One of the over-arching themes of crowdsourcing is its slow march towards the mainstream. One aspect of this is penetration into the larger enterprise, with crowdsourcing a technique embedded into key business processes.

It’s safe to say that progress has been patchy. For example crowdsourcing user testing is now gaining ground among larger companies, but service marketplaces such as oDesk and Freelancer.com are still dominated by smaller companies and start-ups.  Where there is use by larger companies it is often sporadic or ad-hoc, limited to one department or division, or the result of an individual dipping their toe in the water.

The hesitation of the enterprise

It’s a shame that more global companies don’t use service marketplaces as the crowd provides a mind-boggling range of services which could be utilised.

In practice some of the reasons for the reticence of larger organisation to use these platforms lies in the processes put in place by enterprise support functions to minimise risks and reduce costs. Measures involving procurement departments and HR functions often mean that there are approval steps to navigate, lists of preferred suppliers to adhere to and pre-vetting of candidates to undertake.

This effectively puts the kibosh on using a platform like Elance as there are simply too many hurdles to jump over and it becomes impractical.

Private talent clouds

Some of the service marketplaces have tried to meet the needs of the enterprise by providing a managed service which involves sourcing a crowd to carry out a particular type of task, and then providing an interface to manage them.

In effect this creates what Elance has marketed as a “private talent cloud.”

In providing this the service marketplace can meet the particular needs of the organisation by:

• Sourcing the right people to a specification provided by the company
• Vet the crowed accordingly and carry out any risk-related steps such as signing a Non-Disclosure Agreement
• Customising and brand the interface if necessary (although customisation is likely to be more expensive)
• Keep on adding more providers to the crowd to meet need
• Providing access to named individuals within the organisation
• Establish a crowd large enough to provide an attractive on-demand model for a large enterprise

Processes

Private talent clouds provide an opportunity for the enterprise to tap a freelance crowd in a model which is a little closer to traditional outsourcing. It can work effectively for projects, but also for ongoing processes where either the work can be broken down into smaller repeatable tasks or where a diverse population of providers is needed, for example in translation.

Typical processes which larger organisations have processed in this way are:

• Translating product pages into different languages
• Writing, for example managing a global network of bloggers
• Tagging photos and webpages
• Checking photos for suitability, for example removing pornographic images

The providers

This potentially lucrative corner of the service marketplaces has not been widely publicised, but oDesk have been providing these “enterprise services” to some very large companies for a number of years., particularly for technology companies.

It is not surprising that Elance followed suit with its offering, although now with the merger of Elance and oDesk’s operations it is hard to ascertain which direction offerings might take. Although oDesk is no longer mentioning on its website some of the impressive customers it has had in the past, we believe the combined size of the new company gives it an excellent opportunity to ramp up offerings focused on the enterprise.

Other players

Other players include new entrants like Work Market which specifically targets the enterprise to source a freelance-based workforce and provide the necessary platform to manage operations and relationships.

There is also some crossover with CrowdFlower, who provide a platform for managed crowdsourcing usually for microtasks.

Meanwhile Freelancer.com has not entered this corner of the market, still branding itself as the “#1 resource for small business and entrepreneurs.”   Appirio, an IT services company which acquired the software development marketplace Topcoder.com,  is well placed to provide these types of services, but has still to play its hand.

What next?

It will be interesting to see whether private talent clouds using a crowd of freelancers will take off in larger companies. We would not be surprised to see more medium-sized companies using these types of services, although risk-averse global companies may be slower to take-up the opportunity.

Platforms like Elance may also start to see companies with an existing distributed workforce migrate their employees over to the platform in order to help manage processes such as recording time or even payment.

As global web-based marketing and services are clearly not going to be going away any time soon, the type of work which private talent clouds can facilitate will continue to rise. If service marketplaces offer an easy to use, flexible and cost-effective model then enterprises will start to crowdsource processes in this way.

What do you think? Have you had experience of using a private talent cloud? Are we underestimating existing use in larger enterprises? Are there other factors which might limit take-up?  We’d love to hear your thoughts and comments.

