Last November I wrote about being a shrewd entrepreneur, and how businesses could raise funds by approaching a key potential client, identifying their pain, providing a solution, and getting this client to fund the prototype and manufacturing of this product. This is an approach which enables the entrepreneur to test the demand for his concept directly with the consumer, and gain access to potentially ‘risk free’ funding.

Initially this concept was more applicable for companies operating in the business to business sector; however it looks like things are about to change with the growing trend know as ‘Crowd Sourcing’. Crowdsourcing can be described as a group of people who network and pool their money and resources together, usually via the internet, to support efforts initiated by other people or organisations. Initially this began in the form of donations, artists seeking support from fans to launch a new CD or design a new art piece, or politicians seeking funding for their campaigns.

However its playing field is set to expand. Last Christmas, after noticing a growing demand for a wrist watch version of the nano - a pain which needed solving -  a creative entrepreneur offered to design a strap which could transform the nano into a wrist watch. He uploaded his design on ‘Kickstarter’ a Crowdsourcing site, asking members to deposit $50 each towards getting a strap of their own. Scott was hoping to raise $15,000; in a month he raised almost $1,000,000, with $180,000 raised in just three days. Needless to say he’s pretty pleased!

Crowdsourcing could provide the means for entrepreneurs to present their product concepts directly to the customer, receive prompt feedback – either they make an investment or they don’t – while the process provides access to a potentially interest free loan, while safeguarding their equity. Since its launch, Kickstarter alone has taken pledges worth $35 million for over 12,000 hopeful projects. This approach could potentially revolutionise the way funding is raised and one which could compel traditional investors to rethink their current approach.

Could Crowdsourcing be a means for Scottish companies to raise the funds they need to commercialise their products? I certainly think its food for thought.