So why and when should you choose reward-based crowdfunding?
Before getting started on crowdfunding, you first need to make sure that your idea is a good fit for this funding approach, and that your team can take on a large amount of work involved with running the required campaign.
Crowdfunding projects need to be very specific and have a well-defined end goal.
When crowdfunding, tangible products usually do better than intangible projects or services.
Games, big-budget films, design, and technology projects are examples of crowdfunding campaigns that perform well on platforms like Kickstarter.
Very often, this model is great for companies working on Hardware and Product Design projects.
Typically, crowdfunding involves pre-selling limited editions and exclusive access to products before they’re available on the market.
Not only does this give you the funding you need but also gets your product onto the market immediately, following production.
So when should you get started on a crowdfunding campaign?
The best time for a campaign is when your product prototype is ready and looks appealing: the prototype may not be completely final but should offer a lookalike that will, essentially, help you sell your final product to prospective customers.
A crowdfunding campaign will help you offset risk in different ways:
It provides market validation from a new community of backers while confirming the demand for your future product, without spending a lot of money.
At this stage, the objective is to raise money to turn your prototype into an actual product, ready for production at scale, in the promised period.
What’s key here is the ability to sell the product in the campaign, without it being final and user-ready.
You need to know and understand the manufacturing steps for your product, from building it all the way to final delivery, to avoid surprises.
Let’s look at an example: the Roadie tuner
Band Industries, the company behind the “Roadie” guitar tuners, launched their product via a crowdfunding campaign, back in 2013.
In fact, they were so successful that they used this fundraising model 3 other times after that … Eventually leveraging it more as a marketing tool than an actual fundraiser!
When they first started, they used a crowdfunding campaign on kick starter to understand whether their product would actually sell.
Through the campaign, Roadie raised nearly $180,000, triple its $60,000 funding goal.
This gave the team the market validation they needed and the push to continue developing their product.
Having found a community, the team focused on building relationships with their backers, building trust, and delivering on their promise in a timely manner.
Bassam Jalgha, Co founder & CTO of Roadie Music by Band Industries, shares his insights on reward crowdfunding with the hub:
"We realised that it's very important for a hardware company to run a crowdfunding campaign.
The benefits of doing a crowdfunding campaign is that the money that we are getting is not investor money, not tied to any VC fund, or tied to any requirement besides us actually delivering the product; so people are actually placing pre-orders on the product which is the best kind of money a startup can get: sales.
The second benefit of doing a crowdfunding campaign is market validation without investing too much money early on.
You can do that pretty quickly early on during the lifecycle of the product, you can launch a crowdfunding campaign, validate whether the product is going to sell or not, and if it's not, go back to the drawing board, and if it is going to sell then go ahead of proceed into production."
So what made Roadie’s crowdfunding campaign so successful?
Find out in our next video and learn more about how you should get started on your own campaign!