Last week Trada, the first major search engine marketing company to use a crowdsourced model, announced it had ceased operations.  A note from CEO Matt Harada on the Trada website announced that unpaid creditors “have instructed us to cease operations of the Trada marketplace” and was now recommending clients to use the services of two more traditional competitors,  Wordstream and White Shark Media.

For those following Trada’s recent activities, the news of the company’s demise doesn’t come as a huge surprise. In late 2013 there were significant layoffs  and hints at a restructure, and a change in direction around a product called PPCPath.  This new emphasis was clearly not enough to reverse Trada’s fortunes and after seven years the firm has shut down.

An early pioneer

When we wrote the first edition of “Getting Results from Crowds”  in 2011, Trada was one of the pioneering crowdsourcing companies which looked like one of the most likely to succeed.  It’s model of using a crowd of pay-per-click experts (called “Optimizers”) to create web adverts, identify the right keywords and then refine results was a first.

This model seemed well-poised to give small and medium-sized companies a decent ROI and also reward the best Optimizers. It also meant companies could leverage the crowd at short notice to get campaigns up and running quickly, and get a wide set of perspectives to uncover new keywords.

There was also confidence from investors. Trada’s backers included Google Ventures and by 2012 the company had attracted $17m USD over three rounds, with two further injections of $1m in the following years.

Crowdsourced business models can be challenging

Despite significant investment, Trada’s demise shows that even if a crowdsourced business model appears to work very well as a concept, it is not guaranteed to succeed.

Although it is not possible to assess their accuracy, some comments allegedly from a Trada insider  suggest that the company tried to scale-up too quickly and hired too many inexperienced Optimizers leading to some less-than-satisfactory results. The “insider” also commented that the incentive system did not necessarily reward effort.

Although of course we cannot verify this opinion, it is certainly true that without a good quality crowd drawn by decent rewards, then a crowdsourced business model is not going to work.

Attracting the necessary expertise, keeping the crowd engaged so they stay loyal to the platform and achieving scale is a must. At the heart of this is setting the right incentives and building value and a sense of community around the brand.

Whatever the reasons for Trada’s failure, the business model was an innovative approach, and we wish good luck for the future to those associated with the company.

If  you have gone for a job interview or been trying to decide whether to apply for a position, you may have used a website where employees give anonymous feedback about what it’s really like to work at a company.

Websites such as Glassdoor, Careerbliss and Vault allow employees to leave information about working conditions, levels of pay, opportunities for advancement, management and the experience of being interviewed.  Specific feedback is presented and ratings scores are aggregated, usually with companies graded between 1 and 5 for different aspects such as salary levels. This information is extremely valuable for anybody researching career options or who is in the job interview process.

Growth of online reviews of employers

In the same way that many of us would now check out online travel reviews before booking a hotel, the same is becoming true for recruitment. For example technology review company Software Advice conducted an extensive and independent survey from early 2014 and found that 48% of employees in the US have used Glassdoor in their search for a new job.

Employer review sites have been around for a number of years. The market leader, Glassdoor, was founded in 2007 and there are a number of others such as CareerLeak and Enjoy Monday.   Moreover there are a number of country-specific sites such as thejobcrowd.com in the UK or industry-specific sites, and more which are targeted to audiences such as students.

More traditional recruitment sites and jobs boards such as Indeed.com are also featuring online reviews. Additionally there are now some premium services such as Payscale.com which provides more value-added comparable data on salary levels.

Valuable to employers too

The data contained in these sites gives not only gives employees insights but is also gold dust for the companies that are being reviewed. All too often Glassdoor and its rivals are purely viewed as a reputational risk  issue with negative feedback needing to be contained. The implication of this is that the data is not to be trusted.

This is a missed opportunity. Glassdoor can be a valuable barometer of employee sentiment which delivers specific data on some of the issues which a company needs to address.

One of the most powerful elements of employee review sites is that the feedback is anonymous, so that comments are not compromised by the reviewer worrying about consequences from the employer or individual managers. Feedback is more likely to be an accurate representation of genuine employee sentiment.

That anonymous ‘real’ feedback is usually impossible within the confines of internal digital channels such as enterprise social networks or intranets. Here usually all posts and feedback must be attributed to individuals to mitigate concerns about risk and anonymous posts are generally not allowed.

