Crowdfunding and Innovation

– by Paul Niederer –

indexMany times a good innovation dies on the vine due to the lack of capital to make a prototype or take it to market.

Crowdfunding is bridging this gap.

The main idea with crowdfunding is that the innovators and their helpers set up a fundraise as a new project on a crowdfunding platform. The innovators, now promoters, invite others to assist them with funding their goal within a specified timeframe. Most projects have a funding goal that if reached makes their project worthwhile. Depending on whether the crowdfunding is donation, reward or equity based backers receive a gift, product, a good feeling or shares.

In a recent Indiegogo presentation I attended, it became obvious to attendees that reward crowdfunding is not just about the money. The presentation highlighted five reasons innovators may use a reward crowdfunding platform to raise capital.

1.    To validate the market. The innovator wanted to open a “Cate Cafe” in London, needed £108,000 to do it but was unsure if there was enough interest. The campaign raised £109,510 in two months with the request to validate the idea of opening a cat cafe where visitors will have the opportunity to kick back and relax with a cup of tea and spend time in the soothing company of our purring feline friends.

2.    To test a market. Canary pitched itself as the first smart home security device for everyone. Canary is a single device that contains an HD video camera and multiple sensors that track everything from motion, temperature and air quality to vibration, sound, and activity to help keep you, your family and your home safe. Unsure of the market the promoters pre-sold their units in a crowdfunding campaign with an initial sales goal of $100,000. The market responded with orders for over $1.9 million. Over 7000 units were sold. A very successful market test.

3.    Get extra promotion. Sometimes your sales may be confined to the market as you know it and need a wider audience. Take the Robot Dragonfly for example. The dragonfly was developed at the Georgia Institute of Technology, as a joint effort among 20+ researchers, PhDs, professors and students from multiple universities across the world. Through their crowdfunding project they raised over $1.1 million and gained 3200 customers.

4.    To capture data. The Scanadu Scout is a personal scanner packed with sensors designed to read your vital signs and send them wirelessly to your smartphone in a few seconds, anytime, anywhere. The device promoters used crowdfunding to target the consumer market but the backers they attracted, and the data generated by these backers is certain to capture the attention and significant budgets of the medical industry around the world.

5.    Money and matching money. Sometimes it is about the money. This was the case when Tesla’s final laboratory came up for sale. A non-profit wanted to buy the property and turn it into a Nikola Tesla Museum. The property was listed at $1.6 million, and this non-profit would receive a matching grant from New York State of up to $850k if it raised the money.  33,253 contributed over $1.3 million and the building was saved.

Equity crowdfunding and innovations also go well together. On the ASSOB platform hundreds of products and services have reached the world due to raises on ASSOB’s proven capital raising platform. Examples include plastic wine barrels, pressurized fruit juice, dental plans, a self-managed superannuation portal, open source network management software, proximity advertising, children’s designer furniture, encryption software, mining tenements, welding technology and an on-line photography marketing site.

There are now thousands of examples worldwide where innovation and crowdfunding go hand in hand. This is just the beginning.

image001Paul Niederer is passionate about providing matchmaking opportunities for entrepreneurs and investors in the early stage space.

As CEO of ASSOB he supports high growth companies and investors in obtaining funding through Peer to Peer investing.

Established in 2005 The Australian Small Scale Offerings Board (ASSOB) is a unique Capital Raising and Listing Platform for Unlisted Companies that preceded “Crowdfunding”. As CEO Paul leads a team that shepherds businesses through an ordinarily complex and frustrating Capital Raising Process with efficiency and effectiveness.

A big believer in small business peer to peer lending and investing, Paul also publishes a blog called Capital Underdogs which further assists to make “Capital Raising Simpler”.

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