Crowdfunding: what it is and what it may become

Exclusively written for the Sting by Danae Ringelmann, Co-Founder and CFA at Indiegogo

Danae_Ringelmann_Indiegogo

Danae Ringelmann is the Co-Founder and CFA at Indiegogo

Growing up I watched my parents struggle time and time again to get loans for their small business. I had a very similar experience while I was trying to raise money for a theatre production – even though all of the potential investors we invited praised the project, they all decided not to fund it. During my time working in the finance industry, I realized that it wasn’t necessarily hardworking people with great ideas who received financing. When I was in business school, I had the pleasure to meet Eric Schell and Slava Rubin, who had experienced similar frustrations when trying to raise money for their own projects. We were tired of seeing brilliant ideas going unborn every day, not because entrepreneurs weren’t doing their jobs well or because there wasn’t interest for their projects, but because a select few gatekeepers were deciding who did and didn’t get access to financing.  We created Indiegogo as a place where every idea gets a shot at success. Ironically, we faced our fair share of setbacks trying to get our platform funded too. We were turned down by 92 investors before got our first round of traditional funding in March of 2011.

Crowdfunding has quickly become a permanent part of the finance ecosystem. An increasing number of people are welcoming crowdfunding as an either an alternative or complement to traditional funding. Indiegogo in particular has removed bias from the funding equation. It’s a completely open platform where crowd decides which ideas deserve to become a reality – if they like and believe in a project they will fund it, regardless of the gender, ethnicity or religion of the entrepreneur behind it.  With perk-based crowdfunding, anyone who likes an idea gets to participate in its success and be rewarded for participating. It creates an amazing community where people work together to bring ideas to life.

For entrepreneurs and creators the benefits of crowdfunding are more than just financial. The campaign process provides invaluable information as your project evolves.

Market validation – You can not only determine whether there is a market for your product, but you can find out your target customers’ preferences and see if they have any ideas on how to improve your product as you go into production.

Connect with new and existing audiences – As you run your campaign and interact with contributors you’ll build a community that is excited about what you’re creating and will spread that excitement during and after the campaign.  The campaign itself is a media event that you can use to build buzz about your project and reach people outside of your network.

Funding – Perhaps this is obvious, but a well-executed campaign will get the capital you need to bring your idea to life.

Partnerships – Because we want to support entrepreneurs throughout the project lifecycle, we have teamed up with companies like Arrow Electronics, Brookstone, and Celery to help entrepreneurs bring their products to market.

Even beyond the campaign itself, crowdfunding helps entrepreneurs receive additional financing by giving investors and venture capitalists a place to look for new investment opportunities, and proof that a market exists for those innovations. It takes some of the risk out of the venture financing process.

I believe that the future of crowdfunding platforms is to grow beyond simply being a way for people to fund amazing projects, but to provide support system for projects to go from research, design, funding and creation, right through to the marketplace. Indiegogo is pioneering this approach already. We started by partnering with Brookstone, the innovative product developer and specialty retailer to help bring the most ground-breaking crowdfunded products to market quicker than ever before. We’re now working with Arrow Electronics to our entrepreneurs access to industry-leading toolsets, engineers, discounted components and manufacturing, design and supply chain logistics – a package that is worth up to $500,000.

Crowdfunding has already grown tremendously since its origins as a financing alternative for entrepreneurs. But our mission has always been to help entrepreneurs bring ideas to life, and each partnership and improvement to the platform is only making it easier for dreams to become reality.

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