Recap: How Successful Crowdfunding Works
Five years ago, if you had told us somebody would end up raising over $55,000 for the sole purpose of making a potato salad funded by strangers on the internet, we’d have probably said, “Yeah, at this point nothing the internet does is surprising” and “Can we get in on that stranger money?” In fact, the recent explosion of crowdfunding has every startup, inventor, and stranger with a wild idea asking that second question. So on Monday night we held a Crowdfunding Tech Panel (co-hosted with General Assembly), where we brought together insiders from some of the major crowdfunding websites to discuss the future of the industry, along with some tips for making the most of your awesome (or terrible) idea.
Moderator: Colleen Taylor, Reporter, TechCrunch
Shannon Swallow, Head of Marketing Communications, Indiegogo
Marek Zareba, Operations Manager, Tilt (formerly Crowdtilt)
Sarah James, Thinktank Manager, Betabrand
Justin Bailey, COO, Double Fine
With the explosion of crowdfunding as a new means of startup cash, many fledgling companies are turning away from venture capital funding, and are instead looking to their fans to get the money needed to take off. Swallow says this has happened through necessity, as the requirements for VC funding became stricter and more involved. James pointed out the democratic value of the community having a voice in products, which Bailey, as the head of an extremely successful video game Kickstarter campaign, echoed. “The video game model was originally based on the record industry, and so many companies were shut down because that business model doesn’t work anymore,” he said. He added that crowdfunding removes the barrier between the players and the developers that was once occupied by the funding publisher.
Probably the biggest question asked was, “What can a project do to stand out and get funding?”, a source of great consternation for every crowdsourcing participant. Swallow was quick to point out that it is definitely difficult – even celebrities have trouble hitting their fans. “They’re not buying a product, they’re buying you,” she said. But all the panelists agreed that the biggest aspect was to tap into your audience, and see what gets them passionate. Zareba stressed the importance of the first few hours and donors, as without early momentum, most campaigns fall flat and are lost in the fray. Finally, all made it clear to communicate your idea within the first 60 seconds in a clear video.
Most importantly, the game-changing nature of crowdfunding is even making VCs change their tune, suggesting the people behind potential projects essentially market test their ideas by collecting rounds of crowdfunding first. With market validation and proof of concept established well before any money is actually sunk into the project, VCs are starting to embrace the low risk environment.
The panel closed with the panelist’s favorite projects currently being funded. Swallow promoted “Scully,” a modernized motorcycle helmet that raised $1.2mil in just five days. Bailey’s favorite was sort of a self-promotion for Scanadu Scout, a biometrics device that closed out a $100,000 round of funding with $1.6mil last year. James actually mentioned a secret project Betabrand was working on; an antimicrobial commuting jacket, with shortcuts for avoiding dirty surfaces and interactions. Finally, Zareba mentioned a Foo Fighter’s fan who sold $85k worth of tickets through Tilt to force them to come out to Richmond, VA.
Keep an eye out for all of these, and on crowdfunding itself, as the burgeoning industry is exploding in front of our eyes.
And a shout out to Alicia's Tamales Los Mayas, who fed guests before the event.