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This post focuses on crowdfunding as a whole, including pre-purchases and donations. Whereas securities crowdfunding in the US is still being worked on by the SEC, it is flourishing already abroad.
Crowdfunding Startups in 2013 – Age Of The Independent
In 2012, crowdfunding suddenly exploded in a way that nobody could have predicted. The line between the customer and the investor blurred forever, and people found that their entire careers were lining up in front of them because finally they could side-step all the middlemen and just get down to doing what they do best – offering amazing products and services to other people.
It’s also proven itself as the arguable way forward for startups, given that it offers them the freedom to operate without an overbearing investor – in the traditional sense, at least. You’ll find it somewhat unlikely to have someone Kickstart you for half a million by themselves, so there’s very much a sense of people just wanting to band together and push you to the top of a very steep hill.
It also means you’re not starting out broke, and that’s a huge deal for startups that avoid big investors and work for free until they’ve got something to sell. No sleeping in offices, starving as you code or worrying about where you’ll work when Starbucks kick you out. While there is that scramble to reward your backers with anything from tshirts to their name in the credits – even to meeting with them in person – you are now able to be independent, and avoid poverty.
Crowdfunding has also enabled consumers to finally have a say in some aspects of the product and in a way that startups actually benefit from. Frequently, startups have to go and find people to talk to them about their product, but if someone’s thrown thirty dollars at it before it’s released, they are naturally compelled to offer feedback and ideas, and this kind of crowdsourced testing and thinking circle are invaluable assets to a company looking to make something big.
There are some great examples of conversations between the funders and creators. GameStick is a sound one to start with – a USB stick and controller that turns your TV into an Android-powered gaming experience. It sounds ambitious, but the staff have had a constant dialogue with backers, answering questions and thanking people for their support. Even a temporary yank from Kickstarter for alleged copyright infringement hasn’t dulled their spirits, or those of their backers, and they continue to keep things positive and fresh.
Now, there are examples of Kickstarters where a lack of that connection can really be a problem. Code Hero is a game that teaches people to code as they play it. But after rumours came out that the developer had run out of money, the commenters were infuriated at the lack of creator response on the page. This swiftly led to backers mobilising their legal forces, and only then did the creator respond. It’s worth taking away from this that if you’re not willing to run things like GameStick did, then you face some serious challenges from your backers when the lack of info goes from annoying to sinister.
So if you are considering funding your next startup via the public rather than slogging something round all investment companies and angel investors, then you should be on the right track. Big investment companies, if anything, will now do more for you in order to secure your product than they did before – suddenly, they’re not as important, and that turns the tables in a way that benefits startups. They have the power and the appeal, now. So starts the age of the independent.
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This entry was posted on Monday, January 28th, 2013 at 3:09 pm and is filed under Business Updates. You can follow any responses to this entry through the RSS 2.0 feed. Responses are currently closed, but you can trackback from your own site.