Three's a Crowd

Starting a new business venture can be daunting, expensive and fraught with risk. Even once your million dollar idea has become a reality, you’re then tasked with marketing it. After all, how can people buy your stuff if nobody knows it’s for sale? What if there were a way, then of lessening your risk and raising awareness of your product or service while simultaneously locking in buyers? All of this, potentially before you’re even out of the initial design phase. Happily, such a thing exists, is proven and has meant big bucks for those leveraging it. Enter: Crowdfunding! Let’s talk about its risks and how it works for both entrepreneurs and consumers.

Crowdfunding has been around since the late 90s, actually born from British rock band Marillion asking their fans for donations in order to fund a reunion tour to the US. It wasn’t until 2007 and 2009 however that we saw the two largest names appear, Indiegogo and Kickstarter respectively. The idea that lots of small donations from a wide net of people could add up to serious investments turned out to be applicable to all kinds of things! Movies, new products, art and science have all been successfully funded using these platforms. It’s low risk for potential investors, due to the relatively small stakes, while also lowering the inherent risk of piloting a startup because of the funding and visibility.

It’s this role of investor which most of us will take on. Perhaps the most popular form of crowdfunding involves the launch of a new physical product. This product would be available, essentially to pre-purchase, before it was complete and ready for market. In exchange for this, you’d receive the product at a lower cost, once its creator releases it. The risk here is that the product ends up being different from how it was pitched when you committed to buy, or that it doesn’t end up being produced at all. Your comfort level with both of these things will dictate on what level you should consider taking part. There are, typically, no guarantees with this type of investment.

Let’s say you’ve a great idea then. The struggle for entrepreneurs now is the vastness of the platforms and differentiating yourself from other projects. This year on Kickstarter alone, there will have been around six hundred thousand campaigns, with close to twenty two million people pledging monetary support. If you can manage to crack the code and create a compelling, engaging package which people buy into en masse, the sky’s the limit. The record for the most funded Kickstarter campaign of all time? The Pebble smartwatch, earning people’s interest to the tune of $20 million. On the other side of that coin but worthy of note; since their 2015 success, Pebble has since folded. A stark reminder that funding doesn’t solve everything.

So long as you’re smart with what you decide to back, buying crowdfunded ideas can be fun and even a little rewarding. Board games, tech, innovative kitchen items; there really is something for everyone. There’s something to be said for being an early adopter too, and this does offer a genuine avenue to experience things before anyone else. Find something new, take a little calculated risk, and perhaps even end up with something innovative, way before the curve. You trendsetter, you.