It seems like everyone is using crowdfunding to kick off their new business venture, be it a new coffee shop, grocery store or gadget. But there’s been significant debate about just how useful crowdfunding really is. For every successful project, there are many more that never get off the ground, even if they are able to raise some capital.
The reality is that the majority of entrepreneurs need more than financial support to launch their ideas. They lack the experience needed to create and execute a business plan. And with a few exceptions, like very simple or small ideas, they seriously underestimate how much money is needed to get a business off the ground.
Lately I’ve been thinking that crowdfunding has another, potentially more dependable benefit: It’s a great way to test desire for your product or business. You can create all the surveys you want and ask all of your friends and family for their opinions, but the only way to be sure you have a good idea is to know that people are willing to reach into their pockets to pay for it.
In that way, crowdfunding could be the very best way of testing your idea. If you set up a crowdfunding website, you’ll quickly discover if people want your idea -- and how many. They are literally willing to pay for your idea. That’s priceless information. And it can be used to your benefit in many ways.
For one, potential licensees and investors want to know that consumers are willing to pay for your idea. So crowdfunding can be used to attract attention to your product. Partnering up with a more powerful, experienced company is a great way to ensure that your product makes it to market, because they will have working relationships with manufacturers, distributors and retailers. Investors want to work with products that have less risk. What better way to reduce risk than to say, “All of these people want this product. They were willing to pay for it. They’ll pay for it in retail, too.”