To a certain extent anonymity is more likely in the “annual employee survey” which is usually contracted out to a third party. However employees sometimes hesitate to give full and frank feedback as  unique log in details and job information required for the targeting of questions or segmentation of results means answers are technically attributable back to an individual,

A magnet for negative sentiment?

One legitimate concern is that Glassdoor and its rivals tend to attract negative comments and accentuate the sort of people issues which all large organisations have. It is true that these sites may provide a place to let off steam for employees who individually have had a bad experience, but in fact the comments tend to be relatively balanced and it is not necessarily a magnet for negativity.

Moreover Glassdoor has a team which reviews all feedback and rejects between 15 to 20% of comments, removing any which appear fake or malicious. The downside of this is that there are some who believe Glassdoor’s reasons for removing comments can be commercial, for example evident in the comments added to this article.

All in all the ratings and feedback from Glassdoor provide a valuable stream of data about how employees view an enterprise, complementing other information human resources departments gather internally. If not already being done, it is well worth monitoring feedback and using the data as an input into any reporting processes covering employee engagement and sentiment.

What are your experiences using reviews from Glassdoor internally? Are there risks? Has it been valuable?

Previously this section of the workforce has been regarded as difficult to communicate with digitally. This is mainly because they do not have easy access to a computer terminal during the working day. Also many do not have digital identities such as a corporate email address which are usually required to roll out digital communication platforms.

In practice many organisations have deprioritised efforts to open a meaningful dialogue or deliver digital services to this section of the workforce, and attempts have either been muted or ineffectual.

Using employee’s own mobile phones as the primary channel for digital communication removes many of the logistical barriers and presents an exciting opportunity to leverage the ideas and insights of factory and retail workers.

Soliciting opinions from the supply chain

Some organisations are even going one step further, and actively canvassing the opinions of workers in their supply chain, particularly in manufacturing units in developing countries.

In recent years large corporates have come under scrutiny from consumers, pressure groups and even shareholders over poor working conditions and low levels of pay in factories in developing countries.

But giving workers in these facilities a voice provides a potentially revolutionary opportunity to achieve better working conditions, ensure standards continue to be adhered to and satisfy consumers with ethical concerns.

Experiments from global brands

Here are what some global organisations are doing:

In 2013 leading UK retailer Marks & Spencer surveyed 22, 500 garment workers in India, Sri Lanka and Bangladesh using mobile technology, covering issues from working conditions through to feedback on the training they had received from the company.  In 2014 the scheme was expanded to reach nearly 65,000 employees in 5 countries.

Although global retailer Wal-Mart already has a website where workers can report issues in multiple languages, in 2013 it partnered with start-up LaborVoices to provide a facility for workers in its Bangladesh factories to report issues via mobile phone. The results of calls carried out in the employee’ own language are aggregated into data which is can be viewed on a secure online portal.

In 2012 German sports and leisure brand adidas Group experimented with a pilot scheme to issue mobile phones to factory employees working for an Indonesian supplier in order to raise any concerns about working conditions. This pilot scheme was then extended to other factories.

Future potential

Despite what looks like some early successes, engaging with crowds of supply chain employees via mobile devices is still very limited.

Giving the supply chain a voice has enormous potential not only to raise standards, but to harness opinions, feedback and ideas to improve processes and perhaps even subtly change the relationship between global corporates and their suppliers.

What do you think? Is there untapped potential in this approach? Will more global companies use mobile technology to create a dialogue with supply chain workers? Give us your thoughts in the comments below.

In recent years major service marketplaces such as Freelancer and Elance-oDesk have experienced exponential growth across key metrics such as the total value and volume of jobs completed and the number of registered providers.  The success of these platforms has helped facilitate the rise of  a global distributed workforce which can be hired on an on-demand, freelance basis.

There is every indication that the rapid growth of the major service marketplaces will continue during 2015. Both the two market leaders had a successful 2014 and are well-placed to capitalise on the opportunities in the sector.

Freelancer continues buying its competitors

In late 2013 Sydney-based Freelancer floated on the Australian stock exchange. The IPO has given the company a foundation to continue its ambitious acquisition program, gobbling up minor competitors, players with a significant footprint in individual countries or marketplaces which focus on a particular niche.

