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Crowdfunding

Repeat crowdfunding allows businesses to test drive new products

When success is achieved, it’s only natural for a business to repeat the process that led to that success. New data from US based crowdfunding giant, Kickstarter, has revealed that those who have experienced success in developing new products with crowdfunded sourced capital almost double their chances of success with a second campaign. According to Kickstarter, those with five successful projects have a 91 percent likelihood of continued success with regard to raising funds on crowdfunding platforms.

Crowdfunding is becoming a new and relatively inexpensive way for businesses to test how the general public react to new products and ideas, whilst also allowing companies to raise development capital. The ‘business and entrepreneurship’ category of crowdfunding accounted for just over 40 percent of the $16 billion raised last year in the sector, according to estimates by Massolution, a division of research and advisory firm Crowdsourcing LLC.
Take, for example, the Pebble Technology Corporation. Founder and CEO Eric Migicovsky had been unsuccessful in securing funding from private investors for the smartwatch he designed in 2012, so instead he turned to Kickstarter where he secured $10 million from hundreds of investors. His company now employs about 150 people and the Smartwatch is sold to various retailers. Migicovsky launched a second campaign via Kickstarter earlier this year for the Pebble Time smartwatch, which raised funds totalling $20.3 million. Commenting on his decision to return to Kickstarter, Migicovsky said:
“Every single time you launch a product, there’s risk—nothing’s guaranteed in this world. That’s the reason why we went back to Kickstarter, to get feedback and validation early on.”
David Laituri, owner of the business Onehundred, launched his first campaign in 2012 to develop a handcrafted solid wood Bluetooth speaker that raised $195,000 in funding from a crowd of over 1,300 backers. Would it be a fair assumption to say that without crowdfunding, his business would not exist today? Possibly. Since his first Kickstarter campaign, Laituri has launched four other projects via the crowdfunding platform, which have raised a total of $180,000, while an ongoing campaign for a handcrafted knife has raised over $48,000 so far, from 580 backers.
Laituri backs the crowdfunding method all the way, stating that it allowed him to start up his business whilst avoiding things like credit card debt and a second mortgage. The universal attractiveness of the crowdfunding model to both investors and entrepreneurs alike may mean that what was once a niche investor platform could be on its way to becoming a more mainstream business model.

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