Indiegogo and the Importance of Crowdfunding for Startups

As we are approaching the end of the semester and some people are graduating and looking to start their own companies, the importance of social media and how it can help us fund our start-ups is becoming more and more important.

Indiegogo is one way to go. This is an example of how my friends used it to develop their own online artisanal chocolate subscription company- Standard Cocoa, a company that connects chocolate lovers with people who love to make chocolate.

Indiegogo is a crowdfunding platform that relies on “user democracy” (anybody can raise money for anything) and helps users amplify their project through a special “gogofactor.” The more traction a campaign gains, the more eyes will see it. The “gogofactor” is a custom-built algorithm that tracks how popular a campaign is by looking at the funding rate, the number of updates and the number of comments you get. The most popular campaigns end up on Indiegogo homepage and enjoy greater exposure.

The most interesting part is that the level of attention does not depend on the amount of money you’re trying to raise, so in essence as the founder and CEO Slava Rubin says: “The way we think about the gogofactor and Indiegogo is that it’s like America: equal opportunity, but not equal results guaranteed”.

The article gives the following advice on how you can optimize your campaign:

  • Have a good pitch
  • Be proactive
  • Find an audience that cares
  • Do a video campaign- video campaigns will raise 114% more money than non video campaigns
  • Set a good and realistic target

Another interesting part of the story is how Indiegogo makes money. When you set up a campaign/project on Indiegogo there is a fixed and flexible funding option. Either way if you hit your target, the fee that the company gets is 4%. If you decide to go with fixed funding, Indiegogo charges 0% fee and returns the money if you don’t hit the target. If you decide to go with flexible funding though and don’t hit your target, you keep the money raised and pay out a 9% fee to Indiegogo.

In my opinion, Indiegogo is a great way to raise awareness about your start-up and fund your business idea. The challenge is how to make it viral and go beyond the scope of your inner circle.

Questions for the class:

  • Would you use Indiegogo to fund your own business?
  • What are some creative ways to make your business idea viral using Indiegogo?
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s