Crowdfunding has traditionally been used by startups and entrepreneurs as a way to finance their projects without turning to banks or VCs. It’s become incredibly popular for many reasons besides raising funds such as providing market validation, feedback on the product itself, and publicity to increase one’s fan base.
Recently, established businesses have been using crowdfunding platforms before they prepare for mass-manufacturing of their products. Not because they need the funds, but because the market validation and opportunity to connect with customers through crowdfunding is incredibly useful to businesses of any size. In response to this growing need, platforms such as Indiegogo have launched initiatives like enterprise crowdfunding to assist large corporations with their crowdfunding campaigns with strategy advice, hands-on support, promotions and analytics.
For example, GE’s FirstBuild (a subsidiary of GE Appliances) has launched two successful products on Indiegogo. These two campaigns, the Paragon Induction Cooktop and the Opal Nugget Ice Maker, collectively drove over $3 million in pre-sales and helped GE acquire over 10,000 customers. Since then, a number of established brands such as Hasbro, Harman International Industries, Whirlpool and RB have launched crowdfunding campaigns to validate their product concepts and source innovative product ideas.
The benefits of crowdfunding clearly aren’t limited to large corporations or startups; businesses of any size can use crowdfunding as a tool to further their ideas and benefit their business.
By directly taking your idea to ‘the crowd’, you can get a clear sense of how your product will be received by potential customers. The success of a campaign and the feedback that you can gather from contributors along the way can help determine how successful the product will be once it has been created and is available to buy. A fully funded campaign will demonstrate that consumers want your product because they’ve actually spent money on it before it even exists. An unsuccessful campaign, on the other hand, may suggest that you need to take a step back and see what kind of tweaks you can make.
Research and development
The research and development phase of building a product tends to be time-consuming and expensive. In the past, businesses and entrepreneurs have had to heavily rely on focus groups, market research and consumer surveys to guide product decisions.
Thanks to crowdfunding, customers are given a voice at the very beginning of the product development process, which makes gathering feedback much more efficient. The real customers who are purchasing your product will help you determine whether your product is viable, and you’ll be able to adjust it so that it’s exactly what your backers want. You’re also building a community, and backers who feel like they are part of the process will be more likely to support future ideas.
Marketing and publicity
As you launch your campaign, your team will likely rely heavily on pushing campaign news through social media platforms like Twitter, Facebook and Instagram.
Successful crowdfunding campaigns are a great way to generate publicity for your business and the specific product you’re raising funds for. This is invaluable for raising your profile to potential investors and building trust and confidence with your possible customer base. When you are ready to do media outreach, don’t do a massive bcc’ email blast. Make sure you research journalists who have covered crowdfunding campaigns related to your specific campaign or similar products. The best time to reach out to the press is either right after you launch your campaign and once you have raised 30%, or when you reach a milestone such as reaching your goal or exceeding it. Remember that a successful campaign may be more interesting to certain journalists than a brand-new campaign. Ensure that you make it easy for journalists to write about you. Give them everything they might need to convey your story to their audience including high-resolution images, your campaign’s link, as well as several methods to contact you.
Whilst crowdfunding used to be seen as only useful for start-ups and other early-stage companies, it has become clear that it’s a great tool for any business. From SMEs to large multi-national corporations, crowdfunding provides invaluable market validation, R&D, and an opportunity to build buzz for your product.
By Joel Hughes, UK head of technology and hardware at Indiegogo