Crowdfunding, a mix of crowdsourcing and fund-raising made popular by sites like Kickstarter and IndieGogo, has become all the rage for some businesses due to its accessibility and global reach, not to mention its growth. In 2012, entrepreneurs crowdfunded $2.7 billion for their business ideas, which grew to $5.1 billion in 2013, and projections show even more growth in 2014.
Here are four types of small businesses that are ideal fits for the crowdfunding model.
1. Online Book Publishing
It’s not easy to publish a book these days, either in print or online. In the self-publishing sector, between 600,000 and 1 million books are published each year, and very few of them sell more than a few hundred copies. Thanks to the power of crowdfunding, however, many authors who might get lost in the Internet crowds, or put on the back of a shelf at Barnes & Noble, are instead finding both publication and readers. Unbound, a crowdfunding website for books that has signed up over 50,000 users and raised over $1.5 million, allows authors to pitch ideas to their respective fan bases online. The popular ideas get funded and become published works. With the fans choosing the next release, books are virtually guaranteed to sell, making online book publishing far more efficient and fruitful.
2. Data Analytics
Many businesses have had a tough time harnessing consumer data, and using it effectively. With this in mind, tools geared toward helping businesses manage and use their data are cleaning up on crowdfunding sites. Bitvore, an automated intelligence-gathering system for businesses, won nearly $5 million in funding earlier this year, and Reporter, a platform for consolidating and simplifying data from multiple sources, met its funding goal with ease. It’s clear that businesses are searching for better ways to interpret and utilize internal data – and are willing to back products that promise to help.
3. Health and Fitness
We’ve developed a fascination with monitoring our personal health — an obsession we’ve demonstrated through crowdfunding contributions. From apps like RunKeeper to the Pebble Watch to the Skylight Microscope Adapter, there’s a big demand, and a high rate of success, for health and fitness products. Granted, Kickstarter prohibits health, fitness, and medical projects, but alternatives have sprung up to fill the void. Medstartr, a site built to crowdfund healthcare innovation, launched in 2012, and has hosted the successful funding of over 60 health and fitness products and technologies.
PonoMusic, the most successful Kickstarter project of 2014, raised nearly $6.25 million this past April. Granted, its primary backer was Neil Young, but there’s still something amazing about raising more than $6 million from strangers. The site’s sixth most successful project this year, the world’s smallest wireless earbuds from Earin, took in more than $1.2 million. It’s safe to say that since music-consumption products are so consumer-facing, and have easily-demonstrated features, they’d be a popular choice for people looking to pledge some cash (and get the product in return).
These products demonstrate a few of the qualities that make a crowdfunding campaign most appealing. At the end of the day, crowdfunders are like any other consumer — they want something that can improve their daily lives, they want a clear and demonstrable value, and they want to see how the product will work.