A few years ago the idea of selling a product before it existed would have seemed like a pipedream or a scam to me. Why would someone buy something that didn’t exist?
(My dad asked me that the first time I mentioned pre-selling a product)
However when if you look around you’ll start recognizing that many companies are already preselling products every day and no one thinks twice about it.
Let me explain.
Here’s a real-world example of validating the demand for a product by collecting money up front from a large group of people before delivering on a promise.
Have you ever bought a concert ticket? If so you probably paid ahead of time (with a “convenience” fee I’m sure) for a show that wasn’t happening until months later. I bet you didn’t think anything strange about it at the time, but this is an example of pre-selling a product and validating the market. Guess what happens if not enough people buy tickets? They either cancel the concert, or they move it to a smaller venue.
The concert organizer is mitigating their risk up front, as should you.
Another example I saw recently was Tesla, who opened up pre-orders for their Model 3 car, an all-electric vehicle that doesn’t yet exist. They pre-sold $276 million in the first weekend from pre-sales on downpayments alone. These payments are refundable up to the point they start building your car. The cars are set to start delivering in late 2017 and into 2018.
That braingasm you have when you pre-sell a billion dollar car…
Have you ever had an idea for an app, product, an event, something you wanted to do but weren’t sure how to make it happen?
Here’re 7 reasons you should consider crowdfunding it:
1. Validation of your idea
There’s no better validation for your product than having someone take their wallet out and pay for something that doesn’t yet exist yet. If they are willing to do this then you know you’ve created something that solves a real problem in the world.
2. Low financial risk
It can cost a lot of time and money to launch a new product into the marketplace. Rather than putting up your money or getting a bank loan, crowdfunding gives you a way to access capital for bringing your idea to life without putting your personal life at risk or giving up equity. It also ensures that if people don’t want or need your product that you don’t end up with a garage full of junk you can’t sell and a hole in your bank account.
3. Build a tribe
Crowdfunding is an excellent opportunity to build a community around your idea. The people who support you and fund your idea before it even exists are the champions that will make your product a success. They will support you, hold you accountable and push you to ensure it gets delivered. Then they’ll share it with their friends as early adopters.
4. Tell your story
“People don’t buy what you do; they buy why you do it” – Simon Sinek. Watch this video to understand what he means. Crowdfunding is the perfect place to tell your story; who you are, what you want to create and why it will be beneficial to the world. Unlike a regular e-commerce or a retail store, the crowdfunding platform is your opportunity to connect with people who would otherwise never have found you.
With a funding goal and a time limit your project is running against the clock which creates a sense of urgency and scarcity for visitors, making them less likely to procrastinate on buying. It also brings up a feeling of competition as once someone supports you they are financially (and sometimes emotionally) invested in you succeeding so that they don’t miss out on their reward. In decision theory, loss aversion refers to people’s tendency to strongly prefer avoiding losses to acquiring gains.
6. Promotion & Marketing
Kickstarter and Indiegogo are ideal platforms for promotion as they have a rabid community of people that browse their website on an almost daily basis to support cool projects. This is organic traffic that you do not have to generate yourself as they are already on the lookout for cool stuff. FYI, for each of my projects, I received 30% of all funding through organic traffic on Kickstarter.
7. Crowdsourced Development
Your crowdfunding backers are a great source for product feedback. With each of the projects I have run on Kickstarter, the product at the end of the campaign has been improved through feedback from the backer community throughout. If you do it right, many of these people become passionate about the product and want to help however they can to make it the best possible.
Don’t get me wrong; crowdfunding is not the silver bullet or fast path to cash. If your only interest is in making money, or you’re not interested in putting the work in up front, then it’s not for you. However if you have a workable product idea that you want to validate and fund into potential future business then crowdfunding is the way to go. It’s the only way we were able to launch and scale BestSelf.co the way we have.
Last note, Not only is crowdfunding incredible for all the aspects I mentioned above, but it’s also really FUN.
What do you think?
If you’re planning a crowdfunding campaign yourself, one of the first decisions to make is which platform to use. Take this 2-minute quiz to get my personal recommendation, based on your answers (no email required).
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