strategic about which platform they launch on and how they target their networks.

Overall, the crowdfunding ecosystem continues to evolve at a rapid pace in sync with the creation of a new economy. A whole new era of creativity and innovation is upon us thanks to the democratization of the financial landscape. Never have entrepreneurs and organizations had so much power at their fingertips to get their projects off the ground. The story will keep developing as the ecosystem continues growing, so stay tuned for much more about the new era of finance. If you are interested in seeing examples of amazing projects from the sites listed above, check out our new Crowded Judgment blog series.

+ The Collab Economy – Inspiration from Spain
+ Finance 2.0 – London + Crowd Finance

Building Blocks – PLAN – the Business Model

Sustainable growth – it is a term that has become the focus of the brightest business minds’ around the world; however, there is one issue – in today’s environment, it is an oxymoron. Politicians and economists want us to focus on growth in order for them to try and repay the mountain of debt that they piled on in the name of ‘prosperity.’ Environmentalists and activists, on the other hand, want us to focus on sustainability and preserving the planet. The problems is that we can’t just pick one or the other, we need to do both simultaneously. That’s why in today’s blog we are going to explore the term sustainable growth and discuss how to turn it from an oxymoron into the new standard for business.

A few weeks ago, I was browsing the Internet when I stumbled across the Capital Institute’s website, which brands itself as the Future of Finance. Started in 2009 by the former Managing Director for JP Morgan, John Fullerton, the Capital Institute aspires to spark discussion about the role of finance in our society and what business will look like in the new economy. One video in particular, called the Biospheric Reality (embedded below), caught my attention and inspired me to start to think deeper about the role that both business and financial institutions should play in our society.

Among a number of great concepts that were illustrated in the video, the one that really struck me was the analogy that compared our financial system to the biosphere. In Mother Nature, when the environmental ecosystem starts becoming highly unbalanced, a period of chaos ensues. That is what is currently happening in our global economy. Following the period of chaos, a higher order emerges and the entire ecosystem starts to rebalance itself over a period of a number of decades. This is what lays ahead in the next several decades for our global economy.

In our last blog, Finance 2.0 – Wall Street Meets the Web, we discussed how the new crowdfunding movement will be a key catalyst in the creation of a new financial ecosystem. But this is just a small component of the whole, as the global shift that has begun is composed of a series of movements and new paradigms that are all contributing to reshape our economic landscape. The motivator for the entire shift, in my opinion, is the desire to rebuild our economy around the principle of sustainable growth.

But what is sustainable growth?

Sustainable growth is a philosophy that recognizes that economic growth (in today’s terms) is constrained by our finite resource base; therefore, despite the fact that economists’ models are based on the principles of infinite growth, we have to recognize that the environment (ie. our planet) that nourishes our existence is in fact composed of a finite amount of resources. The sustainable-growth model focuses on ‘growth’ (in an economic sense) that is balanced with our social and environmental surroundings.

Rather than looking for opportunities to profit at the expense of both people and the planet, the new paradigm is built on the premise that we can make profit while improving the lives of people and the state of our planet. Instead of trying to find opportunities in every crevice of the globe just to keep the current economic model alive, we should instead focus on redefining what we are trying to achieve in the first place. In the video above, John Fullerton parallels this to the Copernician moment, which happened centuries ago when everyone on the planet realized that the world was not flat as they had been brought up to believe.

So what does sustainable growth look like?

First we need to plant the seeds to the first trees (businesses) that will begin to sprout their first leaves (profits).

The (sustainable) growth of the tree (business) will unfold until it has fully blossomed (profit threshold).

At that point, other businesses in the external environment (the forest) will take notice and begin to follow the sustainable-growth model – a new forest (new industries) will begin taking shape.

The businesses who fail to adopt the principles of sustainable growth will inevitably fail and a full-growth forest (interconnected industries) will develop – then one day the forest will merge with the surrounding ecosystem (global economy) and mark the beginning of an entirely new economic paradigm.

That’s how we see the sustainable-growth model in the new economic environment. It remains to be seen how quickly this new growth model starts to become implemented, but we expect that a business that takes root one decade from now will not look, or think, anything like the businesses of today. It’s time to turn sustainable growth from an oxymoron into the new standard for doing business.

+ Building Blocks for the New-Era Business
+ Finance 2.0 – Wall Street Meets the Web

Crowdfunding Strategy – Summary

PLAN – the Business Model

While investors around the world continue to watch the stock market swing like a seesaw, a new funding model is taking shape that has the potential to reinvent how entrepreneurs access capital. The crowdfunding model, where a large number of investors each contribute a small amount of capital to fund a project, has caught fire around the world. In this blog, we will look at the driving forces behind the crowdfunding movement and how it has the potential to transform the global economy.

