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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.

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4 Comments

4 Comments

  1. PICISI.com

    June 8, 2015 at 5:20 pm

    Great article, Kaitlyn we are trying to launch our crowdfunding site at http://www.PICISI.com, however we need 4 more administrators to be able to do that, would you kindly refer some good people to us?

  2. Gitendra

    June 9, 2015 at 12:13 am

    Kaitlyn and her team do spectacular work – they don't just have deep understanding of the crowd funding model and its associated best practices, they also respect the entrepreneurial process. This means an immersive and comprehensive examination of specific and often unique client product development and growth needs. Blended together, these framework approaches make Kaitlyn and RainFactory a powerful and effective agency with an in-house feel.

  3. Pingback: What's next for crowdfunding? Four predictions ...

  4. Pingback: Which state leads crowdfunding efforts? Texas, duh - The American Genius

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Business Finance

7 ways spending habits have changed since COVID-19

(FINANCE) How are spending and saving habits changing for Americans during the pandemic?

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Wallet open with $5 bill out, reflecting spending habits

Regardless of whether you’ve lost your job or kept it during the pandemic, you have undoubtedly been affected financially in some way over the past 8 months. For those who have been furloughed or laid off, it’s more obvious. If you’ve kept your job, you might be operating in a limited capacity, experiencing setbacks, or have a decreased client base. Of course, some of us are luckier than others, but if you’re not Jeff Bezos or Elon Musk (who have seemed to profit endlessly during COVID), chances are your bank statement looks a little different than you thought it would.

So how do these changes affect how we’re spending this year? Here are 7 ways Americans have changed their spending habits since March.

Out of work, using up savings

For those who are out of work and require more to live on than the negligible unemployment amount (especially after the extra $600 in COVID relief expired), resorting to savings is a means of survival. I’m sure no one imagined the “rainy day” they were saving for would be the economic repercussions of a global pandemic, but here we are.

Slashing expenses, saving more

We all arguably have less to spend money on these days. Going out to eat and drink? Travel? Shows and events? Not so much. It’s possible our wallets might be feeling a bit flush (especially if you’re still employed). As a result, many Americans are putting this new extra cash into their savings. Re-fluffing your financial cushions is a smart move, no doubt about it.

Putting life on hold

Did you want to move to New York City last spring before all hell broke loose? Did you want to buy a house or go back to school? You’re not alone. With all the financial insecurity that COVID-19 has brought on, it’s no wonder why many Americans are putting their dreams on hold.

Paying off debts

Similar to stock-piling cash for saving, many Americans are taking this time to pay off debts they have, weather that be a mortgage, students loans or something else. Smart move, I must say.

Looking to buy a home

Have you saved so much during the pandemic that you actually have enough to make a down payment on a house? Good for you!

It’s also important to note here that this trend also applies to those who participated in the mass flights from major cities to the ‘burbs – why live in a tiny, cramped apartment during a pandemic when you could buy a spacious home 30 miles away?

‘Comfort shopping’

Ain’t nothing wrong with a little retail therapy. If you’re using your end-of-the-month surplus on fun items for you, your home or others, I totally get it. Chase that serotonin rush – times are hard out here!

All that aside, as a consumer, I find market trends and marketing techniques during COVID so interesting. Absolutely no shade if you end up buying that $80 face cream because #selfcare (I’ve been there), but I have a fun time dissecting the ways in which digital marketers are extorting the current moment for financial gain. Think about it the next time you’re about to buy something you 100% would not have in a pandemic-less world.

Donating more than ever

On the other side of the spectrum, many Americans who have a little extra to spend right now are helping out their communities and other funds by donating to them. Whether it be mutual aid funds that provide meals to members of the community who need it right now, or to national funds that support disenfranchised or marginalized groups hit hardest by the pandemic, Americans are donating more than ever – especially with their stimulus checks!

It’s always interesting to see how large-scale events impact micro-economies, such as individual American households. The discrepancy between those who are working and those who are not plays a crucial role in dissecting spending habits but have less to do with the overall picture than one might think.

It will be interesting to see if COVID-induced spending habits will just be a fad for these dire times, or if they will continue after a vaccine is widely distributed. It seems only time will tell.

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Business Finance

Will China’s new digital currency really compete with the US Dollar?

(BUSINESS FINANCE) It isn’t the first time that China has tried to compete with the dollar, but the release of a digital currency has lead some economists to raise red flags.

