Why even established companies can use crowdfunding.
When I first discovered Kickstarter, I figured the fledgling crowdfunding site was little more than a sandbox for DIY geeks and wild-eyed inventors trying to fund their pet projects. And it's true that Kickstarter and other sites like it still feature their fair share of lovably unhinged ideas--steampunk-theme cupcake sprinkles, say, or a smartphone-controlled paper airplane. But crowdfunding is growing by leaps and bounds, and it's revolutionizing the go-to-market playbook for serious inventors, entrepreneurs, and small companies.
In just five years since its debut, Kickstarter has raised nearly $1 billion for more than 50,000 projects, with pledges from more than five million individuals worldwide. With a few extraordinary projects having raised millions of dollars each, plus thousands of more modest successes, Kickstarter is undergoing a scale shift. Now, not only established filmmakers like Spike Lee but even entrenched enterprises are looking to use the platform to gauge demand for new products and lower the risk of rolling them out.
Launching a product is risky business, after all. In extreme cases, a new product can make or break a company. Wouldn't it be great if you could sell your next one before you made it--validating the market and getting paid in advance? If we could build everything we sell to order, perfectly matching supply and demand, we would earn more, waste less, and have a lot more fun.
My maiden voyage on Kickstarter came three years ago. I was on the site to check out a new watchband design that promised to turn my iPod Nano into "the world's coolest multi-touch watch." I joined a growing group of backers, pledged my money for the nonexistent watchband, and looked on during the next month as the project raised almost $1 million from 13,500 people.
As an entrepreneur who knows the exhausting and sometimes humiliating experience of raising money from professional investors, I was mesmerized by this revolutionary "consumer direct" technique: Design a cool product, tell a great story, and sit back as people fund your first production run. Absolutely brilliant!
I became a bit of a serial Kickstarter after that, backing projects such as flashlights, space-age titanium guitar picks, an iPad stand, and even a documentary film. To date, I've backed 50 campaigns; other people have backed hundreds.
The more I pledged, however, the more I wanted to be on the other side of the deal. I decided to launch my own Kickstarter project from inside my company, Rickshaw Bagworks, to test-market a new custom fabric for our messenger bags, backpacks, and tote bags. Over a 30-day period, we received pledges from 430 people totaling more than $20,000--and the short video we produced about our project was viewed more than 2,000 times. Not huge numbers, but pretty thrilling for a company our size.
I learned several things during that month. First, Kickstarter is addictive. I have never been so obsessed with my iPhone as I was while watching the pledges roll in. Second, the site's audience is mostly male, by a 3-to-1 margin, which probably cut into the appeal of our fabric pitch.
Third, crowdfunding is a lot of work before, during, and after your project launches. We foolishly promised delivery by Christmas, so we were frantically sewing the tote bags and zipper pouches we offered as rewards just days before Santa's deadline. In the end, though, we delivered nearly 1,000 bags and pouches to 10 countries--enough to convince me that crowdfunding is a revolution in consumer engagement. My next project is already under construction.