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The Decentralization of Finance: New Role For Gatekeepers

02/28/2014 03:21 pm ET | Updated Apr 30, 2014

In a networked world where people can freely talk and transact with one another, it's inevitable that people will also freely fund one another. From our point of view at Indiegogo, it's just a matter of time until finance will become fully decentralized, just like communication has become through tools like Twitter and commerce has through portals like Ebay.

And just as broadcasting and publishing have had to reinvent themselves in response to the newly unlimited ability to distribute information, banks and other financial institutions are starting to evolve in response to crowdfunding, API payment gateways and virtual currencies.

With all of these industries, the infrastructure to move information or money is becoming democratized to the point where the old institutions -- and the decision-makers who work inside them -- no longer serve as a barrier. So what's left is just us, people deciding for ourselves what is and isn't important.

Institutional decision makers are basically investors, and until the onset of democratized finance, they had two jobs: gambler and amplifier. If they gambled right, then the fun would continue by their investing more funds and amplifying the success. If they guessed wrong, they'd simply hope that they guessed right elsewhere enough to offset the losses. As a result, investing became hit-driven and high risk, and investors operating within these machines found themselves saying "no" more than "yes." That's why these investors (aka talent scouts, artist and repertoire execs, venture capitalists, etc.) developed a reputation as gatekeepers.

Now, with crowdfunding, new ideas come to market quickly or fail fast. Crowdfunding validates a market better than any industry studies, focus groups, investor expertise or guesswork can ever do. It enables entrepreneurs to get smarter faster by testing their pricing, features, messaging and target markets before they launch. Essentially, crowdfunding reduces market, execution and financing risk in one swoop.

In reducing risk, crowdfunding is thus giving investors the biggest gift of all -- an incubation platform to discover the ideas the world wants rather than letting them flail in finding ideas they think they world might want.

The good news is that crowdfunding is enabling the gatekeepers to swap their "gambling" role for an "influencer" role. And their personal expertise and relationships now mean more than ever. A "yes" from a gatekeeper at a respected institution brings the responsibility to add value beyond the money and the opportunity to share that "yes" and inspire others to follow further. In a world where everyone is deciding what's important and what's not, traditional investors will be guides who earn the trust of the people through their wise "yeses" and follow-through work rather than chaperones telling the people who's hot now, and who's not.

On the receiving end of the yeses, what does the democratization of finance mean for the innovators, entrepreneurs and creators themselves? On the plus side, it means more meritocracy and broader opportunity. On the minus side, at least for some people, it means you won't be able to rest on your laurels. It'll keep you honest to continue creating and innovating for the people who originally inspired you to create or innovate in the first place - your fans and customers. So stay engaged and stay relevant. Stay true to your talents and keep creating what the world wants. If you do, the world will thank you with the strongest yes of all.

This post is part of a series produced in partnership by the Global Innovation Summit and The Huffington Post around impact, innovation, and technology. For more information on the Summit, click here.

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