Indiegogo’s Danae Ringelmann on Crowdfunding as Market Research

6/5/14Follow @wroush

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project: they really like the project and they want to see it happen. Third is participation: they want to be part of something bigger than themselves. The fourth is perks, the thing or service that the raiser is offering. When equity-based crowdfunding happens, there will be a fifth P, which is profit or ROI.

When somebody says it’s not fair that the people who put money into a campaign on Indiegogo or Kickstarter don’t get to play in the upside later, they’re making the assumption that people were trying to fund the campaign for ROI reasons, but our data shows that ROI is not a factor. When you can offer it, it will be a motivating factor, and the conversation will change.

It all comes back to expectations. I don’t know the Oculus team, and I don’t know what their goals were. But speaking hypothetically, if they had been raising money on Indiegogo, we would have encouraged them to be transparent about their goals. If their end goal was to sell to Facebook, we would have encouraged them to be transparent and let funders be part of the process of getting to that sale. That way, they’d get to say, ‘I was part of one of the biggest acquisitions Facebook ever had.’

X: It seems like a growing number of companies are basically using Indiegogo and other crowdfunding sites as advance e-commerce platforms. They’re pre-selling products which they’ll then manufacture using the proceeds from the campaign. Does that fit with the original spirit of crowdfunding and democratizing access to capital?

DR: Campaigns on Indiegogo have generally broken down into three categories. One is creative, from music to film to photography. It’s a way to discover or amplify the next big artist, and for the artist it’s a way to engage with fans. Another is the entrepreneurial domain: everything from small businesses trying to open or grow or stay open. For example, we see a lot of small bookstores trying to stay open through a campaign on Indiegogo. The third bucket is causes, everything from non-profits to more personal causes. It might even be the Red Cross raising money after Hurricane Sandy.

Within the entrepreneurial domain, one of the use cases that has popped up recently, especially in the last year, is hardware technology. It’s grown 1,000 percent. Often, it’s product designers using Indiegogo to get quick feedback from potential users and get smarter before they do a big launch. It’s also a way to get the community involved and get them excited, so you can be sure you are making something people really want, as opposed to something you hope they want.

A lot of people now talk about that category purely as “pre-selling.” I think that is underacknowledging what is really going on, which is that it’s an opportunity for the campaign owner to understand their market before they actually launch. In that way, the customer will get a better product, the campaign owner will launch a better product, and there will be less waste. If you create a product no one wants, it will just go to the landfill. So this is just making production and manufacturing smarter and more efficient and sustainable. There is also an element of community engagement and market feedback and giving fans the opportunity to be involved. All that stuff is not captured when you just say “pre-sell.”

Within that hardware area, take a look at what’s happening with New Matter right now. Bill Gross is raising money to launch an affordable 3D printer, but he also wants to crowdsource designs from the community. He wants to connect with his community, not just try to shove a product into people’s lives, but create a way for people who want to be involved to bring this into their lives and connect with each other, which will make their experience more robust and interesting. He is also learning a lot about what people are willing to pay, and understanding more about who his customers are. So when he fully launches, he can launch a 3D printer that meets the needs of his customers at a price his customers can afford.

Wade Roush is a contributing editor at Xconomy. Follow @wroush

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