The company’s 2014 acquisitions included Zlecenia.przez.net, the leading Polish service marketplace, Fantero, a virtual content marketplace and Warrior Forum, an internet marketing marketplace.

Expansion and funding for Elance-oDesk

Meanwhile during 2014 oDesk and Elance completed their merger.  Instead of carrying out a significant rationalisation program, the new combined Elance-oDesk company has actually expanded from 200 to 300 people.  Late last year it also picked up another $30m dollar in funding.

Grasping the opportunity

This is a sector where there is still a huge opportunity for expansion as use of service marketplaces by providers and employers becomes normalised and accepted into the mainstream. For example a new survey suggests 68% of Australians would consider using these sites to supplement their income.

Both Freelancer and Elance-oDesk should be able to meet the needs of an expanded user base, while also extending capabilities and services. The companies have continued to invest in their own technology platforms and also have a relatively mature set of processes. However they will need to carry on investing in technology, particularly to develop more mobile interfaces or if they want to provide services to the potentially lucrative enterprise market.

Overall we expect that their success story will extend into 2015 and beyond.

What do you think? Could new players and models enter the market? Are there barriers to growth? Are we being over optimistic? Let us know what you think below by adding a comment!

One of the most fascinating developments we have observed in the Crowdsourcing Landscape over the past two years is the explosion in local service marketplaces. These sites allow individuals to outsource small personal tasks and errands to local providers. From house cleaning to fetching the groceries to somebody coming to assemble your flat pack furniture, it’s now easy for buyers to connect to sellers who will do those jobs they don’t have time to do or those chores they hate.

The best known local service marketplace is TaskRabbit which has received nearly $38m in funding and expanded outside the US. Meanwhile other platforms have flourished usually serving particular cities or countries, for example Ask for Task in Canada and Airtasker in Australia. The latter is now looking to break into the US and providing a service targeted to businesses.

Despite what look like some real success stories, local service marketplaces have real challenges, as evidenced by the evolution of the business models of some of the major players.

A fragmented market

One of the main issues is that the sector is highly fragmented, both in terms of geography covered and type of service offered.  It can be difficult for a local service marketplace to expand beyond the metropolitan area it usually serves and few sites genuinely compete at even a country-level.  New entrants may also find considerable competition for particular cities or around particular services.

There are also some sites which only provide a marketplace for a certain type of work such as house cleaning, landscape gardening or electricians.  Some of these are very niche – for example lawnmowingonline.com is just about mowing lawns. Meanwhile a larger provider like homejoy.com which provides cleaning services is now planning to expand to offer other types of domestic service.

The business model for these sites can also vary. Some are true service marketplaces with customers posting jobs and providers bidding for the work, but others offer more of an agency model where customers book their cleaner and there is no pre-selection of the provider. Payment may also be facilitated via the site.  Additionally some sites are effectively online directories of providers, perhaps with some level of vetting to guarantee quality and safety for customers.

Building brand and reputation

There are also considerable challenges around creating a good brand name and reputation. Building this fast is extremely important. Firstly you need to attract enough providers to make your service viable, and then you need to achieve trust among consumers, particularly as they may be letting individuals into their homes. Many customers may also not have tried a service like this before.

Building brand with customers requires sustained marketing investment and effort, something which may be difficult for a cash-strapped and frantically busy start-up. It appears that few local service marketplaces have achieved significant brand awareness, although TaskRabbit, which has opened an office in London, has taken to advertising on London Underground trains.

Building an international brand in this area is even harder because the personal services are so location-dependent. Effectively you need a multi-city and multi-country presence.

Previously we wrote about the emergence of Ebay Hire. This launched in beta in 2013 in the UK and the US. Ebay is one of the few companies that could possibly grow an international brand in this area quickly, as it is an obvious extension of their existing business. Although Ebay Hire was an experiment, it looks as if it has been quietly retired as the links for the UK and US sites are no longer operational and there has been more or less no news about it since Ebay’s original announcement.  If Ebay can’t make the model work, could others?

