Crowdsourcing site Indiegogo announced today at CES that it has launched a service for big businesses to garner public funding for R&D projects, validate product proposals and run cash-prize contests for new consumer-based ideas.
Like other crowdsourcing services, Indiegogo's Enterprise Crowdfunding service also allows consumers to get their hands on new products before the general market does through pledging money toward that product's development.
Since being launched in 2008, Indiegogo has served as a crowdsourcing platform for small businesses, charities and entrepreneurs. To date, it has run more than 400,000 campaigns.
Big businesses, however profitable they may be, often have a plethora of internal projects or ideas that face an uphill battle for funding approval, and developing projects in-house requires large up-front costs.
Running a 30-day crowdsourcing to fund a project, validate a concept or open up a forum to the public for new product ideas, removes much of the financial onus from the business, according to Gwen Nguyen, Indiegogo's senior director of corporate partnerships.
The 30-day campaigns allow for direct customer feedback on new products (including features, use cases, prices and messaging) and can prove market demand through actual sales as far as nine months in advance of a product going to retailers.
The campaigns also build awareness and create excitement among early adopters and the media, Nguyen said.
"Indiegogo and crowdfunding provide a unique opportunity for large enterprises to solve a long-time problem, which is, 'How do we produce products that customers and consumers actually want?'" Nguyen said.
The Indiegogo Enterprise project has been in pilot phase over the past year, but it has already attracted Fortune 500 corporations who've run successful campaigns.
Google, Hasbro, GE and Philips, for instance, have run innovation contests offering cash prizes and crowdfunding campaigns on Indiegogo.
In February, FirstBuild, GE Appliances' community of designers, engineers and appliance users, focused on creating next-gen appliances, and launched its Paragon Induction Cooktop through campaign on Indiegogo.
GE's Paragon Induction Cooktop uses a Bluetooth-connected temperature sensor and associated iOS app to control temperatures within 1 degree Fahrenheit so it can be used for precision cooking techniques like sous-vide. GE's FirstBuild offered early bird pricing on its Indiegogo campaign for the cooktop at $149, with future retail pricing expected to be $249. The campaign raised more than $350,000.
GE's first Indiegogo campaign was so successful that it launched a second one in July to prove market demand for a countertop nugget ice-making machine for the home. GE offered the Opal icemaker for $399 to early buyers on Indiegogo, with a future retail price of $499. The icemaker will be shipped to Indiegogo contributors in mid-2016.
GE's Opal icemaker project raised $100,000 in the first hour; $600,000 in the first 48 hours and $2.64 million total from 6,177 contributions by the end of the 30-day Indiegogo campaign. The campaign also garnered 510,000 page views and 15,000 Facebook shares.
"GE actually had this idea for over 20 years in their R&D lab, and never really understood the right way to launch it," said Andrew Erlick, director of Indiegogo's corporate partnerships. "They didn't know if there was a consumer market for it, didn't know how well it would do if they spent the millions of dollars on making that product a reality."
It took GE just four months to move the icemaker from concept to production using the Indiegogo campaign, according to Natarajan Venkatakrishnan, head of R&D for GE Appliances and director of FirstBuild.
"If it flops, no worries. Upfront costs were some 20 times less than a traditional product rollout, which can cost tens of millions of dollars," Venkatakrishnan said. "If we're going to fail, we want to fail fast."
There is no qualification process for corporations to use Indiegogo. Like small companies or entrepreneurs, they simply create a product or idea campaign page and add videos and descriptions for the products or ideas. Indiegogo charges companies 5% of every dollar rasied through the campaign.
The Indiegogo Enerprise campaigns also do more than just raise funds for product development and production. Indiegogo offers help for enterprises who need to understand which projects are right for crowdsourcing and which may not be.
Additionally, consumers who participate in the corporate crowdsourcing campaigns offer product feedback online, which Indiegogo culls and offers to its corporate clients at the end of a campaign.
"There's a lot of data that is happening prior to launching the campaign, then during the campaign, and then after the campaign," Erlick said.
Josh McClain, engagement manager for Indiegogo's Enterprise Crowdfunding Program, said consumers enjoy the idea that they have the power to shape a final product through their feedback.
"They also want to be able to get product before anyone else and to get [it] cheaper than before its retail," McClain said.
Conversely, enterprises like the idea that they can raise funding for R&D without alarming their shareholders by pouring revenues into unproven products.
Hasbro, for example, launched an Indiegogo campaign early in 2015 to find its next big party board game, like Monopoly.
Five finalists were selected from more than 500 submissions and Hasbro will give $10,000 to the submitter of the winning idea. Additionally, the winner gets a trip to Hasbro's headquarters in Pawtucket, R.I. to meet with its game development team to help make the party game a reality.
"They were blown away by quantity and quality of the ideas they got," McClain said.
For example, one of the finalists was the creator of a card game called Irresponsibility.
Not only did the card game resonate with Hasbro, consumers donated more than $10,000 toward its development through the Indiegogo campaign.
Erlick said that because many corporate R&D projects are so new, they go outside a corporation's normal process for mass-producing a product.
"So they're looking to get the same insights and even, in some cases, more insights than an entrepreneur would get by using Indiegogo as a platform," Erlick said.
Another problem crowdsourcing campaigns can solve is how to market a product, Erlick said. The traditional method has been to perform big data analyses or put together focus groups and ask them questions to understand what they think about a proposed product. But, those methods are all theoretical, Erlick explained, whereas crowdfunding is actual data gleaned from consumers who not only offer their insights but put their money where their collective mouths are to buy a pre-prodution product.
"It changes the whole, entire model, by saying, now, you can get after these early adopter people that want your product," Erlick said. "You can gain their insights, and you know that once you do spend the millions of dollars for tooling, and mass production, and distributing to retail, you are going to have that customer base already built in. It almost pays for itself."