Thanks to platforms like Kickstarter a new wave of products, projects, art, and events have been able to find funding. Crowd-funding allows creators to leverage their social graphs to raise capital and has already funneled more than $400 million into a new economy. Now, entrepreneurs are starting to enter the market and crowd-funding is proving to be an especially valuable tool for mission-based businesses.
When Blake Jensen and Chase Fisher were graduating from college, they wanted to start a business that would serve the San Diego student community they had grown to love. Quality sunglasses at a student-friendly price point seemed an obvious fit for the Southern California city.
Though Blenders Eyewear was inspired by the fun-loving lifestyle of San Diego college students, Jensen and Fisher were serious about ensuring their business would give something back to their customers. The founders settled on providing college scholarships of varying amounts to universities across the United States.
Fisher told TreeHugger that from the start, he and Jensen knew they wanted to build the business on their own, without taking on a huge debt or giving up equity. Kickstarter seemed the obvious choice but after filling out the lengthy application, Jensen and Fisher were disappointed to receive a rejection letter. With its focus on limited-scope projects, the Kickstarter moderaters felt Jensen and Fisher's open-ended business proposal was too broad for their walled-garden.
The pair then went to Indiegogo, another crowd-funding platform that has fewer restrictions.
Danae Ringelmann, COO and co-founder of Indiegogo, confirmed this trend. She told TreeHugger that Indiegogo is "seeing more and more startups across the country...coming together to forge a more vibrant ecosystem for entrepreneurs."
Another entrepreneur taking advantage of crowd-funding is Jenny Davis, founder of apparel company Onshore Designs. Davis had already launched a bootstrapped business, Second Wind Sails, crafting bags and other products from discarded sail cloth. After several successful years, Davis wanted to expand to provide outdoor apparel, crafted in the United States, but realized she needed funding to penetrate a more competitive market.
"Crowd-funding for me was a strategic move," Davis explained. "I wanted to use Indiegogo, or a platform like Kickstarter, to extend my brand to the public. That way, I can show [future] investors there is demand for the products."
This advantage was mentioned by Fisher, too. Indiegogo "gave us great visibility," he told TreeHugger. "Not only did we gain nearly 200 new customers, but it gave us a lot of credibility and free exposure, too."
"One of the great things about crowdfunding on Indiegogo is the ability to validate your idea in the marketplace," Ringelmann explained. "Many of our campaigns are small business or ventures just starting out, and not only have they been able to raise money, but they were able to get customer feedback along the way and ultimately improve their product."
Davis, who was also initially rejected by Kickstarter, pointed out that helping brands expand their customer base is exactly what that platform wants to avoid. Both entrepreneurs acknowledged that Indiegogo's more open platform means there is more competition on the site, and for fewer visitors.
When compared to traditional funding avenues, like seeking out investors or acquiring a loan, however, the advantages of even a competitive crowd-funding environment are clear. Launching a business with a crowd-funding campaign, Ringelmann explained, which is "accessible to anyone, anywhere and shared with like-minded friends through social media, provides exposure to potential customers that a bank loan never will."