Customer experiences

Another key issue is whether there is enough customer demand to really sustain a true marketplace model. For example one of the early start-ups Zaarly, originally started with a true service marketplace model where local buyers in the San Francisco and Kansas areas would propose jobs and sellers would bid for these. Although this attracted interest from investors, by 2013 the model had run out of steam and it transitioned into a storefront model for local providers, offering some vetting and a booking and payment platform. One of the reasons for this transition, according to CEO Bo Fishback, was that “highly empowered buyers are few and far between.”  In short there were just not enough people using the service.

One of the reasons for this lack of demand could be that customers don’t want to have to make the effort of posting a job (and making a decision on scope and price) and then selecting candidates, a potentially time-consuming exercise for what is likely to be a small non-repeatable task.

This is reflected in TaskRabbit’s remodelling of its services. In 2014 the company changed the way it matches clients to providers from a bidding system, to one driven by an algorithm where customers select one of three providers each of whom are priced per hour. According to the company when this was beta-tested in London it saw substantially faster growth than when the old auction model had launched in US cities.

However clearly this move has upset many of the providers who previously had far greater flexibility in selecting the jobs they wanted to take, sometimes fitting them around existing priorities.

More growth on the way

Despite all these challenges, we expect some successful platforms like Airtasker to continue to expand and new entrants to emerge.  It is still a very young market and investors are still seeing opportunities, demonstrated by last year’s $30m funding for task marketplace Fiverr.

As customers grow more comfortable with outsourcing small tasks and as platforms invest in mobile interfaces to make it even easier to book tasks, more growth within the sector seems likely.

What do you think? Are we right to be confident about the potential of the sector despite the issues we’ve highlighted? Let us know in the comments below!

Crowdsourcing is changing the patent and intellectual property industry. The way it has evolved gives an interesting glimpse into how crowdsourcing is infiltrating different business sectors.

The research involved in filing or challenging a patent revolves around finding the “prior art” of a patent’s subject area. In the past this has been the preserve of a relatively traditional industry model complete with government agencies and professional services firms.

But the increasingly global nature of intellectual property, the opening up of searchable patent databases on the web (made even easier thanks to Google), the high number of questionable patents and a highly litigious world has resulted in both commercial pressure and a clear opportunity to open up the sector to crowdsourced models.

Tapping the talent of both patent professionals and amateur researchers has some obvious benefits in lower costs, but it can also result in more extensive searches across multiple territories and in different languages. If there is interaction with the crowd along the way it also allows a more iterative approach to directed searches as new leads and unexpected avenues emerge.  Ultimately all this helps reduce risks for any company filing a patent.

Early experiments

Crowdsourcing patent research was actually a basis for an early experiment in crowdsourcing, and there is a history of different experiments in this area.

BountyQuest was set up in 2000 and backed by investors including Jeff Bezos and Tim O’Reilly. It challenged the crowd to find prior art. However despite the big names involved, the company ultimately failed,  and it may simply have emerged too early to succeed.

Emergence of successful platforms

In 2008 Article One Partners introduced a similar model and the company is still the market leader for crowdsourced patent research.  It currently has around 30,000 researchers on its books, has awarded over US$5 million in prizes and counts Microsoft as one its clients.

When we wrote the first edition of Getting Results from Crowds we commented that Article One does not have any significant competition from other crowdsourcing platforms.

While Article One remains the market leader, competitors have emerged and appear active with plenty of challenges and prizes set. Other providers include BluePatent, based in Germany, and Patexia which was founded in 2010.

Influence on the patent agencies

Perhaps the most interesting aspect on how a crowdsourcing model has started to change the intellectual property industry is the experiments involving government patent agencies themselves.

As far back as 2007, the United States Patent and Trademark Office (USPTO) ran a crowdsourcing pilot called Peer to Patent which was “an online system that aims to improve the quality of issued patents by enabling the public to supply the USPTO with information relevant to assessing the claims of pending patent applications.”

In a climate where the Obama administration has encouraged US federal agencies and departments to crowdsource and use competitions, USPTO’s flirtation with crowdsourcing has continued.

