Crowdfunding gets a lot of buzz, and for good reason: when done right, it can be a great way to test a product and to drum up cash for development. But for every wildly successful effort to raise money there are countless failed bids.
You can put Ben Webster’s efforts firmly in the first category. Webster is co-founder and CEO of Toronto-based sound system producer Mass Fidelity, which holds the honour of running the most successful Canadian Indiegogo campaign to date. As of publishing time, its efforts to fund development of The Core wireless speaker system has raised $940,297—nearly 2,000% higher than the company’s goal of $48,000.
In this week’s BusinessCast, Webster reveals why he thinks his firm’s campaign has been such a hit, and offers advice for others vying to do the same:
1. Use it to validate your offering
From the outset, Webster decided to approach his Indiegogo campaign as a giant focus group. If people responded, great; if not, it’d be time to retool. “We look at crowdfunding as a proving ground for the product and the technology,” he says. This is especially useful when you’re dealing with discerning customers: “It is a great way to gauge market interest in a very tough segment, which in our case is early adopters.”
2. Offer something that won’t bore your target audience
That said, Webster had no interest in putting forward a half-baked product. The early-adopter audiophiles Mass Fidelity is after are a smart group: they spend lots of time on online discussion forums debating the relative merits of different offerings. “They’re usually well-educated about the technologies being offered, so they’re not easy to please,” Webster says. “On the whole, the have a very good BS detectors.” That’s why he was diligent in making sure what Mass Fidelity had to offer was truly unique and novel before putting out a call for cash. “We learned that there wasn’t a product that you could compare directly to ours,” he explains. “That got the community very excited.”
3. Don’t get greedy
In crowdfunding, nothing looks worse than setting a sky-high target—then falling massively short of it. Mass Fidelity’s Indiegogo goal—$48,000—might appear to be modest, but that was a strategic decision, says Webster. “That number was directly related to production costs and cash flow,” he explains. “We already had a relatively successful product in the market before this. We wanted to increase production volume on The Core because after doing a bunch of demos for various sales channel partners, we were fairly confident that demand would far surpass supply. So that $48,000 number was directly related to us trying to meet what we saw as the guaranteed supply of the existing sales channel.” Any money that came in beyond that? Gravy.
4. Treat it as a short-term solution
Crowdfunding is useful as an initial way to boost funds, but it shouldn’t be a permanent solution, Webster says. “It’s really important to understand that crowdfunding on its own is not a viable long-term business model. Looking at it as a way to jump-start a business is, I think, the safest way to look at the platform.”
For more of Webster’s thoughts, check out this week’s BusinessCast, which you can listen to by clicking the button above or download by clicking on the iTunes logo below:
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