chapter 2

The Benefits of Crowdfunding

March, 2014 was a big month for crowdfunding and for crowdfunded products.

In the beginning of the month, Kickstarter announced its one $1 billionth pledge. 5.7 million people have backed around 130,000 creative projects on Kickstarter.

In mid-March, the major feature film Veronica Mars was released in theaters, after 91,000 backers provided $5.7 million to help support production costs. And later in the month, Oculus Rift, a virtual reality display, was acquired by Facebook for $2 billion dollars. It had completed its crowdfunding campaign for $2.4 million in September, 2012.

By now all of us have heard of something cool about crowdfunding. Perhaps you know that since 2010 crowdfunding has contributed more funds to artists than the National Endowment for the Arts did.

Or you may know instead the projects funded on various platforms: the Nikola Tesla Museum, for example, or the Pebble Watch. Perhaps you’ve contributed to help a personal cause, like the bus monitor who was bullied, or for the recovery after Hurricane Sandy. Maybe you’ve heard of the most ambitious crowdfunding project ever: the Ubuntu Edge phone, which aimed to raise $32 million on Indiegogo, and which ultimately reached $19 million in funding. There’s a good chance that you’ve seen a movie, listened to an album, or played a game that was made possible by crowdfunding.

Crowdfunding can be used to great success to bring to life artistic projects, products for sale, and personal ventures like fixing up a restaurant or hosting a special party.

There are especially interesting possibilities for entrepreneurs to launch products with crowdfunding.

Why Crowdfund?

The benefits of crowdfunding a product are many. The most important include:

Getting a following

Done properly, crowdfunding gives you not only the capital you need to start your business on a sound footing, but also an already-committed audience who have stuck through thick-and-thin with you from the very beginning. You’re also likely to get followers on social media as well as online coverage. Few other businesses can claim to have a dedicated following before they sell their first product.

Getting funding without going into debt

Don’t forget of course the fact that you’re going to get funding from your fans who may be anywhere in the world. Got a great product idea or artistic project for people with similar interests? You need not go to your local Chase branch, hat in hand, asking whether you could possibly receive a loan to start selling online. Instead, you’d be connecting to people like you in places like Norway and New Zealand.

And even if your project fails to sufficiently take off, you still may benefit in another way.

Getting market research

We don’t mean only the experience you’ll get running a campaign or engaging on social media, though both are useful skills. Crowdfunding is a relatively cheap way to conduct market research.

Crowdfunding is very useful as a way to reduce business risks. Say you have come up with a product that you think is going to sell. When would you like to know that you’re wrong: After you’ve built the buzz, contracted out the manufacturing, and started taking orders; or after you’ve built a page on Indiegogo and found that people just aren’t that interested?

Crowdfunding is a great way to test the market, to figure out whether the product you want to sell really has potential. You’re going out directly to your fans and customers to see if anyone is willing to pay for a great idea.

Do you see now why we’re excited about crowdfunding? Keep reading to find our recommendations for picking products and for running a good campaign.

Next chapter

3. What Can I Crowdfund?

3 min

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