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What’s next for crowdfunding? Four predictions for the future

Crowdfunding has changed considerably in the last two years alone, so what does the future hold for this form of funding?

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Crowdfunding continues to change

Once upon a time, crowdfunding was done by begging friends and family to invest in your company, then formalized online with sites like Kickstarter and Indiegogo where anyone can chip in smaller amounts to get you on your way. But with so many companies launched to help you crowdfund, and so many new strategies in a rapidly growing ecosystem, what does your company need to know about the future of crowdfunding?

To answer that very question, we tapped the expertise of Kaitlyn Houk is a crowdfunding Campaign Manager at RainFactory Inc., and uses platforms such as Indiegogo and Kickstarter to launch and run some of the most successful crowdfunding campaigns to date, most notably JIBO (the world’s first family robot which raised $2.29M), SKULLY AR-1 (the world’s smartest motorcycle helmet, $2.45M), Luna (the mattress cover to make any bed smart, $1.1M), and Snap Judgment (the NPR radio show that tells stories with a beat, $209k). Her expertise is marketing and fundraising, and Houk spends her days sitting side-by-side with entrepreneurs every day to advise and execute on crowdfunding campaign strategy, inciting thousands to bring each new product vision to life. She has a BA in Political Science and Economics from the University of Virginia.

In other words, she doesn’t bleed red or blue, she bleeds green.

“Crowdfunding platforms have both flattened and broadened the fundraising landscape,” Houk opined. “Anyone with an internet connection can tap into this great fabric for raising support and acquiring customers. Even though crowdfunding is an open door for both product inventors and supporting users, it still takes agility and skill to succeed in a campaign.”

Houk works daily with clients who are “makers” and tells us that the top advancement she’s seen of late is “how these inventors and innovators progress from blueprint to finished product is in taking ideas directly to the online community for validation. This gives them the ability to use community feedback to shape their products. The low barrier to entry, the speed and ease of communication, and the wide range of channels through which we can reach out to all contributors in a campaign, combine to form a tight feedback loop that campaigners can tap into to flesh out, fund, and adapt their product or idea.”

So what is the current state of crowdfunding? Houk offers her three-point overview below:

1. Power to the crowd

This tight communication loop empowers smaller groups who usually don’t have a voice within large companies to be able to demonstrate the potential success of an idea or product. Take our client, Jibo, for example: Jibo Robot, one of the highest-funded technology campaigns on Indiegogo, came out of some of the best and brightest researchers from the MIT Social Robotics Lab. They then took their product directly to the masses and quickly found the buzz-worthy demand they needed to move forward. Jibo could then take their tidy sum of 4,800 pre-orders and $2.3 Million raised and raise another $25.3 million in a Series A round to build their business.

2. Build it together

Early-stage crowdfunding means makers can tailor their product to meet demand. There’s a discovery process that goes on when companies decide to crowdfund. Customers ask tons and tons of questions; often questions that makers have never considered before. For instance, the creators behind the SKULLY AR-1 Motorcycle Helmet have spent a long time discussing the feature sets that they believed would add the most value for potential customers. After the launch of their campaign, and the communication loop tightened, they suddenly had a large pool of motorcycle enthusiasts wanting to know about more features. Backers have a direct line of communication to the maker of the product and real input on feature sets. The SKULLY team released videos, diagrams, and performed demonstrations of other possible features, and got very valuable feedback on which features to focus on.

3. Naked in public

Many of these products fail, and when they do, they fail in a very public way. Products that fail early in their crowdfunding campaigns walk away without any funding and a very bad scorch on their egos. It is even worse if they fail AFTER receiving funding, which is the specter that hangs over any successful campaign. Communication has sped up, but not in lockstep with fulfillment, or the speed to produce and ship products. There is a time crunch within the company itself to live up to its promises.

Every crowdfunding team wants to meet their goal to launch their product. But not every crowdfunded product is able to launch. Angry investors are one thing; angry customers are another. There are innumerable campaigns that don’t launch simply by self-selection: campaigners who are remotely timid about fulfillment sometimes back out or pivot their product before coming to the spotlight. One of our clients even told me, “If I’m opening the kimono, I better look ripped.”

