While the name crowdfunding has been around for only about a decade, the concept goes much farther back in history. Crowdfunding saved the Bank of England in the 1730s, when depositors made a run on the bank that was founded in 1694. Until confidence in the pound was restored, London’s merchants crowdfunded their own currency.
For a more recent example, visit the Statue of Liberty in New York harbor. In 1885, the monumental pedestal upon which she sits was crowdfunded by 160,000 donors in a newspaper-led campaign after government financing for its installation fell through.
Most recently, crowdfunding has rocketed into the popular consciousness thanks to hundreds of Internet platforms (‘registries’) which, for a fee generally between 5 and 15 percent, bring together people who have the ideas (known as the ‘project initiators’) with a community of supporters. In 2014, crowdfunding worldwide raised over $16 billion, which more than doubled to an estimated $34 billion in 2015.
Artists and musicians use the crowdfunding model to finance concert tours, books and films. And the phenomenon has spread into all sorts of other enterprises, with initiators looking for funding for everything from launching clothing lines to getting breast augmentation.
In fact, according to a report on the personal finance website Econible, one entrepreneur, Zack Brown, set out to raise $10 to make a bowl of potato salad. But his campaign went viral and generated $55,000 from over 6900 backers. Brown ended up throwing a potato salad party with over 3,000 pounds of potatoes.
Brown’s spud windfall came courtesy of Kickstarter, a global platform which raised over $400 million in 2014. Another Kickstarter alum is David Weiner, founder of Priority Bicycles. Dave shares his story of a passion for two-wheelers and how crowdfunding continues to help him market his products to the world.
The Kickstarter Story
Technology and social media are changing the art of business in a big way. Thanks to crowdfunding platforms like Kickstarter, the democratization of individual dollars is empowering small companies with big ideas to compete on a large scale.
Kickstarter has given birth to a new wave of businesses, where entrepreneurs can turn to the Kickstarter community to raise capital for product development, production and expansion, instead of using private equity and other forms of institutional investment.
Personally, I’ve found the Kickstarter community to be incredible. Without this community I don’t think my small company would have been able to grow so fast – all while receiving so much valuable product feedback from its customers.
Compared to traditional fundraising, crowdfunding via Kickstarter offers capital funding, a feedback-driven customer base, and full retention of ownership and control of your new business.
I never thought it was possible to launch a small company that could compete with the big boys. In the old days, large companies could launch new products easily and without much competition. Since they had the capital, they could craft a catchy message and buy expensive ads that smaller companies couldn’t afford. This got them the eyeballs. These eyeballs turned into the sales. But thanks to Kickstarter, it’s now possible to create market awareness and begin selling new products without heavy capital by simply relying on the general public.
Building the Dream
Growing up I worked in a small bicycle shop. I was never into fast competition style bikes; instead I liked recreational bikes and also enjoyed helping others find the right bicycle that would fit their needs.
My dream at that time was to someday have my own bicycle shop. As my career developed, I worked for a large bicycle manufacturer before going into the software industry. I saw the software business transform from a small, privately held startup to a larger, publicly listed company.
As our small company grew into a big company, I watched the cultural landscape change. In early 2014 I resigned so that I could chase my dream of having my own bicycle shop. I had major decisions to make? – first, how to make my products innovative; next, how to distribute and sell them; and finally, how to fund the venture.
I had been thinking about the design concepts for this new bicycle company for years. However, making this new company my “Priority” was now the challenge. After resigning my job I began to use my free time to work on bringing my ideas and designs of recreational bicycles that were free of routine maintenance to market. Using a grease-free belt drive and gears/brakes that were internal to the hub, I had the basic recipe.
I knew that to open a brick and mortar store would require extensive capital and time that I didn’t have, plus it would limit the geography of customers my new company could reach. Therefore, starting as an online only retailer seemed like a low overhead way to ensure I could reach customers around the world, and offer better prices.
Beyond that, I wanted this company to listen to its customers for direction, not a board of directors. So in mid-2014 Priority Bicycles launched on Kickstarter. The goal was to see if others liked my idea of low maintenance, affordable recreational bicycles.
Fast forward to today: Priority Bicycles is a successful company with thousands of bicycles all over the world. In the last two years we’ve raised $600,000 via Kickstarter. Our small team wakes up every day knowing that our “backers” make our jobs a reality. Backers are our Kickstarter donors; these are the people who believe in us enough to pre-order our products (often at a discount from MSRP) before these products even exist beyond prototype.
We spend our days listening to our thousands of backers talking about how they are enjoying their bicycles, along with any feedback they have and ideas for improvement. If any of our riders have a problem with their bike, it’s our job to fix it right away. Given that Priority Bicycles only exists online, our reputation is only as good as our latest online customer review. This means the only way we can survive is with 100 percent customer satisfaction.
We know that if we simply listen to our backers, and make decisions that they feel are right, that we’ll continue to receive their backing, and that they will also spread the word about our company, telling their friends, and hopefully increasing our pool of future backers. Since we use social media as our main form of communication, word can spread very fast.
As we get ready to launch our third Kickstarter campaign for the next bike, the “Priority Coast,” the ultimate low maintenance, rust free beach cruiser, I’ve been getting a lot of questions about why we are going back to Kickstarter.
The simple answer is that I couldn’t imagine a better way to launch a new product, or a better way to sustain and grow our company.
Being a crowdfunded business means that we’ll continue to bring new ideas to our customers early and use crowdfunding techniques and social media to reach our desired audience. We’ll continue to ask potential future customers to “back” us, or support our ideas by pre-ordering our products at a reduced price. We’ll be hyper-active online, focusing on great customer service with the goal of building the most loyal, happy riders who believe in our mission, products and values.
I hope other young entrepreneurs with strong vision can utilize this concept to crowdfund their business, new product or service. The financial and marketing tools to be successful are at your fingertips; launching a new business is easier than it has ever been. Your potential customers can fuel your growth if you’re willing to let them in to provide valuable feedback. My advice? – don’t focus on how to raise money, focus on how to create innovative and great products, and then let the public decide.