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Indiegogo's Cofounder On The Wisdom Of Crowdfunding

posted May 29, 2013, 3:15 PM by   [ updated Jun 5, 2013, 9:34 AM ]

There’s a time and a place for everything. I think credit cards are valuable; so are bank cards and money from family and friends. But with the advantages of technology and electronic payments, now is the time for crowdfunding. The benefits stretch beyond the money. As an entrepreneur raising funds, you get to engage demand and mitigate risk. You get to capture customer data, e-mail addresses and physical information, if people are willing to provide it. You can test your marketing and get more promotion than you ever could on your own. I tell entrepreneurs and small-business owners that if you’re coming on Indiegogo just for the money, it might be easier to hit up your dad or the bank.

We’ve had tens of thousands of campaigns. There’s no question that it’s led to job creation. We had a single designer who wanted to create a T-shirt shop in Pennsylvania and was able to raise money and open a shop that now has 16 employees. Emmy’s Organics–a small healthy-snack-foods business in Ithaca, N.Y.–has hired a few more people since raising money on Indiegogo. They were turned down by banks because they didn’t create enough revenue and traction to get a loan, even though they were doing okay. Now they distribute in more than 40 states.

Some campaigns are for $100; others have gone over the $1 million mark. Each is really a microdemographic of something, whether it’s skateboarders or 80-year-old basketball players in a league. You have a lot of cross-pollinating when people start funding items on discovery.

You get some pretty cool projects that otherwise probably wouldn’t have seen the light of day. Who Gives a Crap raised $66,000 to make toilet paper and uses 50% of the proceeds to build toilets in the developing world. Not everyone is an entrepreneur. Nik Wallenda, a seventh-generation member of the Flying Wallendas family, raised money and walked across Niagara Falls on a tightrope. A group raised $250,000 to rebuild a mosque in Joplin, Mo. that had burned down after sheltering people during last year’s tornadoes. We also crowdfunded our first baby: A couple raised money to be able to afford in vitro fertilization.

Why do people contribute to the campaigns? First, they care about the person and the cause. Second, they want the perk–say, an iPhone case that doubles as a stun gun. Third, they become part of a community, knowing that they helped make something happen. Lastly, people want to profit. Right now that’s not legal. It will be in 2013, when the SEC finishes its rules to implement the JOBS Act, passed last April.

Slava Rubin is CEO and cofounder of four-year-old Indiegogo, a funding platform (and Kickstarter rival) that takes a 4% to 9% cut of monies raised. He talked to Dan Schawbel, founder of Millennial Branding, a Gen-Y research consultancy, and a contributor.

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