In 2012 USPTO took advantage of the America Invents Act to allow third parties to submit relevant materials to help patent examiners. The process was helped by the creation of the patent search at Google, and an “Ask Patents” community set up by Stack Exchange. However some commentators have questioned the success of the scheme with only around 1,200 “third-party preissuance submissions” over the first fifteen months.

The USPTO is now exploring ways to make crowdsourcing work better, and in April 2014 it convened a roundtable on the subject to gather public opinion on the topic.

New twists

Meanwhile new twists on crowdsourcing patent research continue to emerge.  GE and Quirky, a crowdsourced invention and manufacturing platform,  announced a partnership, which recently resulted in the commercial production of a smart air conditioner.

As part of the deal inventors on Quirky can search through GE’s own database of patents prior to submitting an idea, although some have been critical of the commercial terms for inventors regarding who ends up with the IP rights. #

The influence of crowdsourcing

The crowdsourcing model has clear value for discovering prior art. Looking at how it is changing the patent industry is a classic example of what is happening in some other areas where early experiments are superseded by a commercially successful model. Eventually crowdsourcing infiltrates the mainstream.

Which direction do you see crowdsourcing patent research heading? Do you think more government agencies will encourage its use? Is there room for another strong presence to compete with Article One?  Is there a downside to using the crowd to research prior art?  We’d love to hear your comments!

Given the attention that crowdfunding and Kickstarter have had in the media over the past two years, it is surprising that more large enterprises have not experimented with crowdfunding internally with employees.

Ideation platforms, where employees can contribute suggestions and ideas and then vote on the best ones to implement, are now commonplace in both large and small companies. Some of these schemes have been in place for over a decade.

Similarly, arguing the business case for your own initiative is now part of corporate culture, and some organisations have an “innovation” fund for new projects which may be regarded as extraordinary spend, above and beyond normal functional or departmental budgets.

With idea management widespread and pitching for funding part a frequent activity, perhaps enterprise crowdfunding is not such a huge cultural leap.

The advantages of internal crowdfunding

The advantage of distributing some budget for the employees to back different projects is it greatly increases the influence of the workforce and each individual on which initiatives are actually taken forward.

In traditional idea management schemes, a committee tends to sift through the most popular projects, but internal crowdfunding means there is a potentially deeper sense of involvement for all employees.

In turn this means more considered participation, better proposals, deeper engagement through the process (particularly if there are incentives), more ongoing feedback and the diffusion of an innovative culture.

IBM’s experiments

So far the experiments in internal crowdfunding which have been reported are few and far between. In fact IBM’s experiment in internal crowdfunding in 2013 is the only real example with any detail.

The Harvard Business Review contains a fascinating interview with Michael Muller, one of the authors of an academic paper on IBM’s experiments.  Interesting details which emerge include:

• The website they used internally is not dissimilar to Kickstarter and other crowdfunding sites
• In one experiment 500 employees each got $100 to spend
• Projects proposed ranged from technical challenges to internal processes to engagement schemes
• They had very high levels of participation  – up to 45%
• The incentives offered on each project did not seem to be regarded as important by employees
• Not all the projects have been completed, partly because in only one of the experiments proposers were given any extra time to carry these through on top of the “day job”

Other examples

While we believe more organizations are following IBM’s lead and experimenting with internal crowdfunding, so far few examples have emerged.

A rare instance is The US Government Department of Health and Human Services which has set up an internal crowdfunding experiment known as HHS Fairtrade which aims to be a place where

“Department staff can go to find resources –  including people’s time and expertise to help them get their idea off the ground.”

Here employees post descriptions of ideas and others can then pledge resources or support, with projects only proceeding once all the necessary commitments have been made.

While some other organisations have created forums to share resources through crowdsourcing – for example ING Bank’s Crowd Savers community – it is still unusual to create a Kickstarter-like facility.

One element which will make this easier is the emergence of off-the-shelf solutions such as Dutch start-up Intraboot specifically aimed at internal crowdfunding campaigns. Other  providers such as  Fundrazr provides a hosted crowdfunding platform for the enterprise which could be used externally or internally, either for charitable or engagement-led projects or something more business-focused.

Potential barriers

One company which has revealed that it is looking into setting up an internal crowdfunding programme is Fidelity Investments through the Fidelity Center for Applied Technology (FCAT), the company’s innovation lab.  In a fascinating post FCAT describes how it is undertaking research to see whether a “Kickstarter” model could work internally.