So what’s next? Four predictions for the future

So what will be the next advancements? How will funding be innovated in the future? In her own words below, Houk offers four predictions every brand must pay attention to:

  1. Building Trust – More new digital marketing firms like RainFactory are entering the space to help campaigners hone their vision, and build confidence in the product as well as the ability of the team to bring the product to life. Customers and backers are needy: constant feedback, profuse thanks, and social validation are an imperative.
  2. Streamlined Operations – New services are cropping up to offer accessible and affordable fulfillment systems for crowdfunding campaigns, such as BackerKit. Even the crowdfunding platform Tilt has begun to offer fulfillment services. I wouldn’t be surprised if more platforms began to do the same.
  3. Vocal Backers – Backers will become more comfortable with this “buy and wait” model, as long as the crowdfunding community of trust is maintained. There are even backers who feel compelled to defend the product against critics. On the other side of the same coin, backers will have better “lie detectors” to call out any crowdfunding schemes that look suspicious and vocally demand more answers.
  4. Simplified Legalities – The legal system will catch up. The hybrid donate-presale model will reach a level of maturity and there will be mutually agreed-upon sets of terms and conditions for launching and running a crowdfunding campaign. Kickstarter and Indiegogo are the biggest requirement enforcers right now and they will continue to be the leaders in this arena. Their Trust and Safety teams are some of the best I’ve ever worked with.

Okay, so there is actually a fifth prediction:

  1. Fostering Growth & Imagination – The technologies that are being created via this direct-to-consumer method are truly awe-inspiring. I am excited each day I get to go to work and help these people make products that have a meaningful impact. More exciting technologies are developed, more dreams come true, and more jobs are created: one campaign at a time.

Houk concludes, “Case in point: Go fund somebody today and you’ll have an extra skip in your step. I promise.”

#Crowdfunding

The American Genius is news, insights, tools, and inspiration for business owners and professionals. AG condenses information on technology, business, social media, startups, economics and more, so you don’t have to.

Business Finance

How to survive a recession in the modern economy

(OPINION EDITORIAL) Advice about surviving a recession is common these days, but its intended audience can leave a large gap in application.

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recession squeeze

There’s no question of whether or not we’re in a recession right now, and while some may debate the severity of this recession in comparison to the last major one, there are undoubtedly some parallels–something Next Avenue’s Elizabeth White highlights in her advice on planning for the next few months (or years).

Among White’s musings are actionable strategies that involve forecasting for future layoffs, anticipating age discrimination, and swallowing one’s ego in regards to labor worth and government benefits like unemployment.

White isn’t wrong. It’s exceptionally important to plan for the future as much as possible–even when that plan undergoes major paradigm shifts a few times a week, at best–and if you can reduce your spending at all, that’s a pretty major part of your planning that doesn’t necessarily have to be subjected to those weekly changes.

However, White also approaches the issue of a recession from an angle that assumes a few things about the audience–that they’re middle-aged, relatively established in their occupation, and about to be unemployed for years at a time. These are, of course, completely reasonable assumptions to make…but they don’t apply to a pretty large subset of the current workforce.

We’d like to look at a different angle, one from which everything is a gig, unemployment benefits aren’t guaranteed, and long-term savings are a laughable concept at best.

White’s advice vis-a-vis spending is spot-on–cancelling literally everything you can to avoid recurring charges, pausing all non-essential memberships (yes, that includes Netflix), and downgrading your phone plan–it’s something that transcends generational boundaries.

In fact, it’s even more important for this generation than White’s because of how frail our savings accounts really are. This means that some of White’s advice–i.e., plan for being unemployed for years–isn’t really feasible for a lot of us.

It means that taking literally any job, benefit, handout, or circumstantial support that we can find is mandatory, regardless of setbacks. It means that White’s point of “getting off the throne” isn’t extreme enough–the throne needs to be abolished entirely, and survival mode needs to be implemented immediately.

We’re not a generation that’s flying all over the place for work, investing in real estate because it’s there, and taking an appropriate amount of paid time off because we can; we’re a generation of scrappy, gig economy-based, paycheck-to-paycheck-living, student debt-encumbered individuals who were, are, and will continue to be woefully unprepared for the parameters of a post-COVID world.

If you’re preparing to be unemployed, you’re recently unemployed, or you even think you might undergo unemployment at some point in your life, start scrapping your expenses and adopt as many healthy habits as possible. Anything goes.

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Business Finance

Clyde helps smaller brands to offer product protection programs

(BUSINESS FINANCE) For small brands that sell not-so-little items, Clyde is a big deal! Now you can offer product protection normally reserved for the big brands.

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For small businesses seeking to adapt to their new or growing online presence, Clyde, a platform allowing small business consumers to receive extended warranties and protection on purchases may be the answer.

Due to the current pandemic, online retailers have reported on average, a 200% increase in digital sales. Online commerce is only expected to continue its growth with 52% of consumers suggesting they will not return to in-store shopping, post COVID-19. With online shopping in demand, stolen packages, damaged products, and lost goods are also surging.

If you’re ordering from a superstore like Amazon, Target, or Walmart, chances are your items are protected and will be quickly replaced upon a discovery of any of the above issues. However, for smaller companies, protection on consumer goods is usually not offered, not because smaller companies don’t want to give their customers this option, but because finding insurance for small businesses is hard.

