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Crowdfunding is a unique way to organize the financial backing and promotion of a new product before it hits the market. Websites like Kickstarter and Indiegogo allow anyone with an idea to get a feel for the consumer reaction to their product prior to launching. This helps creators identity product market fit and gives businesses a chance to provide incentives for early backers while creating a culture around their idea.
Popular with companies who may not have access to or are looking to avoid traditional funding avenues such as bank loans or venture capital investments, crowdfunding uses online communities and social networks to raise money through small donations from a large number of people.
Today there are over 300 crowdfunding sites worldwide. At Doejo, we support crowdfunding by frequently featuring tech or design Kickstarters in our weekly newsletter. Some of these ideas, like the Pebble, an E-Paper watch for iPhone and Android, have had incredible success with crowdfunding, raising over $10 million.
“The term crowdfunding has not only been popularized by the general public but President Obama has even passed a crowdfunding law called the JOBS Act with near unanimous support from Congress,” said Ethan Austin, the CEO of Give Forward, in a blog post on Built in Chicago.
What makes a business prime for successful crowdfunding? Brian Meece, the CEO and co-founder of RocketHub, told Entrepreneur.com that crowdfunding is about building relationships. Meece says you will need an intriguing, clear story, an existing network and cool perks. When choosing these rewards be sure to offer a range of perks that appeal to a broad audience.
Having a quick, compelling video to supplement your online campaign is vital. “If you can sell your story in under a minute, you’ll be much better off,” said Kria Simon-Kennedy via The Daily Muse. Simon-Kennedy is a filmmaker who successfully funded a $50,000 project on Kickstarter.