Although the research is a work-in-progress early conclusions include:

• An internal crowdfunding model would help identify and attract entrepreneurs inside the company
• A potential problem is that an idea might be popular with staff but it doesn’t mean that customers will like it
• Good ideas that had been rejected by a traditional top-down investment review could come to fruition through internal crowdfunding
• As “internal investors” would be using a “central pool” of money rather than their own, it is not certain whether they would take the task seriously  enough, and there are also questions of how incentives would work

The team also spoke to a large pharmaceutical company that tried to set up an internal crowdfunding initiative but met some barriers, including an inability for employees to make compelling pitches, an unwilling finance department, and not having the rewards in place to incentivize internal investors.

The opportunities ahead

Despite the apparent lack of activity and some of the logistical and cultural roadblocks to overcome, IBM has shown that internal crowdfunding has the potential to work.

We hope more organisations continue to experiment with crowdfunding because it could be very powerful.

We are keen to hear from anybody who is currently doing anything in this area, or who knows anybody else who has implemented an initiative. If so please let us know in the comments below.

Crowdtesting involves a distributed crowd carrying out  user testing for software development and IT projects, usually across a hosted platform. It has grown into an accepted model in mainstream business, used by both large enterprises and smaller companies.  It’s still a fast-growing area with the market leader uTest one of crowdsourcing’s undisputed success stories.

User testing focuses on identifying bugs, issues and potential improvements during the development and pre-launch phase of any software.  Within most software projects there are different types of testing, for example testing which focuses on usability, or “load testing” which tests the response from software experiencing high demand from multiple users.

The advantages of crowdtesting

Overall user testing is absolutely essential for a successful deployment.   Tapping the crowd for user testing has several advantages over more traditional models:

• Volume:  The higher the number of testers, the more likely the number of bugs and issues are spotted, so this improves the quality of your software implementation.  For load testing, volume is a pre-requisite.
• Flexibility:  IT projects are inherently unpredictable, and testing rounds are often required at short notice. Pre-booking resources usually means the testing you carry out has to be predictable, which is simply impractical. The crowd operates on an on-demand model, ready to action testing when it is actually needed.
• Diversity:  Particularly for mobile apps, there are a proliferation of devices and browsers used, across a variety of different markets, groups, languages and scenarios. Using a crowd can identify particular issues across this diverse set of users and technologies.
• Platform:  It is critical to have a robust platform to distribute what needs to be tested and record the bugs and issues found. Crowdtesting providers have already invested in high-performing and easy-to-use platforms.
• Cost: Organising testing on-demand across a hosted platform greatly reduces costs, thanks to the flexibility and diversity of the crowd.
• Availability: Internal resources are not always available, or willing, to give their full attention to user-testing. They often view it as a distraction from their day-to-day work.
• Experience: Most of the crowd on uTest and its competitors are experienced testers so there is no training required and less risk of miscommunication.
• Insight:  Because of their experience, testers will often provide additional insights.

From uTest to Applause

The market leader uTest is a good example of crowdsourcing success.

uTest was founded in Massachusetts in 2007, and attracted several rounds of funding, including a $17m D round of funding in late 2011.  In January 2014 the company announced a $43m E round of funding, led by Goldman Sachs.

The continuing investor confidence in the company has been sustained through consistent high growth, a quality client list including Microsoft and Google, and an expansion of its testing population to more than 100,000.  It has also won many awards and featured on lists of promising or fast-growing companies.

The company has always demonstrated its ambition to expand, and has added capabilities along its journey including services to help its testing community and a data insight tool which analyses feedback from user reviews of apps. In late 2013 it announced it would rebrand as Applause, expand its crowd population exponentially and focus on an integrated platform which combines testing and analytics.

Other players

There are a number of other players within the crowdtesting space.

Some of these seem to be on an upward trajectory. For example 99Tests.com, an Indian start-up which had just emerged when we were wrote the first edition of Getting Results from Crowds in 2011, now has an international client base and a testing population of over 7,000. Meanwhile German company Testbirds recently announced a 2.1m Euros Series A round of funding and also released a mobile app to manage crowds of testers.

