Is Crowdfunding Back in Fashion? Why Startups Should Consider Using Kickstarter to Get Funding!
Let’s face it, product development has changed a lot in recent times.
About 12 years ago, it was easy to develop and launch a product. You would dream up a product idea, come up with innovative ideas on how to develop the product, and then you’d launch it on to the market. If people liked the product, they would buy it. It was that simple.
Although the process was simple, it also had its downsides, one of them being uncertainty and cost.
It was not uncommon to spend thousands (sometimes millions) of dollars on private development and production, with little information as to whether the public would actually like the product you’re developing. And if the product was not in fact embraced by consumers, you’d be stuck with significant sunk costs. It was a big risk!
Most companies launched products without knowing about their target market, the number of people they were targeting, and whether their product would be embraced.
The launch of global crowdfunding websites like Indiegogo and Kickstarter completely changed the game. These platforms enabled entrepreneurs to connect with their target audience and receive direct feedback, without investing a significant amount of money.
I have launched many products through Indiegogo and Kickstarter, and I have seen the benefits of these crowdfunding platforms first-hand. Below I will share the benefits of using these two crowdfunding platforms based on my personal experience.
What are the benefits of crowdfunding for startups?
- You get instant feedback from your target customers
One of the greatest benefits of crowdfunding is that you get immediate feedback from your target customers. From the moment your crowdfunding page goes live, backers (customers) will start talking about the product and give their personal opinion and feedback. They will discuss everything about the product, from the design to shipping and price. This is very important because it will give you access to valuable information about the product, without investing a lot of money on research..
- You involve customers in the creation process
As you get feedback from your backers, you will start making necessary changes to the product to accommodate their needs. This means that you involve your target audience in the product creation process.
Multiple studies have shown that customers tend to associate themselves more with products when they have taken part in the creation process. When you feel that you played a crucial role in product development, you will naturally have a vested interest in the product and its success, and that is exactly what crowdfunding does – it involves customers in the product development process. This is important as it transforms customers into loyal supporters. They will do everything they can to ensure that the product becomes a success.
- Transparency with your customers
Getting immense support from your target customers will give you more courage to deliver quality products that match their expectations within the promised timeframe. The pressure can be immense, but if taken positively, then this vast responsibility can be your ticket to success. Trust is a huge concern for many customers. The good thing about crowdfunding campaigns is that they are transparent.
For instance, as soon as you set up your crowdfunding page, the platforms require you to publish when you’re likely to launch your product. This is important, especially to customers, because it gives them a chance to hold companies accountable.
If you don’t deliver as promised, then everybody will know that you have failed your backers. Launching a product through crowdfunding can put you under a lot of pressure. However, if you transparently do things and deliver just as you had promised, then you will establish trust and a good and long term relationship with your customers.
- Reduced financial risk
Product creation and development is costly. It can cost thousands (sometimes millions) of dollars in a private development. Kickstarter campaigns not only help reduce such costs, but they also minimise risks.
Most crowdfunding websites are free to set up. This means you can create a Kickstarter campaign, then use it to get invaluable feedback from customers, as well as involve your backers in the creation process without the usual associated costs. You will spend less, but you will get so much in return. You will also have a fantastic group of people to support your project and give you ideas on how to make your product better. This community will likely become your greatest group of supporters as your company grows and develops.
My own experience with Kickstarter – LIFX
I co-founded my smart lighting company, LIFX, way back in 2012 before smart home devices became mainstream. Today, the company has grown, and we now have over 12 products in over 80 countries. We have also partnered with large companies like Amazon, Google, and Nest.
But the big question is, how did we start?
The answer is through Kickstarter.
When we launched our first Kickstarter campaign, we had 9,236 backers who raised $1,314,542. A majority of this funding, along with the invaluable feedback we received from our backers, was used to make the necessary changes to our product to ensure that it met our customers’ needs. When we finally launched our LIFX smart bulb onto the market, not only had we spent less money than if we had chosen a more ‘traditional’ platform, we were also confident that by the significant number of backers, and the amount of feedback received, the public would embrace our product.
Involving our customers in that initial development process has continued to help the company over the years. I passionately believe that our continual success has largely can largely be attributed to our initial backers who have remained our most vocal supporters.
Will I use crowdfunding again? YES!!
The amount of support and feedback we received from our first crowdfunding success has enabled LIFX to reach the success it has today.
I genuinely believe in the benefits of crowdfunding platforms, which is why I have chosen, along with my co-founders, to once again use crowdfunding for the “Raine One” electric scooter.
We launched our Kickstarter campaign on the 11th of November with the goal of raising $50k USD. Due to overwhelming support from our backers, this goal was met in just 43 minutes! Since then, the Raine Kickstarter has made over $300k USD in two weeks!
On top of the $300k USD pledged through Kickstarter, we have also gained the support of Canva investors, Blackbird Ventures, with $500k AUD in seed funding.
But most importantly, we’ve already generated an incredible amount of useful feedback from our backers, which we will incorporate into our final product design and production.
To check out our electric scooter campaign, click here: https://www.kickstarter.com/projects/raine-scooters/the-raine-one-electric-scooter
And you can read more about the “Raine One” here: https://raine.co/