Seeking funding in order to sell: Crowdfunding as a marketing tool
Section snippets
Crowdfunding: From creative projects to a commercial launch platform
Eric Migicovsky created the Pebble smartwatch, which perpetually remained on because it was made of e-paper and had a battery life of up to 10 days. While he was able to raise some funds for its development through a business incubator, he failed to raise sufficient venture capital. Migicovsky then turned his hopes to the crowdfunding website Kickstarter (Netburn, 2012). The Pebble campaign launched in April 2012 with an initial fundraising target of $100,000. Backers could pay $115 to
Crowdfunding as a form of marketing
Gerber and Hui (2013) identified a number of reasons why company founders might launch a project on a crowdfunding website. Naturally, the most significant motivation is fundraising. Crowdfunding gives entrée to financial support for people and organizations that do not have easy access to banks, angel investors, and venture capitalists. The process of founding and launching a crowdfunding campaign is also less time intensive than other options, as no legal applications or approval procedures
Match company objective with crowdfunding approach
It is evident from the aforementioned examples that crowdfunding websites can serve as valuable marketing channels, and that there are various approaches firms can take to engage with them. The starting point for selecting the right approach entails determining what the company wishes to achieve. Table 1 presents the primary objectives of each of the crowdfunding projects that were discussed in the previous section. However, it should be clear that although these firms may have had certain
Select a crowdfunding approach based on objectives and constraints
While firms have a range of options regarding how to engage with crowdfunding websites, the examined campaigns show that not all of these options are available to all firms. The selected approach therefore depends not only on the objective of the crowdfunding campaign, but also on certain constraints. First, if the firm wants to organize a reward-based crowdfunding campaign, it needs to offer a physical product that is a good investment opportunity and for which potential backers are willing to
Consider crowdfunding strategically and realistically
As this article demonstrates, crowdfunding websites can be used as marketing tools not just by companies with a history of crowdfunding (e.g., Pebble) but also other established firms. Campaigns can be organized to cover a range of different objectives, including raising funds, registering direct sales, and generating product ideas.
However, it is clear that not all possible approaches are available to all firms. Two constraints, as discussed in the previous section, play a role. First, some
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