Why Companies are Starting to Look More Closely at Crowdfunded Products

By Rachel Shapiro

Crowdfunding has increased in popularity over the last several years, as it provides entrepreneurs and start-ups with a platform to raise money for their business ideas. When creating and marketing a new product or venture, entrepreneurs tend to run into problems with the costs to advance from the ideation phase to the actual production phase. For many new businesses, investors are needed to help get to the next step. Cue crowdfunding platforms like Kickstarter or Fund an Idea. These platforms allow entrepreneurs to create a profile that details the intricacies of their project and request various amounts of money oftentimes rewarding their contributors to their campaign with a gift after their venture launches.

The fact that crowdfunded projects already have a fan base of potential customers that are willing to donate shows that the products are in demand. These particular ventures appeal to companies because there is proof of consumer interest. They are not only integral in raising money for the company, but also serve as a way to spread the word about the project. In a sense, it’s a way to market the company – for free. Because the fundraising is done entirely online, the link for their page can be shared via text, email, social media and more. With billions of internet users all over the world, crowdfunding pages can go viral. This interesting spin on the concept of “word of mouth” provides entrepreneurs with a large audience for their project, and hopefully, a wide range of financial backers.

Because crowdfunded projects can land in the lap, or on the screen, of virtually anyone, they provide entrepreneurs with an interesting way to gain feedback about their product or service. Yes, a financial backer could be an actual investor looking to dip their toes in a new project. They could also be your Average Joe who takes interest in the project or has a need for whatever product is being funded and wants to see it go to market. The more backers a venture receives could essentially equate to the more consumers who would be willing to buy the product or service once it’s off the ground.

When having fans and funds coming from potential customers, companies are interested in working with inventors or entrepreneurs with products that are popular in their industry. If a large base of consumers are willing to donate their own money towards a product that means they hope to see that product on the market. That alone would appeal to companies because it is essentially a guarantee that the product would be purchased. The prospect of future customers, as well as the ability to bypass a bit of the market research typically done for new products, makes crowdfunded projects appealing to companies looking to add new products to their line.

With the number of crowdfunding platforms available today, it is no wonder entrepreneurs are turning towards this method of funding to move forward with their venture. Because it provides them with an easy way to both raise money and market their product, these platforms are only gaining popularity every day. Companies are turning towards crowdfunded products because they ensure a certain level of consumer acceptance, a key component to a successful product launch. 

Matthew Tagliavia