Democratizing financing: Crowdfunding in Mexico

Crossposted from the FOMIN blog

The great potential of crowdfunding in Mexico attracted more than 100 people to a recent launch event for the first detailed analysis of this emerging financing model for entrepreneurs, soon-to-be entrepreneurs, small businesses, artists such as filmmakers and musicians, and even people interested in social development. The premise of this kind of collective fundraising via online platforms is anything but modest: Democratize financing so that anyone with a great idea can implement it. Can it fulfill this promise?

The event, organized by the MIF with support from the Institute of Entrepreneurship in Mexico at the Ministry of Economy, gave me every reason to believe so.

Crowdfunding in Mexico is just over two years old. I remember when we held our first workshop on crowdfunding last year in Washington D.C., the first platforms throughout Latin America were only starting to pop up.

Now, as the report on Crowdfunding in Mexico we launched at the event shows, the market is maturing and already looks more like this:

A group of five platforms, Idea.MeCrowdfunder.MxFondeadora.MxKuboFinanciero.com, and Prestadero.com, have joined forces to create the Mexican Association for Crowdfunding in order to promote and defend the interests of this growing industry and establish best practices to protect their clients in running crowdfunding platforms.

Of course, developing a new financing model, born out of the increase in the use of social media by the wider population, has its challenges. A regulatory framework and clear regulations that address the activities need to be established. Tackling risks that come with the use of the Internet as a business platform is in the common interest of many stakeholders, banks as well as crowdfunding platforms.

But the success stories are convincingly beautiful. From the platforms that are part of the Mexican Crowdfunding Association alone, 140 projects and companies have been successful in financing themselves, about 44% of those published.

One of them is Tania Ortiz, who launched a campaign via Idea.Me to seek funding for her newly formed fashion accessories business, TANgerine. Now, her latest collection can be seen on the streets of the hippest neighborhoods in Mexico City. (More success stories here).

The private sector has discovered the potential of crowdfunding as well. For example, Leo Schlesinger, CEO of the wood products company Masisa, has collaborated with the portal Fondeadora.Mx to launch #MasisaDetona, a project to engage young entrepreneurs to produce innovative and sustainable products. More than 200,000 joined the Facebook group alone.

Finally, looking at the percentage of women businesses in venture capital and crowdfunding confirms that crowdfunding can indeed democratize. While only about 4% of businesses that receive venture capital in the US are women-owned, 40% of successful crowdfunded businesses have women at the helm.

These experiences and the energy and enthusiasm of the platforms and organizations that we met here, make me believe that exciting times are to come.

What do you think? Have you participated in crowdfunding yet, either as a funder or seeker of funds? Will crowdfunding fulfill its expectations? Let me know in the comments section below!

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