Crowdfunding is no longer only an option for start-ups

When it comes to crowdfunding, big businesses are learning how to deal with outside investors

CEO and Co-Founder of Indiegogo, Slava Rubin. Indiegogo has been testing corporate partnerships for a short while, providing support to established businesses looking to test the waters with a new product 

At the Consumer Electronics Show this year, the technology sector’s best and most ambitious were showing their ‘next big things’ to eager attendees. Behind every buzzing drone or monstrous television, investors are paying careful attention to see if products are worth their attention and money. No longer the domain of small teams with a plan and a shed, crowdfunding is here for big business.

Launching that same week was a tool designed to bring in that funding: Indiegogo’s new platform – Enterprise Crowdfunding – provides support to established businesses looking to test the waters with a new product. It’s meant to be an extra tool for research and development departments, and works as a very low risk measure of public reaction. Projects that don’t get sufficient public support drift off into the sunset, and projects that do get some early interest, marketing and money. Indiegogo will provide strategy, support, promotions and analytics for enterprise users, as well as their users who have a track record of taking a gamble on new ideas.

“We created Indiegogo to empower anyone, anywhere to raise funds for their ideas, from the inventor working out of her garage to the largest Fortune 500 companies looking to create innovative new products that line up with what customers really want”, said Indiegogo CEO Slava Rubin. “Some of the world’s most successful companies are already using Indiegogo for product development, market research, and to support causes important to them. Now we’re taking that a step further with Enterprise Crowdfunding.”

Indiegogo has been testing corporate partnerships for a short while now, with a few projects already achieving some early success. General Electric’s FirstBuild has already funded two projects launched on Indiegogo: the Paragon Induction Cooktop and the Opal Nugget Ice maker.

Video games make up a big slice of Kickstarter’s projects; six of the top 20 most-funded projects in the site’s history were connected to games

Funding for the masses
The only risk for big companies would be a loss of good faith from the crowdfunding user base, who may see projects from big companies as a misuse of the system. The argument is that high-profile celebrities and companies can fund their own ventures, plus afford to take the hit if they fail. Kickstarter and Indiegogo are there to ‘give the little guy a go’, funding projects that would never get off the ground otherwise.

It was this argument that saw Kickstarter field criticism in the past when it hosted two high profile projects in 2013 that, debatably, could have been funded through more traditional methods: a reboot of the Veronica Mars TV series, and a film written by actor Zach Braff. Despite the negative publicity, both projects were successfully funded.

Kickstarter has always been supportive of these major projects, largely because they draw so much new blood to the service. According to figures released by Kickstarter at the time, 63 percent of the people who funded both those films were first-time backers. Thousands of those people went on to back other campaigns. Kickstarter has referred to this as the ‘blockbuster effect’; high-profile campaigns that draw a large number of new users. Discouraging them would be a mistake.

After years of running both small and large projects, Kickstarter and Indiegogo have amassed large pools of people willing to participate in the system, while absorbing some of the risk. Although the return for this risk has always been merchandise, backers don’t really have any stakes. More recently, crowd investments are becoming available.

Luke Lang is the Co-Founder and CMO of Crowdcube, a service that crowd sources investments. Crowdcube lets armchair investors pool their money to purchase portions of businesses alongside some of the biggest venture capital firms – Lang said 2015 was a standout year for the service.

“In total we’ve raised about £140m of funding for more than 300 businesses. In 2015 alone we raised around £75m to £80m for businesses. I guess the thing that really happened last year, which is what I feel was a real breakthrough year for us, was a trend towards much more established businesses using Crowdcube as a financer. I think there were 21 or 22 deals of £1m or more raising funding through Crowdcube last year. Five of them raised between £3m and £4m, so we’ve very much moved into that kind of ‘Series A’ funding round.”

As crowdfunding gets more attention from bigger businesses, more platforms are popping up to cater for the most specific users. Video games make up a big slice of Kickstarter’s projects; six of the top 20 most-funded projects in the site’s history were connected to games. Fig was launched last year as a crowdfunding platform that allows fans to invest to get games off the ground, plus investors have room to jump in for potential returns based on sales. The website features handy sliders for investors to see potential returns based on the sale price and copies shipped. So far the site has funded two projects for a combined total of just under $4m raised. Of that money, just under half came from accredited investors.

Lang said it’s changing the way investment works, and blurs the line between venture capitalists, angel investors and the general public. “When I look back to 2011, we were trying to disrupt angel investing. We were trying to enable everyday people like you and I to be able to get involved in angel deals that were previously out of reach of the average person.”

Kickstarter in numbers


Total pledged


Successful dollars invested


Unsuccessful dollars invested


Live dollars

Source: Bloomberg

The power of the entrepreneur
The deals Crowdcube now makes would be out of reach of most individual angel investors. “We’ve actually kind of stepped up a level and not just given people the opportunity to participate in seed rounds but venture rounds as well, which is really exciting. It feels like the balance of power has shifted slightly. With choice, entrepreneurs are not beholden to one or two inventors, whether they be venture capital firms or whether they be agent investors that are putting in the lion’s share of the money. A greater breadth of people participating in a round means the balance of power shifts back to the entrepreneur, which is certainly a good thing”, said Lang.

Another benefit companies will be seeing is a higher level of scrutiny. The public nature of a crowdfunding campaign puts an idea under the spotlight of potentially hundreds of thousands of eyes. Lang said even if a company fails, the feedback can result in a successful second round. “We have had multiple campaigns that have come onto Crowdcube that have been unsuccessful, learnt from the experience and come back at a later date and been successful. A lot of that is down to preparation and executing the campaign, but in some instances it’s about understanding the business and taking onboard feedback.

“I often used to say that a business that goes through a crowdfunding campaign at the other end, whether they’re successful or not, they’ll come out the other end as a much stronger company. The cross examination and the interrogation that investors give these businesses, I think can be invaluable.”

Undoubtedly of interest to GE will be the appliances that aren’t successful, perhaps even more so than those that are. Enterprise Crowdfunding’s biggest use would be as an incredibly wide-reaching focus group, tapping into the virtually limitless perspectives and options online users will offer up. Users may foresee not only design or production problems, but even potential legal issues too.

An early campaign in Crowdcube’s history was for a stake in an aperitif manufacturer named Kammerling. Its investors queried if the name would be an issue given the similarity to a German brewer. Turns out it was, and the product was renamed to Kamm & Sons before it was successfully funded. Lang said this avoided what could have been an expensive rebranding disaster. “I think people underestimate the power of the crowd, that collective wisdom and what it can bring to bear.”

Now crowdfunding is out of the bag, business has no choice but to take notice of the benefits small-scale outfits have been receiving for years. It’s applicable to virtually any type of business, and has so far produced impressive results. With a well made, open and clear campaign, big businesses can engage and expand their customer base by operating in a more public way. It’s more thorough than focus groups, and the benefits are impossible to ignore. Businesses will need to get smarter and let the crowds in.