Crowdfunding is becoming popular and successful in Japan. (WSJ) This is going to lead me, over the next few years, to invest in the economic future of Japan. Something I have not seen so far.
First let's discuss crowdfunding.
Crowdfunding is an Internet-based institution where business startups describe their business, their background and their business prospects to interested Internet readers. The readers are then permitted to invest in the crowdfunded business. There are many interesting twists on this including the promise from the start-up fundraiser to provide early products or services to the investors.
I haven't seen any data on the success or failure of crowd funding. There are several prominent crowdfunding sites in operation.
Based on my extensive experience with small and startup businesses, American crowdfunding will result in no greater success rate than any traditional family funded small business start up function. That is a very small percentage. Certainly less than 10% of the people who fund these projects will get anything back, ever. Probably more like 5%.
The same is not true in Japan. Japan has a far more entrepreneurial small business culture than the United States. It ranks even higher than France in small business entrepreneurship probably the highest such ratio in the world. Moreover the Japanese are honest beyond any level known anywhere else in the world.
While young Japanese who got credit cards in the 1980’s ran up their bills to the maximum and didn't pay, because they had no experience with consumer credit, I don't believe that is true for the more mature Japanese who would borrow money with crowdfunding.
With a combination of Japanese imagination, which is extraordinary, their incredible honesty and their entrepreneurial skills, I expect this unique form of crowdfunding to create great growth in Japan in the next decade or two.