Before any new device makes its way to the market, extensive amounts of research hours are put into its production. This research and the manufacturing process that follows come at a cost, which is a significant roadblock for any company that is just starting its operations.
With the advent of the internet, crowdfunding became a plausible way for startups to earn funds free of interest. Read ahead in the article to learn more about crowdfunding.
What is Crowdfunding, and how does it work?
Crowdfunding relates to when a business raises money via the public in the form of donations or by offering incentives to the general public for a fixed amount of monetary support. Technically it is a way to finance a business without incurring any loans. Crowdfunding in today’s day and age mostly takes place over the internet, but it has its roots in the subscription-based business model that publishers of the past used.
The entire process takes place through popular websites like Kickstarter, Ketto, Indiegogo and GoFundMe, to name a few. Businesses post campaigns to these websites explaining what they hope to achieve. Updates related to the projects can also be found here, which helps reinforce the consumers’ trust. People who donate to such projects are popularly known as Backers on such websites. The money that has been given (or pledged) earns them an acknowledgement on the device or business’ website. More substantial sums of money also have certain rewards associated with them, these range from offers on future products, merchandise and in most cases the related product itself.
The model behind crowdfunding also opens up an avenue for the manufacturers to connect with their consumer base. This allows for further refinement in the final product via their inputs.
Downsides of Crowdfunding
Although Crowdfunding has its fair share of positives, it does pose some risk in the form of three things, the success of the project, the post-delivery service and the doubt of fraud.
An example of a failed project that comes to the mind is the Lily Camera, a drone with features that were set to differentiate from DJI and other competitors. The device had raised $34 million via pre-orders, but due to improper financing, the manufacturer had to file for bankruptcy protection and tried to issue refunds to its customers.
The doubt of fraud also exists because of projects like the Dragonfly Futurefön by IdealFuture which The Verge detailed in a report. This project was run on Indiegogo, which then had still not updated its guidelines for projects. All the doubts that backers had about the product were dissolved with a trail of faked updates and 3D renders.
As for post-delivery service, that would largely depend on the business that posted the campaign. I had a great experience with the one product that I backed, which you can read about below.
My experience on Kickstarter
In June 2017, I received a promotional email from Anker, a company popular for making power banks. The message that it contained was regarding their latest venture, a company called Zolo, an audio device manufacturer. Keep in mind that this was roughly six months after the AirPods had made their way to the market, and the hype for wireless earbuds was full-blown. Anything that could provide a similar experience for an Android user was right up my alley. So, as a birthday gift for that year — the campaign went live on the day of my birthday — I went ahead and joined as a backer.
What sweetened the deal for me was the $60 discount I earned on the retail price of $149 for being an ‘Early Backer’. It took about five months for the device to reach my hands; during this period, the company kept all backers updated with a total of 28 posts. These included updates about the real-life testing that was conducted and all sorts of manufacturing updates.
Once I had the box in my hands, I knew I had got my money’s worth. The earbuds were nicely packaged in a box which felt premium. The earbuds had a great feel to them, and the features worked as promised, while long, the wait for the earbuds was worth it.