Disclaimer: I had a Victor Kiam moment after stumbling upon hiSbe’s crowdfunding video (the subject of this post); I liked the campaign so much, I invested in the company. I’m now a proud Non-Executive Director of a social enterprise that plans to give folk on average incomes an opportunity to shop ethically (“How It Should Be”). Here’s what I learnt about crowd-funding along the way.
Crowd-funding is becoming an important source of income for startups, both nonprofit and commercial. Buzzbnk is just one of several specialist services that support ventures or enterprises that are looking to grow, to attract funding from people interested in supporting social change. Typically, campaigns run for a limited time, e.g. 2 months, people give small amounts in return for benefits, e.g. public recognition, invitations to organisation events, discounts, etc. and if they don’t raise their target amount then the money is returned to investors.
The “crowd” element shifts the focus from attracting investment from a few people, to generating small contributions (and word of mouth) from lots of people and that’s what makes it interesting in terms of market research.
An important stage in New Product Development, is test marketing, e.g. launching a product in a small way to refine it and learn more about demand before a full (expensive) roll out. Even before that, you need to test the demand for a product (or service).
Crowd-funding could serve a useful function in finding out if (enough) people really are prepared to put their money where their mouth is before a new venture is launched. An enterprise like hiSbe, that aims to leverage shopper power, will need to have local support (not least, lots of customers) in order to achieve its social goals. Running a campaign prior to opening the pilot store is one way of testing the truth of that support, and raising start-up funds at the same time. Do you want to know if your Followers, Friends, Connections, etc. really care? Ask them to whip out their credit cards.
Likes are the digital equivalent of having friends and family said they’d buy your gizmo if you were able to get it produced. Crowd-funding shows that social media backing can be skin-deep. Some proof of this can be found in the Buzzbnk archive of campaigns that were Misunderstood i.e. ended without meeting their targets. Looking a bit deeper at the projects, some of them had 1000s of Likes on their Facebook groups, but only a handful of people ended up donating a tenner. Whereas, among the Successful campaigns, we find examples where there’s less social media backing, and more financial backing e.g. Pants to Poverty, which exceeded its target.
Is it all about the idea? Or is there an art to converting people from passive supporters to active fans?
Crowd-funding is an interesting way to check whether there’s genuine, active support for your project or venture before it’s too late and raising its profile in the process. But some of the success lies in positioning as much as the product. The Guardian has some good advice on how to make Crowd-funding work well in the nonprofit sector, much of which can apply to businesses too.