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Crowdfunding, not just for startups

26 May 2016

Traditionally, crowdfunding has been a method used by small companies or startups when they want to take a product from conception to commercial reality.

Almost anyone can come up with a pitch for their project and take it to sites such as Kickstarter, where millions of members of the public can take a look and, if they think it's worthwhile, pledge a few bucks for one of the first off the assembly line.

Although there have been some spectacular failures, a huge number of crowdfunded projects have become runaway success stories and the concept has quickly gained momentum.

What few people expected however, was that "big name" companies would use crowdfunding as a way of developing new products and pre-selling them.

One of the first of the "big name" companies to go down the crowdfunding route seems to be Xiaomi, the very large Chinese company which has made its name in mobile phones and action cameras.

It has been an open secret for some time now that Xiaomi have been working on a consumer-grade drone designed to compete with the myriad of offerings from other (largely Chinese) manufacturers.

Given its background in the "action camera" and consumer electronics areas, adding a drone to its product range would seem to make sense. It's interesting to note that the world's most well-known action camera manufacturer (GoPro) is also preparing to roll out a drone later this year.

The big surprise in Xiaomi's case however, is the fact that they don't seem to be funding this from existing revenues -- they're going down the crowdfunding route instead.

Well a number of publications (eg: The Verge have reported the strategy as crowdfunding but it seems a whole lot more like pre-selling to me.

Allowing customers to pre-order (and pay for) upcoming products is nothing new but referring to it as "crowdfunding" is.

I actually wondered how long it would take "big business" to figure out that crowdfunding by way of Kickstarter, etc, was a really great way to sell products and free up capital.

Even if you're a big corporation, why spend huge chunks of your own (or borrowed) money to develop a product when crowdfunding can provide you with the necessary capital for free -- not even any interest payments!

I'm predicting we'll see a whole lot more corporate crowdfunding going on in future as savvy marketing and finance people latch on to the benefits that come from being paid for a product before you've even got it off the drawing board. In fact, if I was on the board of any company developing hi-tech consumer products which wasn't using crowdfunding I'd be demanding to know why not.

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