By Michelle McIntyre
I recently met an entrepreneur named Kitae Kwon who had raised $84,000 three years ago on Kickstarter for his unique docking station called Landing Zone.
This is pretty amazing considering the average amount raised is around $5,000.
There are some other exceptions.
Scanadu, maker of the super cool Scandadu Scout personal health monitoring device, raised more than $1.6 million using Indiegogo.
If you are not that familiar with the concept, here is the definition:
Crowd funding or crowdfunding (alternately crowd financing, equity crowdfunding, or hyper funding) describes the collective effort of individuals who network and pool their resources, usually via the Internet, to support efforts initiated by other people or organizations. Crowd funding is used in support of a wide variety of activities, including disaster relief, citizen journalism, support of artists by fans, political campaigns, startup company funding, movie or free software development, and scientific research. (Source: Mashable.com)
From a technology perspective, usually people who sign up to use the crowdfunding services of say a Kickstarter or Indiegogo ask for monetary donations, not for equity in the company, and in return, send donors a gift. It’s usually their product.
It’s nice because it forces the founder to get his or her marketing act together. This could mean getting professional photos and videos made or simply writing sales messages.
It could also mean a slew of new customers, if the donor gift is in fact the product.
The third benefit is that it’s organized way for friends, families and of course, new contacts to donate to your company.
Crowdfunding typically works better for B2C products by the way. B2B’s should probably just tap angel investor friends directly for funds.
There are some downsides though. Kitae Kwon says watch out for people who make your product look bad by posting terrible reviews which can often be fake. For example, someone posts a negative review before actually receiving the product.
Kwon said they probably come from competitors or random people who just like to write bad reviews.
He added that you have to be strong and confident when crowdfunding. If it doesn’t go as planned, your company could still be successful. Sometimes the campaign was just not planned or executed well.
Additionally, said Kwon, you could have a successful crowdfunding campaign but the product fails.
The net is, says Kwon, don’t let the campaign define your startup’s future.
However, Kwon adds, there are many crowdfunding benefits. For example, when people donate to get your product as a gift, it shows a bigger prospective investor, like a venture capitalist it is in demand.
Since he raised $84,000 for his docking station for the Apple Macbook Air, which is 10 times the average amount raised, Kwon must have had a huge demand.
For more unique crowdfunding examples, check out this story on the website Hooked on Social Networking. For information about Kwon’s company Landing Zone, visit: http://landingzone.net/
Michelle McIntyre is the president of MMC high tech PR, on the TEDxSanJoseCA executive team, and director of marketing communications for SVIABC. Follow her on Twitter at @FromMichelle [Photo credit: iStockPhoto.com.]