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Man holding phone in one hand and credit card in other hand, handling digital currency.

For decades the US has been the world standard for foreign trade. As of 2019, 88% of all trades were being backed by that almighty dollar, making it the backbone of the world economy. However, China may be sneaking in something new for digital currency. 

In the last few months, over 100k people were “airdropped” cold hard digital currency. This currency came from People’s Bank of China (PBOC), who has created a digital manifestation of the Chinese yuan. This is planned to run concurrently with its paper and coin playmates. Upon initial inspection, they resemble the same structure as Bitcoin and Ethereum. But there’s a major difference here: The Chinese government is the one fronting the money.

The suspected plan behind this is that the government plans to tightly control the value of the digital yuan, which they are known to do with the paper one as well. This would create a unique item within the world of cryptocurrency. Personally, I don’t think that any of this is going to go anywhere soon. Too many people still need hard currency but it does open up a unique aspect of currency that has only just started since debit and credit cards. It gives the government the ability to spy on its cryptocurrency users. Being able to monitor transaction flows can reveal things like tax evasion and spending habits. There is even the possibility of experimenting with expiring cash.

But how does this affect the US? There’s a method that has been used by Americans since WWII called dollar weaponization.  The exchange domination allows the US government to monitor how the dollars move across the border. Along with that monitoring they are actually able to freeze people out of global financial products as well. It’s a phenomenal amount of power to hold. 

The concern for economists is that the price fixing capabilities of this new currency as well as its backer being an entire countries government could affect everything about the global financial system. Only time will tell how true that turns out to be.

There are a number of possibilities that could come up honestly and they could fall flat on their face unless they put their entire monetary worth behind it. Only time will tell but some economists are already calling for DigiDollars from the American government. Another step into the future.

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Business Finance

A tiger shows its stripes: The growth of Tiger Global and their investments

(BUSINESS FINANCE) Tiger Global has been acquiring a load of tech companies – let’s talk about who they have and how they’ve been so successful.

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Two business partners shaking hands as part of a Tiger Global acquisition deal.

In 2003, Tiger Global was founded by Chase Coleman who began his career at Tiger Management (brilliant name choice). In the ensuing years the investing firm expanded to include private equity and venture investing. Today it’s hitting the charts at $65B with its employees (number at ~100) being the firms’ biggest shareholders.

Earlier this month, Tiger Global raised one of the largest pots of VC money ever recorded, coming in at $6.7B. These came from a list of occurrences and investments.

  • Roblox: A sandbox gaming startup, Tiger Global owned 10% when it went public in March and the value is hitting ~$38B+
  • Stripe: A fintech firm Tiger Global leaped onto this investment when Stripe announced a $600m rise in value at a $95B monetary evaluation of the company.
  • M&A wins: In 2020, 3 portfolio companies (Postmates, Kustomer, & Credit Karma) of Tiger Global were acquired in billion-dollar deals.

The tactics that Tiger Global stands by are well documented in a few different locations. One of the biggest that they push is speed. The deals that fly across their tables are completed in just 3 days, far outpacing other firms. When you are an investment firm hour are a time between success and failure. To keep up with these ideas, they have a pre-emptive approach to startups. Doing thorough research and throwing money at people before they even start looking for it. Knowledge is power and this lets them get their foot in the door faster than anybody else.

Resources and a monstrous war chest are 2 of the other factors that they set their claim to fame on. The numerous portfolio companies have high-priced consultants thrown at them for advice on a regular basis. These consultants just add to the success of the companies and keep things building. Where does this money come from? The stakeholders. The mountainous mounds of money that this firm keeps on hand is matched very few in the world. Scrouge McDuck would be hard pressed to keep up with these guys.

They also keep to long-term holdings as an approach to their methods. Unlike traditional VCs, Tiger Global operates public market hedge funds which provides price stability for startups since it doesn’t have to distribute funds after an IPO, unlike traditional VCs.

In the first quarter of 2021 Tiger Global has closed 60 deals, keeping with their hit the ground sprinting approach. They have bids on a number of different companies already as well (ByteDance, Discord, Hopin, & Coinbase). At least one of these reaches a value into the tens of billions. This company is set to be one of the fastest growing groups in the globe. Who knows where it will stop? Let’s wait and see, or join. Whatever hits your fancy.

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