Startups · Seed funding

Has Crowdfunding run it's course or can good ideas still find backers?

Cheyenne Jones CEO/Founder

February 3rd, 2015

There are so many Crowdfuning variations out there, I would like to hear feedback from the tech community as to how valid it has become. I see a few huge winners, but many ideas generate very little funding. I know it has to do with social networking, but what percentage of Crowdfunding ideas actually receive funding? Also, how many Crowdfunded ideas go any further, or do most fail to go to market?

Michael Boezi Writer, Strategist, Educator.

February 3rd, 2015

Crowdfunding is just like a product launch-you won't be successful if you don't have an audience BEFORE you start. It's extremely rare to for a "cold" idea to gain traction on its own-even if it's a really good idea. The dynamics are totally different if you've built up trust to the point of advocacy. Then, you actually have a shot. It still might not work, but at least you have a chance.

A platform alone (crowdfunding, social media, etc.) is not magic-it's just the plumbing. It's what you do with it that counts. It's all about your creativity, your strategy, and of course, your execution. No shortcuts. You've got to do the work of creating connections and building relationships first. Then you can ask for support.

Jared Hardy Founding Director at Data Roads Foundation

February 3rd, 2015

Crowdfunding is very helpful in preventing overly optimistic production runs, whenever market demand is too weak to sustain scalable production, via its pre-sale market signals and minimum funding requirements.

Crowdfunding as an industry suffers from tunnel vision on near-finished developments that are well past MVP or prototype phase, but announce just before a scalable production chain has been completed. This is the most predictable phase of development timelines, so it lends itself best to the scheduling predictions that crowdfunding sites all demand. The industry has also suffered from service brand proliferation and dilution, because no one platform has created a defensible or unique set of web promotion tools (which all existed as standard marketing and nonprofit donation pooling tools well before crowdfunding adopted them -- remember all those giant fundraiser goal % thermometers and countdown clocks?). This is because it has set itself up as a megahit driven industry, akin to high production cost music and movies, where the product needs to be practically finished before it can be promoted effectively to test true market demand within a limited introductory period.

I see a huge opportunity being missed here that I would like to exploit in my own startup: connecting adventurous and patient lead customers, who are willing to risk experiments with new innovations to get first access to a radically new product or service to fulfill their needs, without forcing any arbitrary deadlines on non-negotiated feature completion. The standard countdowns and predetermined "tipping point" goal lines of the crowdfunding industry have never fit the needs nor helped in the discovery of niche leading customer-innovators, who are more interested in testing and influencing the MVP or pre-alpha version rather than being limited to the final release candidate. Neither entrepreneurs nor leading customer-innovators are being well served by any current social discovery and funding models.

Cheyenne Jones CEO/Founder

February 3rd, 2015

Thank you Paul! I was looking for some genuine feedback from the marketplace, but received several offensive comments from some of the @founderating people. Thanks for your support..

Paul Dowling Founder at Dreamstake

February 3rd, 2015

It's a good debate to have.  I posted this yesterday www.dreamstake.net/blog.  I personally believe that VC will long-term be dis-intermediated by platforms such as our own www.dreamstake.com.  I am less sure about crowd-funding. There will be big fall-out from the first significant failures.

Cheyenne Jones CEO/Founder

February 3rd, 2015

Thank you Michael, you confirmed what I pretty much knew, but am just looking for feedback from the marketplace. I also thank you for being professional in your comments, I have received some really offensive comments from @founderdating people. Warmest regards, Joann

Cheyenne Jones CEO/Founder

February 3rd, 2015

Debate are always valuable! What criticism are you citing?

Richard PhD Global FinTech - Crowdfunding - Research & Policy | Strategic Advisory | Board Member | Author | Consultant

February 3rd, 2015

Cheyenne

Great questions - the success rates vary tremendously - from less than 10% on many platforms to as high as 42% on other platforms.  You can track statistics (neither comprehensive nor 100% accurate, but close) at http://thecrowdfundingcentre.com/

But, what does this actually measure? If you lump together and compare amateurs with zero pre-campaign preparation with agency driven campaigns, you lose any value in the numbers.  The field is noisy and with the introduction of major agencies, brands and Fortune 100 companies using crowdfunding platforms, it is going to be more and more difficult for startups to compete.

However, between 60 and 70% of people who "fail" at crowdfunding report that they intend to do another campaign. There are significant benefits to crowdfunding - and the financial rewards are typically the 5th or 6th most important to the entrepreneur at the close of the campaign.  

Data from Wharton reports that nearly 90% of projects that met a $5,000 funding goal in the past five years are still engaged in the activity for which they raised funds - this includes community crowdfunding, not-for-profits etc.  Early evidence suggests that successful rewards crowdfunding is associated with more viable firms, but more research is needed.

Glenn Saunders

February 3rd, 2015

This is purely anecdotal, but as tough as it may be to suffer a failed campaign, I've noticed some cases where projects failed on the first try and managed to make it on the second try.  Sometimes the first campaign simply doesn't run long enough to hit critical-mass.  I've come to see crowdfunding sites as a great way to raise awareness, something that has value based on the overall foot-traffic flowing through Kickstarter and Indiegogo.  You never know what indirect benefits might come from running a campaign, bloggers writing about it, investor inquiries, etc...  But it's more than just whether or not you cross over the finish-line.

Cheyenne Jones CEO/Founder

February 3rd, 2015

Sorry, debate *is* always valuable. What criticism is it that you are citing?

Cheyenne Jones CEO/Founder

February 3rd, 2015

Thank you Richard, your comments are valuable and exactly what I was looking for, I can't beleive some of the offensive comments I received from @founderdating. Thanks again.