Clyde, a company working to provide product protection programs to small retailers through the navigation and connection to insurance companies, intends to change that. Clyde gives small businesses or as their CEO, Brandon Gell, would say, “everybody that’s not Amazon and Walmart,” the opportunity to provide their customers with individual product protection or an extended warranty contract that can be purchased at checkout.

Clyde also provides the retailer with a portion of the insurance profit, serving as an incentive for smaller companies who usually get left out of this profitable market. Product protection is responsible for a whopping $50 billion market, so getting in on the game is key. The company also provides sellers with critical data analytics, product performance statistics, that otherwise would not be obtainable to smaller companies.

Not only is Clyde protecting consumer purchases, but its mantra acts in the best interest of smaller companies normally left out of big commerce perks. The company’s dedication to provide smaller businesses with access to revenue and its consumers with product protection at a time where the demand is higher than ever may allow this company to flourish.

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Business Finance

Will cash still be king after COVID-19?

(EDITORIAL) Physical cash has been a preferred mode of payment for many, but will COVID-19 push us to a cashless future at an even faster rate?

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No more Cash

Say goodbye to the almighty dollar, at least the paper version. Cashless is where it’s at, and COVID-19 is at least partially to thank–or blame, depending on your perspective.

Let’s face it, we were already headed that direction. Apps like Venmo, PayPal, and Apple Pay have made cashless transactions painless enough that even stubborn luddites were beginning to migrate to these convenient payment methods. Then COVID-19 hit the world and suddenly, handling cash is a potential danger.

In 2020, the era of COVID-19, the thought of all the possible contaminants traveling around on an old dollar bill makes most of us cringe. Keep your nasty sock money, boob money, and even your pocket money to yourself, sir or madam, because I’ll have none of it! Nobody knows or wants to know where your money has been. We like the idea of taking your money, sure, but not the idea of actually touching it…ewww, David. Just ewww.

There is no hard evidence that cash can transmit COVID-19 from one person to the other, but perception is a powerful agent for changing our behavior. It seems plausible, considering the alarming rate this awful disease is moving through the world. Nobody has proven it can’t move with money.

There was a time when cash was king. Everyone took cash; everyone preferred it. Of course, credit cards have been around forever, but they’ve always been just as problematic as they are convenient. Like GrubHub and similar third party food delivery apps, banks end up charging both the business and the consumer with credit cards. It’s a trap. Cash cut out the (greedy) middle man.

Plus, paying with a credit card could be a pain. Try paying a taxi driver with a credit card prior to, oh, about 2014 when Uber hit the scene big time. Most drivers refused to take cash, because credit cards take a percentage off the top. Enter rideshare companies like Uber. Then in walks Square. Next PayPal, Venmo, and Apple Pay enter the scene. Suddenly, cabbies would like you to know they now take alternate forms of payment, and with a smile.

It’s good in a way, but it may end up hurting small businesses even more in the long run. The harsh reality of this current moment is that you shouldn’t be handling cash. No less an authority than the CDC recommends contactless forms of payment whenever possible. However, those cabbies weren’t wrong.

The banking industry has been pushing for a reduced reliance on cash since the 1950s, when they came up with the idea of credit cards. It was a stroke of evil genius to come up with more ways to expedite our lifelong journey into crushing debt.

The financial titans are very, very good at what they do, at the expense of all the rest of us. The New York Times reported on the trend, noting:

“In Britain alone, retailers paid 1.3 billion pounds (about $1.7 billion) in third-party fees in 2018, up £70 million from the year before, according to the British Retail Consortium.

Payment and processing companies such as PayPal (whose stock is up about 55 percent this year) and Adyen, based in the Netherlands (up 72 percent), also stand to gain.”

All kinds of banking-related industries stand to benefit as well. Maybe we’ll go back to spending physical cash one day, but I don’t think there’s any hurry. Fewer old grandpas are hiding their cash in their proverbial mattresses, and the younger, most tech-savvy generation seems perfectly content to use their smart phones for everything.

We get it. Convenience plus cleanliness is a sweet combo. If only cashless payments weren’t such a racket.

If this trend towards a cashless future continues, future travelers may not experience what it’s like to fumble with foreign currency, to smile and shrug and hand over a handful of bills because they have no idea how many baht, pesos, or rand those snacks are. They may not experience the realization that other countries’ bills come in different shapes and sizes, and may not come home with the most affordable souvenirs (coins and bills).

We shall see what the future holds. Odds are, it may not be cash money, at least in the U.S. I hope the cashless movement makes room for everyone to participate without being penalized. We’re in the middle of a pandemic, people. We need to find more ways to ease the path for people, not callously profit off of them.

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