An Update on Crowdfunding


Crowd funding has changed a great deal in the past 5 years.  Sadly those changes are not necessarily in a way that benefits an inventor.  Many erroneously see it as a great way to raise funds when you don’t have any to develop an idea.  Unfortunately, where this may have once been the case, it no longer is.  Crowdfunding is something that can be beneficial if you are in “start-up” mode for your idea, but it’s really not a useful avenue for anyone looking to license their product.  

Why?  Well crowdfunding only offers value if you are already at a point that you can manufacture, or better yet, have begun manufacturing and have product ready to go.  You need to be at a point that your costs for manufacturing have already been fixed.

Just because you see the results of a successful campaign, you can’t assume that the campaign is their first go round.  It may very well be their 2nd or 3rd time and previous tries were a total crash and burn.  I’ve see and heard of a lot more failures than successes when it come to crowdfunding campaigns.

The successful campaigns I have see are often due to the inventor working with a marketing team that has helped launch the campaign.  While this approach has its value, you have to be careful because marketing teams come with a high price tag and they usually negotiate for a percentage of the “raise”.  That means that even if your campaign is successful, you might still walk away with nothing after you pay them for their services.

The reason I mentioned before that you need your manufacturing costs to be fixed before participating in a campaign is because you might find out after the face that costs for manufacturing are higher than you anticipated and the “raise” doesn’t cover them.  You end up bankrupt before you even get to market.  Each campaign also requires that the platform be paid and other fees as well.  Like anything else, there are costs associated and you will have to take care of those before anything else.

Successful campaigns have product on the way or available, they know exactly what the product will cost to make.  If you can claim both those things, then crowdfunding may be a useful tool for you.  But at absolute minimum, these days you MUST have proof of concept prototypes before you can launch.  The days of campaigns that just feature ideas are over.  So if that’s where you are, you need to look for other avenues to continue.

If you have questions or need advice on the direction you should take, please consider joining one of our virtual meetings that occur monthly. It’s a safe place to learn from the mistakes other have made, the opportunity to do some networking, and can really help you determine the best course of action wherever you might be on your journey to market.

www.inventorlady.com is the website and the best place to find the links for any upcoming meetings

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