By Jane Lasky
Crowdfunding, the relatively fresh practice of funding a certain project or a new venture by raising money through contributions, has grown into a hot commodity in 2017. Unlike its beginning about 13 years ago, this creative way of raising funds is no longer just for small start-ups, atypical products and independent film making. Today, crowdfunding has shifted gears to make this ever-growing phenomenon a very viable revenue source for all types of big business, too.
Some $34.4 billion has been raised this way in 2015 alone. To wit, on Oct. 30, 2015, the SEC stepped in to start regulating crowdfunding under Title III. The rules of this plan dictate that the issuer must be deemed a private, United States-based company.
A Growing Trend
So why should the corporate hierarchy think about getting in on this growing trend? One big reason is because crowdfunding utilizes the magic of social media to get the word out. With that comes the ability to run a litmus test of sorts, because even before a product or service is made available, the powers that be can now understand the customer base.
Last year, Venture Beat ruminated on Indiegogo’s proclamation regarding its intended dive into “enterprise crowdfunding.” Journalist Harrison Weber stated in January 2016, “The concept isn’t totally new. Enterprises will use much of the same stuff as the rest of Indiegogo’s users. It’s more like a welcome sign for the Fortune 500, complete with an Indiegogo consulting service.”
Venture Beat talked to Indiegogo CEO Slavin Rubin about the new development. He stated that there has been a lot of Fortune 1000 interest because, in part, the crowdfunding concept is “very similar to the projection of social networking. Slowly people were learning this is a good way to share. This is a good way to share with your customers.”
That said, through the support offered by crowdfunding, management will be able to see early on what type of consumer is enthusiastic about a product or service, and also what can be improved on before anything concrete is ever introduced into the marketplace. Talk about a keen focus group where feedback is key.
In a 2015 report from David M. Freedman and Matthew R. Nutting entitled “A Brief History of Crowdfunding Including Rewards, Donation, Debt, and Equity Platforms in the USA,” the two authors refer to successes with crowdfunding campaigns. One, a product called the Coolest Cooler, was seeking a $50,000 funding goal. The actual results? Some 62,000 backers hit up Kickstarter with $13,285,000.
Freedman and Nutting claim that, “companies like GE Appliances are already capitalizing on this trend. GE launched FirstBuild, a global co-creation community and micro-factory that looks for insights on how to improve the way major home appliances are created, designed and manufactured.”
And so, with this new innovation being embraced by larger, more established companies more than ever before, it looks like crowdfunding is here to stay—and in a bigger and certainly more wide-reaching way.