To say that the economic prospects for the global economy have looked brighter would be an understatement. As several of the world’s most developed nations stare down the barrel at a potentially deep recession, many are wondering how to deal with their massive debt burdens. The answer, according to most, is to develop an ecosystem of startup companies; yet in today’s world, the path to raising capital for the typical startup is as difficult as it ever was.

In its current form, raising capital for a startup company is a very vertical process, one where an entrepreneur is essentially asking for permission to raise funds from the small number of people who administer large amounts of money. The path usually goes something like this:

Friends and Family → Angel Investor → Venture Capitalist → Stock Market

With this conventional, vertical financing path, many entrepreneurs with big ideas are unable to launch because they lack the capital at the early stages. Take Johnny the typical entrepreneur:

Johnny has a great idea, so he does some research, writes out all the details and then tells his friends … and they love it.

The problem is that Johnny has nowhere to go with his idea; he doesn’t have the capital, his friends and family don’t have enough money, and he has no investor contacts. So the idea goes to waste. That is until crowdfunding came into the picture.

With crowdfunding, Johnny can create a video to explain the project and outline a plan for use of the funds, then post it up on a crowdfunding platform (see examples below) for the crowd to vote on with their dollars. If they love it, they will fund it – the project needs to reach the specified goal in the allotted period of time (typically 60 days) to be funded.

In their current form, the majority of crowdfunding sites work on a donation basis, where ‘investors’ donate the capital (typically between $10 and $10,000) in exchange for a social reward (ie. front-row concert tickets for the rock bank you supported, the first shipment of the new product that you backed, etc.). We are, however, at the frontier of a new era of crowdfunding, where investors can take real equity stakes in businesses through registered crowdfunding platforms (more on this below).

The key enabler for crowdfunding is technology, but the driving force behind the movement is a desire for a more democratic way of investing. By leveraging the collective intelligence of the crowd, businesses are able to finance themselves and move to market much more efficiently than in the typical system. In most cases, investors also become buyers, cheerleaders and social supporters, all in one.

So who are some of the early pioneers in the crowdfunding industry?

Kickstarter– Many consider Kickstarter to be the pioneer of the crowdfunding movement. Having launched in the 2009, the New York-based company recently eclipsed the $100 million dollar mark in capital raised through the platform. (learn more about how Kickstarter works here …).

Ulule – More than just a cool name, Ulule is also a pretty powerful platform. In its first year, the company has helped 359 aspiring artists and entrepreneurs launch their projects. Ulule brings other features to its platform to increase its reach, such as multi-lingual capabilities and a store for presales. (Check out the team behind Ulule). – The crowdfunding movement is in full force in Latin America, and Buenos Aires-based is helping to pave the way. While not the first platform to launch in South America, is the first major site to finance projects across different Latin countries, including Argentina, Chile, Colombia and Mexico. (See the faces behind

ProFounder – Co-founded by Jessica Jackley, a member of Kiva’s founding team, ProFounder streamlines the equity-raising process for new ventures in the US by allowing them to efficiently navigate stringent US security regulations and raise funds (both private and public) through the company’s platform. (learn more about how ProFounder works … )

So how will crowdfunding lead to the creation of a better economy?

Many of today’s most prominent business models are not structured to meet societal needs in an economic, social, or cultural context; innovation needs to come from the bottom-up. Yet countless numbers of entrepreneurs, artists, social enterprises and others sit on the sidelines waiting for an opportunity to make their mark on the world, needing only a small amount of startup capital and the support of their community to get started. The new economy will be structured to efficiently bridge this gap, and crowdfunding will be a prominent catalyst in redefining how enterprises are created.

The key to the movement lies in the power of collaboration and community; instead of trying to walk uphill into the wind to get a venture off the ground, entrepreneurs and artists are able to get a gust of wind at their back right from the beginning.

What’s coming next for crowdfunding?

The next step will be to enable investors to take real equity stakes in startup companies on registered crowdfunding sites. Already, a few sites have launched or are in pre-launch phase in the United Kingdom, while The Entrepreneurs Access to Capital Act, which would legalize startups to raise funding via registered crowdfunding platforms, awaits Senate approval in the US. Estimates range as to how many new businesses will be created once crowdfunding investing becomes legalized, but the results could be massive.

Overall, crowdfunding represents a paradigm shift in the way businesses are formed and funded. Instead of taking an idea to the few people with large amounts of capital, crowdfunding enables the inventor, artist or entrepreneur to take their idea directly to the crowd for funding, support and feedback. Soon the path to setting a venture in motion will be streamlined significantly, and people everywhere will have the power to spark new ideas from their laptop – this is definitely a crowd worth joining.

+ Building Blocks for the New-Era Business
+ Finance 2.0 – Wall Street Meets the Web

Crowdfunding Strategy – Summary

PLAN – the Business Model