When entrepreneurs turn to crowdfunding to help them jumpstart their next venture, it’s usually because the need the capital to get their product, service or business off the ground. But by asking for people to support the development of your business, you’re also inadvertently asking them for feedback on your product or project. It’s a bit like market testing before actually hitting the market.
Back in 2016, Smith & Bradley, Ltd., used Kickstarter campaigns to decide which of their seven watch designs to take to market. Two of the campaigns didn’t make the cut. Now Smith & Bradley uses crowdfunding to validate the market for many of their products before going into product, Forbes reported in December of 2016.
Although it’s not a business, you can also look at the success of the crowdfunding efforts to create a Veronica Mars movie. While many in the industry thought Veronica Mars had more of a cult following, the crowdfunding campaign almost tripled its $2 million fundraising goal with a final total of $5.7 million from more than 90,000 backers, according to the campaign page.
Of course not every project is a Veronica Mars movie or watch from a reputable company. According to Kickstarter’s Stats on August 7, 2017, for the 129,375 projects that were successfully funded, another 231,714 were not successfully funded. The report also shows that most successfully funded projects raise less than $10,000 and that many campaigns struggle to get the promotional support they need to find success.
So what does this mean for your business venture? If you’re on the fence about what you’re doing and you want to try to a new way of market testing, crowdfunding might be a unique solution. It won’t be right for every product, service or business, but it’s a trend that’s getting stronger every year and, last year, was projected to surpass Venture Capital investing for the first time, so it’s definitely something to consider if you can support the promotional element of building a campaign.
If you’re thinking about taking the crowdfunding route, this guide might help: http://crowdfundinghacks.com/is-your-idea-right-for-crowdfunding/.