Crowdfunding as a boost for “green” projects?

Crowd funding was the topic of an international conference last year in Spain. Photo: BlackBox_Innova, CC some rights reserved

In Box readers often enjoy pointing out problems – problems with government policy, with business practices, with personal behavior. I’d hope that In Box readers are also on the lookout for possible solutions.

When it comes to energy issues, there’s been much discussion in this blog about the playing field. Many say it’s far from level – which means new technologies face steep disadvantages.

Is this something best left to the free market? Is there a role for active government intervention? How? Why? Who decides? Should taxpayers get sucked into the mire? (On and on it goes.)

So, what if there was a way that anyone with a few extra bucks could invest, earn a decent return, support green energy technology – and do all that without leaning on taxpayers? Sounds aluring, doesn’t it? Rather win-win.

Of course when it comes to solutions (and investments) the proof is really in the pudding. Still, I was intrigued by this recent New York Times article, Crowdfunding Clean Energy, by David Bornstein.

The article cites just one company as an example, which isn’t really enough to prove anything. But it sounds amazing:

When Mosaic posted its first four investments online – solar projects offering 4.5 percent returns to investors who could participate with loans as small as $25 — the company’s co-founder, Billy Parish, thought it would take a month to raise the $313,000 required. Within 24 hours, 435 people had invested and the projects were sold out. The company had spent just $1,000 on marketing. All told, Mosaic has raised $1.1 million for a dozen solar projects to date.

Frankly, aspects of the narrative bring to mind the old caution: be skeptical about anything that sounds too good to be true. (This post takes no position on any of the companies cited, they are just introduced for the purpose of discussion.) And yet…

Crowdfunding or crowdsourcing is pretty trendy these days. All sorts of projects have been launched by way of Kickstarter campaigns. There’s great interest in its potential – and real concern about possible downsides, as explored in another NYT article:

To its advocates, crowdfunding is a way for capital-starved entrepreneurs to receive financing that neither big investors nor lenders are willing or able to provide. To others, it represents a potential minefield that could help bad businesses get off the ground before they eventually fail, and in some cases could even ensnare unsophisticated investors in outright fraud.

Without a doubt, any new investment model requires lots of “buyer beware” or an ability to kiss the money goodbye, should the investment fizzle out. Practically anyone can throw up a good-looking web site that showcases a non-existant or dubious company. It’s not too hard to employ pyramid scheme payments to lure investors in either. Environmental do-gooders might be especially easy marks, lulled into thinking that a fellow environmentalist couldn’t possible be a rip-off artist. (Do-gooders need to harden their hearts sometimes.)

Also, for all that many want clean, renewables to succeed, solar energy in particular carries a lot of volatility right now.

Not the technology itself, that’s pretty good and swiftly getting better. Rather, the business side of manufacturing and distributing the equipment – or investing in the same – seems quite challenging at present. China seems to have taken a lead that might be hard to regain, or compete against.

But is crowdfunding’s risk so very different than buying stock on the stock market? (It might be! I’m looking for reader input on this question.)

Finding new things that work – in technology and in funding – is going to be hit and miss. Results (or necessary regulations) will emerge over time.

Still, I like the idea that lots of “little people” can make a difference – and maybe even reap financial rewards for getting new goals accomplished.

File this under “stay tuned” I guess. Along with a big dollop of buyer beware!

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9 Comments on “Crowdfunding as a boost for “green” projects?”

  1. The Original Larry says:

    A good idea, but I don’t see anything new. It’s capitalism.

    Like/Dislike this comment: Thumb up 1 Thumb down 1

  2. Pete Klein says:

    Wasn’t paying much attention to the headline and got interested because I thought it was saying “Crowfunding.”
    For the record, I’m all in favor of funding crows and ravens too.
    In fact, if anyone wants to send me $25, I’ll buy some food for the local crows.

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  3. newt says:

    Looks interesting.
    As Larry says, just free capitalism, but really much closer to the ideal as described by Adam Smith, or at least my college Economics teacher’s interpretation, where everyone has open access to the market, information about it, and no single investor can dominate or control it. Or something like that.

    One might hope that neutral third party businesses might act as monitors to prevent fraud. Just like bond rating agencies in the run up to 2008. Oops. But, it might work in this case.

    Like/Dislike this comment: Thumb up 4 Thumb down 0

  4. Kent Gregson says:

    Nothing ventured, nothing gained. If you’d like a better world and the opportunity to help occurs, You could act on your principals or wait for someone else to do it for you. If you wait for the government, you’ll have a long wait indeed. perhaps more compelling is the idea that if you are offered a way to help and you don’t take it, you forfeit your right to complain.

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  5. tootightmike says:

    A Kickstarter campaign can indeed a bit of a crapshoot; some succeed and some fail. It’s more important though, to have an opportunity to be a part of some clever person doing some interesting thing, and you can have an influence on that project, and the chance of success.
    By contrast, you will never have any influence with National Grid….

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  6. tootightmike says:

    And why not invest in random projects that interest you. Last I checked, my money-market account had earned $8.42…I could have saved that much in gas money by not driving to the bank.
    “The system” is not working for us, and it’s time to step outside the system and put your money and energy into something meaningful. Our government is no longer working for us, and it’s time to begin to fund and support the kinds of projects that our government won’t.

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  7. Paul says:

    These programs are great. These type of things can fund any risky venture. Why not. Even young kids are using this to fund their next video project. On some of these if you can’t raise what you need for the project you have to give the money back to the “investors”, which is fair. I put that in quotes since you don’t get a return in some instances (so not really capitalism Larry). Your return come in seeing what you invested in succeed. The same concept can work for funding things like research. You will see a benefit if it works that could help you financially (avoid a hospital bill or a disease that will kill you young) but you don’t get a traditional return on the investment. This is a great topic to cover I look forward to hearing more.

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  8. Paul says:

    To explain more on my comments here is how it works with Kickstarter:

    “Do backers get ownership or equity in the projects they fund?

    No. Project creators keep 100% ownership of their work. Kickstarter cannot be used to offer financial returns or equity, or to solicit loans.

    Some projects that are funded on Kickstarter may go on to make money, but backers are supporting projects to help them come to life, not financially profit.”

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  9. tootightmike says:

    And there’s nothing wrong with that system. If I back a couple of projects at $100 or so each, and they send me a t-shirt, I’ve done better than the money in my money-market account. Best of all, I’ve lent a hand in the creation of a small business, and I didn’t even have to bring my tools, or carry a fricken piano!

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