Wednesday, September 29, 2010

Service and Flow Fundraising

I'm starting to see more and more advertisements asking individuals to donate money to a specific cause by texting.  This scheme really took off during the Haiti earthquake, and it's proved to be a remarkably effective way of raising money.  I find it especially interesting because the donor doesn't give money directly to an aid organization.  Instead, the network provider has worked out a deal with the aid organizations whereby the provider actually contributes the money, but then collects the texted donation amount from the donor in their next phone bill.

The idea of a "middleman" has typically been associated with bureaucracy and waste.  A new business trend responding to the explosion of information and communications technology belies that notion.  Stemming from the idea that sometimes too much information can be a bad thing, companies like Pandora help individuals navigate the ocean of data by simplifying the process of satisfying wants.  This is where the idea of service and flow comes in: often times an individual or organization wants only a service, and doesn't really care about the details.  Providing services often involves a fixed investment, like purchasing a CD to get music or a cooling system to get coolth.  The risks and details involved with fixed investments discourage a lot of services from being provided.

If a middleman comes in with the fixed investments and expertise already established, they can provide services to a much broader set of people who were initially unwilling to pay for the service due to risk aversion, lack of expertise, etc.  This is basically the idea behind a lease.  Service and flow companies take the idea of a lease and apply it to non-traditional things.

Although these businesses have been around for a while, their foray into the field of fundraising is new and promising.  The most brilliant example is Kickstarter.  Clients wishing to raise money for projects purchase the service of fundraising, and pay only if the target amount was met.  A middleman company like Kickstarter can specialize to a high degree in one particular endeavor, generating fascinating conclusions about what works and what doesn't.

Check out this TOTALLY KILLER PROJECT in New York being funded by Kickstarter.

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