It really is all it’s cracked up to be.
17 Jul, 2017ROOTS.LY
Crowdfunding isn’t exactly news anymore. Kickstarter got started almost a decade ago, and by now there are so many lookalikes — Indiegogo, GoFundMe, Crowdrise—that it’s easy to lose track.
The fact that crowdfunding has become so common makes it easy to suspect that it’s overvalued. After all, hasn’t the moment passed? Aren’t there better ways to launch a product by now?
Haha, no. Sorry.
While it may not be the shiniest new thing on the tech landscape, crowdfunding is still one of the best, if not the best, ways to launch a product.
Why? I’ll give you six reasons.
When we do roadmapping sessions at Rootstrap, the thing we’re always, always, always trying to look for is market validation. We want to find out, in as low-risk a way as possible, if people actually want the product we’re working on.
Crowdfunding gives you a way to prove validation at an extremely low cost.
If people like your product and fund it, you know for a fact that there’s a market for it. If they don’t, you know that the product won’t fly in its current form—and you’ve invested very little time and money figuring that out.
This one is obvious, but it’s still worth pointing out: crowdfunding, when it works, is literally free money. And unlike taking “free” money from an investor, free money from crowdfunding is actually free money: no strings attached.
Investment capital may seem like free money now, but trust me, it’s not all it’s cracked up to be. Somewhere down the line, you’re going to find out the cost of that money.
And it may just cost you the entire company.
On the one hand, you need money to develop your product. On the other, you need a community of people to actually buy it.
Normally, both of those things cost money to achieve—but crowdfunding actually lets you get both, for free.
A well-executed crowdfunding campaign lets you not only raise the money for development from a community of backers, it also lets you market your product (and any subsequent releases) directly to that community of backers. And their friends. And their friends’ friends.
See how this goes?
Ok, that last point was kind of cheating — anybody can build an audience. It’s 2017.
The trouble these days is building an audience that actually cares. Crowdfunding solves that.
Anyone who pledges money to your product before they’ve even seen it believes in what you’re doing. And a community of 20,000 that actually cares about the product is far more valuable than 30 million fake likes on Facebook.
Ok, before I say this, let me preface by saying that there are plenty of things you can do to influence the decisions of investors. I’m not saying that other routes to raising seed capital rob you of all agency over the outcome of your fundraising.
What I am saying is that crowdfunding, these days, is as much a science as it is an art. You generally have to have an innovative product that’s flashy enough to catch the eyes of a large audience, but beyond that, there are real, concrete steps you can take to orchestrate and market your campaign for success.
With investors, there are things you can do, but ultimately you’re relying on some old VC dude’s decision. Kinda lame. 🙄
If you study the mechanics of a great crowdfunding campaign, learn them like the back of your hand, and execute them well, it’s very possible to control your success with crowdfunding. You’re not just throwing paint at a wall. Also, you won’t have to buy so many darn lunches for people.
One of the most important and oft-neglected virtues of crowdfunding, though, is that it’s still a very open platform.
Building an audience organically on Facebook is certainly still possible, but they’ve really started to throttle non-paid posts (although, to be fair, this is supposedly not an attempt to make money.). It’s also certainly still possible on Twitter, Snapchat, Instagram, or any other network you want to name, but these places get more crowded every day. Increasingly, social networks are arenas where the more money you can throw around, the easier it is to rise to the top.
Certainly the same kinds of problems exist in crowdfunding networks, but to a large extent, crowdfunding is inherently built around ideas — and ideas are open to anyone.
If your product solves an important need and you can communicate that effectively, people will be drawn to it. It really doesn’t matter if you’re a big tech company or just two kids in a garage.
This might be the chief attraction of crowdfunding, particularly for product development. It’s one of the few spaces left on the internet where you can put your product idea out there, measure it up against the competition, and have it judged only (or at least mostly) by its merit in the eyes of “the people.”
And to tell you the truth, that’s worth more money than any VC can throw at you.