There are also various specialist platforms which focus on a particular niche of crowdtesting. For example Bugcrowd.com focuses on testers finding security flaws in software, with testers rewarded with a “bug bounty” when they identify an issue.

Meanwhile Mob4hire focuses on mobile testing with 60,000 users with a diverse number of devices across various local markets. Usertesting.com concentrates on detailed crowdsourced and videoed user experiences of websites and mobile apps.

Sustained growth

We have every confidence that rapid expansion in the crowdtesting space will be sustained. This is through a combination of:

• an unambiguous value proposition
• demonstrable confidence from investors
• the addition of bolt-on and complimentary services from major players
• specialist services and niche providers to meet particular needs
• a customer-base which includes larger enterprises
• sustained demand for user testing for software projects, particularly around mobile apps.

Do you think our confidence in the sector is justified? Have you used a crowdtesting service with either positive or negative experiences?  Please let us know your thoughts and experiences!

Angel investors traditionally have two pathways to buy into new enterprise. They put their money into a fund which seeks out high risk, high return projects; or they find projects and do due diligence themselves.

Some venture capitalists, observing the crowdfunding model, are exploring avenues to exploit the global reach the internet and social media provide. One such venture capital group, the Israeli startup platform OurCrowd, brings together venture capital and angel investment strategies into a new model for equity crowdfunding.

OurCrowd claims to curate best in market projects, does the due diligence, and provides initial capital investment to set projects in motion. Hereafter, they raise the balance of funds through their own global, sophisticated investor network, via their own crowdfunding equity platform. The platform allows these investors to review a range of projects available, and choose the ones they like.

OurCrowd have hit their capital raising target in all of the 32 projects they’ve engaged in their first year of operation. Furthermore, 12 of these have gone on to raise subsequent rounds of funding at higher valuations from institutions and larger companies. GE Capital have invested several million dollars into OurCrowd, in effect taking a portfolio reserve interest because they like the rigor and discipline applied to OurCrowd’s due diligence.

So, what are the implications and possible trends of VC crowdfunding?

1. Other venture capital firms will follow. This model of distributing financial risk through an expanding, global, sophisticated investor crowd will create new investor markets.
2. Sophisticated investor peer groups will consolidate, composed of new, high net worth individuals from a variety of backgrounds.
3. Due diligence will be outsourced. Institutional investors and large companies will seek out equity crowdfunding platforms that source best-in-market innovations and provide first class due diligence.
4. Due diligence will be crowdsourced. Equity crowdfunding platforms will increasingly draw on the expertise of their tribe of sophisticated investors to identify holes and hidden opportunities in startup projects. OurCrowd’s current network is composed of 4000 individuals in 53 countries. Such diversity will offer insights and expertise as to how globally scalable projects could work in a variety of markets.
5. Big new ideas will be run by the wealthy status quo. Whilst there are good reasons for young projects to be run by more conventional wisdom, there is a risk that once in the hands of ‘the money men’, good grass roots ideas to drive innovation could be being drowned out by ‘smarter’, ‘more experienced’ people.
6. Globally distributed tribes will pool their capital. Web 2.0 has lowered the barriers of geography. People of cultural, political, social and linguistic persuasions are more accessible and connected than ever before. Expect to see the venture capitalists amongst them gather around capital raising platforms and projects that service specific interests.
7. Projects that don’t meet venture capital criteria will not benefit. Startups with inexperienced directors who have no experience in the startup space will not get access to these opportunities. Projects need to display real traction by the time they get to venture capital crowdfunding platforms.
8. Visionary investors will get the diamonds in the rough. With an expanding startup investment class, and more talent and capital from sophisticated investors enriching high grade opportunities, projects that don’t make the grade will be developed by passionate risk takers and true believers.

Whilst it may be argued that the OurCrowd model is more a new form of venture capital than a new form of crowdfunding, VC crowdfunding may be the new term used to describe this class of capital raising. However it may be classified, any new model that drives more capital into innovation bodes well for the startup industry.

What do you think? Is VC crowdfunding the future of venture capital?

Image Source: Quinn-Dombrowski