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September 26, 2019
Maria Pesin

What is crowdfunding?
The Internet is a place of infinite possibility. It’s a place of connecting with others on social media, e-commerce sites, and more recently crowdfunding sites. According to crowdfunding.com, crowdfunding is defined as “a way to raise money for an individual or organization by collecting donations through family, friends, friends of friends, strangers, businesses, and more. By using social media to spread awareness, people can reach more potential donors than traditional forms of fundraising.” Crowdfunding builds a customer base and a way to generate capital. Over the last few years, crowdfunding has become increasingly popular. Be aware there are fees but there are many benefits attached. It is a rapid way for entrepreneurs to get financial backers on their products and start their own company at a prompt rate.
How to be successful at it?
Make sure you are ready to produce your product when listing it on a crowdfunding site. There are backers that will believe in your product and it would be unwise to leave them hanging wondering when they will receive the product they helped fund. Also be aware that there is a minimum that you must raise on these sites or backers get their money refunded. On the other hand, if it is going to take you longer to produce a product than originally intended make sure to send out regular updates on the production and manufacturing process. Some companies like Mousr took 4 years to ship their product but successfully sent it to all of their backers. Take note for fashion companies it cannot take that long to ship your product; people will lose interest this example was a tech company. Currently Mousr is on Amazon and retail stores like Best Buy so they were an example of a success story with crowdfunding. However, some backers that donated on crowdfunding sites did not receive product at all that they funded like Ibackpack. The owner of Ibackpack received $800,000 of support by backers and not only did he not return their investment with a product; he used their money for personal reasons. Investments always come with risks but you want to be a reputable, successful brand not trapped in a legal nightmare. Recently, this case reached the FTC and the owner of Ibackpack has to return every donation he received. Make sure you can fulfill orders so you don’t get in trouble for fraud by the FTC like Ibacpack did. Think about what is needed to manufacture your product before setting a price on a crowdfunding site to avoid setbacks. There is a lot that goes into crowdfunding, but it is a helpful tool when done right.
There are many crowdfunding companies out there, but two in particular that have been most popular are:
Kickstarter is one of the older crowdfunding sites out there first launching in 2009 but also one of the most commonly used. There are some restrictions on Kickstarter to be aware of when deciding to list a product on their site. For one thing, the product has to completely new. It won’t be eligible if it was listed on other crowdfunding sites. Be aware that the entrepreneur will only get to keep money if they reach their goal and if they don’t the money gets refunded to the donors. A successful product on Kickstarter was Pebble Time. They raised $20,338, 986 in 2016. In 2018, Pebble Time closed their doors for good and Pebble Watch Technology was sold to Fitbit. They had a good run and made a substantial profit. Kickstarter has raised $3 billion dollars in funds overall since its inception.
Indiegogo is one of the first crowdfunding sites to launch on the market.  Unlike Kickstarter, Indiegogo lets creators come over from other crowdfunding platforms. Also unlike Kickstarter, sometimes companies can keep their money generated from the campaign if they haven’t reached their goal. Indiegogo also set up new measures to ensure that product will be guaranteed. They have software to show that the campaign is being held by a real person to prevent fraud. A success company on Indiegogo was Flow Hive. Flow Hive is out of Australia and generated $10 million dollars in backers. They were able to ship all of their products to every backer. Just like with anything else there are risks but the financial backers took a chance on the product and reaped the benefits.  Indiegogo has raised $1.5 billion dollars overall.
Personally, I think crowdfunding is a good way to generate backers and launch your business. In fact one of my clients is using Kickstarter now and will be going live in a few days launching his campaign to get financial backers. It is a direct way for an entrepreneur to generate traction for their brand. Stock can be generated directly on these sites and its easier than ever to build a business from the ground up. Technology has its positive aspects and negative aspects but I believe this is positive aspect and a step forward in the business world.
Overall, crowdfunding is a great resource. However, you really have to put in the time and effort to make it effective and have visuals and marketing in place to ensure marketplace success. Like pieces of a puzzle, everything must fit together to make it complete. Research to see which site might be best for your business hosting a campaign just starting out. With hard work and dedication success can literally be a click away.

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Maria Pesin

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