Crowdfunding – What is it and is it worth it?

Over the last few years crowdfunding has become more popular with tech companies for helping them to launch their products. Anyone with an idea for a project can set up a page on sites such as Kickstarter, outlining their vision and how much money they need to make it a reality.

Projects on Kickstarter and Indiegogo have raised millions from individual backers, who pledge money to support projects in return for rewards, including the promise of receiving the finished product. For example, Pebble Smartwatch was launched on Kickstarter in April 2012 with an initial fundraising target of just $100,000. Backers pledging a minimum of $115 were promised the Smartwatch when it became available - in effect pre-ordering for the watch that did not yet exist for a discount.

Within six days, the project had met its $100,000 goal and within the first month it had become the most funded project in the history of Kickstarter, raising over $4.7m. By mid-May, funding closed with $10m pledged by almost 70,000 investors, making it one of the most successful crowdfunding projects to date.

Tech start-ups and small businesses thinking of using crowdfunding websites such as Kickstarter as a basis for getting a certain idea or project off the ground need to be aware of the challenges that will face them. Crowdfunding successes like Pebble do get a lot of press. But so far the majority of crowdfunded ideas have never really taken off. According to Kickstarter stats only 44 percent of projects meet their funding goal. Of roughly 60,000 unsuccessful projects, nearly 40,000 failed to reach even 20 percent of their goal.

So how can PR help? It can certainly help businesses gain traction with their crowdfunding campaign through raising awareness that can hopefully lead to increased backing. How well a project is promoted is often a key to the success of it. Ongoing PR is an opportunity to maximise the investment potential of a project You’d be surprised at how many crowdfunding projects I’ve seen that, after a good start, seemed to assume their work was done and offered little follow-up during their campaign. If you’re asking for investment, you have to show a desire to make your project work and PR can certainly help show this.

In the end, like everything else in business, it's a balancing act. Crowdfunding is not a scheme to help businesses get rich quicker, but for a smart tech entrepreneur it can be a great way to get innovative technology to market while minimising their business risk.

(Image: Rocio Lara via Flickr Creative Commons)