Innovation an
d the need for funding go hand in hand. Lots of great ideas are nurtured in college labs, which is great if they are grants.
But often, entrepreneurs turn to their own bank accounts for seed money, and then to friends and family. However, new sources for funding are emerging. Today, incubators and accelerators offer mentoring, modest funding, networking opportunities and an environment conducive for entrepreneurs to develop their dream product. But at a certain point, an entrepreneur may need more funding as they work to develop their “proof of concept.”
In the wake of tight credit markets, crowdfunding has emerged as an alternative source for capital to fund innovative ideas. It enables entrepreneurs to advertise their capital needs to regular people who aren’t rich, but who might give an entrepreneur $10, $25 or $1000. Through small contributions, this form of funding has fewer restrictions and enables a company to raise funding from a large group of individuals via an online platform.
Consumer product ideas that resonate with large numbers of people tend to perform well using the crowdfunding model. Seven of the top ten most-funded projects on Indiegogo are hardware projects. Together they account for 83 percent of the total funding (a number that exceeds $2 million) garnered by such projects. Similarly, at Kickstarter, which is the most popular crowdfunding platform today, hardware projects ranks among the most funded projects across multiple categories on the site.
The Pebble smart watch is a crowdfunding success story. Eric Migicovsky, Pebble’s CEO and founder, was initially turned down by more than ten Silicon Valley VCs before he turned to the Kickstarter crowdfunding platform and raised $10.2 millions for his sleek smart watch.
Recently, Canonical’s Ubuntu Edge beat out the Pebble watch by $2.6 million on the Indiegogo platform but the Ubuntu Edge product isn’t happening because it fell short of its $32 million objective. Its 11,000 supporters will receive refunds. The Ubuntu Edge excited the open source community and was designed to take on Apple’s iPhone 5 and the Samsung Galaxy S4. Canonical isn’t going away. It excited the market by creating demand for a never-before-seen device and sent an important signal to the handset makers. Now, the team is continuing to push the boundaries of mobile technology, specifically the ambitious concept of convergence that would have given Edge users the ability to swap and Android mobile OS and a fully capable desktop-enabled Linux version. It will be interesting to see what comes next.
Contact Susan at susan@c4trends.com