Using Crowdsourcing to Start a Business

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Jeff Howe and Mark Robinson intertwined the two words, crowd and sourcing. They brought this to the limelight in the Wired magazine in 2006, where the defined Crowdsourcing as a web based business strategy that takes advantage of solutions from the internet. The internet has a network of people who are there ready to receive any suggestions and they provide answers. Howe gives out the definition; Simply defined, crowdsourcing represents the act of a company or institution taking a function once performed by employees and outsourcing it to an undefined (and generally large) network of people in the form of an open call. This can take the form of peer-production (when the job is performed collaboratively), but is also often undertaken by sole individuals. The crucial prerequisite is the use of the open call format and the large network of potential laborers.

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Crowdsourcing is online based platform where a problem is distributed or posted and solved. The model has come up in recent years to replace the traditional model. It was encouraged by the development of the internet. Examples of Crowdsourcing industries include Threadless, iStockphoto, InnoCentive and the Goldcorp Challenge. The other definition of Crowdsourcing as pointed by Howe is “crowdsourcing isn’t a single strategy. It’s an umbrella term for a highly varied group of approaches that share one obvious attribute in common: they all depend on some contribution from the crowd”. Crowdsourcing is therefore an online method of finding solutions to problems. The companies with problems post their problems online, then the web based individuals find the solutions to them. Surowiecki points out that the web gives an avenue that is capable of gathering many different and independent proposals the same way the markets the systems of voting handle the situations. In addition to that, Levy sees collective intelligence as the best way to enable the communities to advance in knowledge with much ease. He claims that through coming together, individuals work better than when divide. It has become impossible to restrict knowledge and its movement to castes of specialists. Our living knowledge, skills, and abilities are in the process of being recognized as the primary source of all other wealth.

What then will our new communication tools be used for? The most socially useful goal will no doubt be to supply ourselves with the instruments for sharing our mental abilities in the construction of collective intellect of imagination. In the above definition, Levy tries to mean that united intelligence is more powerful than the individual effort and intelligence.

Examples of Crowdsourcing Companies

The benefits of crowdsourcing are visible even is starting and development businesses. The industries that make this development possible include:


This is a company that makes and designs t-shirts through online work. It was started when Jake Nickell and Jacob DeHart who met on online forum, and Nickell won. The company was “…selling 60,000 T-shirts a month, [had] a profit margin of 35 per cent and [was] on track to gross $ 18 million in 2006… with fewer than 20 employees”. The company has no restrictions for their members in the community to join. The only thing required is a functioning email address.

iStockphoto is also an online company, but it sells “royalty-free stock photography, animations, and video clips”. It was made in February, 2000, by Bruce Livingstone. Clients are required to submit their photographs which are then stored in the company’s database with their respective key words. According to Brabham, every image taken by the camera can easily be accepted to the database. This means that all those people who can access and operate a camera have the potential to earn money online.

InnoCentive Company was launched in 2001 derived from Eli Lilly, a pharmaceutical company. The company deals with “Corporate Research and Development (R&D)”. He further points out that it, “enables scientists to receive professional recognition and financial award for solving R&D challenges”.

Crowdsourcing and Business Grouped online-based solutions are used to provide a base for starting businesses. The idea of crowdsourcing help to complete works related to business. The tasks are made complete by a third party or the company itself. Crowdsourcing helps broaden the company’s talent. The most popular type of Crowdsourcing include: Crowdfunding, Crowdcontests and Microtasking.


The idea behind Crowdfunding is that it borrows financing from the public through an online forum in order to start successful businesses. According to Ethan Mollick, “Crowdfunding allows founders of for-profit, artistic, and cultural ventures to fund their efforts by drawing on relatively small contributions from a relatively large number of individuals using the internet, without standard financial intermediaries”. The entire idea behind this program is drawn from micro-finance and crowdsourcing. Examples of Crowdfunding companies include:


Olson points out that this is the “first major crowdfunding platform…raised over $1 billion since its inception in 2007”. It has contribution of almost 2.5million members online from 226 countries. The company is based in San Francisco, and enjoys a global arena attracting a string of investors from across the word. The company has no restrictions to its members, and allows them to retrieve their donations even if they fail to meet their goals. The platform provides the best avenue for raising capital to start business. People who are willing to start business can well be funded by this online platform.


The company is best known crowdfunding platforms in the world launched in 2009. From the year it was launched, it has managed to raise over $2 billion. The platform got its roots from Pebble Technology. It also got a boost of $20 million in 2015 from Pebble Times smartwatch project. The Kickstarter platform “…remains the most renowned embodiment of the crowdsourcing philosophy”. It helps create a funding program for actively encouraging individual investors and entrepreneurs who are unable to get support from traditional forms of funding.

CircleUp is a crowdfunding platform located in San Francisco. The company help fund emerging businesses to form a stable foundation. It was launched in 2011, and “helped over 211 entrepreneurs raise $305million”.

Benefits of Crowdfunding

Provides capital access to investors. Is the best way to provide capital funding for to businesses. Crowdfunding provide funds to individuals without asking for equity. The funding comes from the community.

Helps reduce the chances of having risks in setting up businesses. Starting a company is a project faced with many challenges and this discourages investors. However, Crowdfunding provides a reduced chance of risks in establishing ventures. This is done through allowing entrepreneurs “to gain market validation and avoid giving up equity before going all out and taking a product concept to market”.

Helps advertise business ventures. Due to the wide deep connection of crowdfunding in the world, businesses under the platforms benefit from the media advertisement. The use of social media platforms and referrals attracts organic users from the best and potential funders.

Provides an avenue to positive comments from the public. Crowdfunding helps eliminate the possibility of problems related with upcoming ventures. Through the positive feedback and comments from the public, the business ventures to develop faster.


This is a crowdsourcing platform that allows for creation of new ideas. The ideas are come up in such a way that one has to, “announce that you’re looking for some kind of product or idea. Establish the rules. Set a deadline. Advertise your contest. Wait for the results”.


In this type of crowdsourcing, work is decomposed into small tasks which can easily be completed in good time. Clients post small tasks online, and workers handle the works each at a time. The works are distributed to a large crowd and thus completed faster.


Crowdsourcing is important to starting business ventures as it employs the idea of work being handled by the crowd rather than an individual. Work done online by a crowd is incorporated by various ideas which are important for the development of the business. Many people can be able to divide labor into small tasks which make it easy for them to do it perfectly, therefore, quality of work is achieved. Through using a crowd, a business venture can only incorporate the best idea among the many ideas produced online. Additionally, the use of crowdsourcing helps create an avenue for enhanced productivity through employing minimum costs.

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