The original promise of crowdfunding platform Kickstarter was that it could provide a new, more democratized way for people to raise money.It has delivered on that promise. It’s on track to generate $300 million for fundraisers this year.
But a new, equally revolutionary use of the platform is emerging.
Kickstarter is becoming a way to assess demand in real time and it could solve an expensive problem for retailers: inventory.
Before, companies would spend a lot of money and resources building products, not knowing if they’d sell. On Kickstarter, a startup can gauge interest with no upfront cost.
Take Pebble for example. A few weeks ago, five guys in Palo Alto introduced an idea for a smart watch on Kickstarter. They set out to raise $100,000 but the concept went viral. More than 66,500 people poured $10.2 million into Pebble.
Often when people pledge money on Kickstarter, they don’t get anything tangible in return. They’re simply buying into an experience. For Pebble, every payment pledge was a pre-order.
All 66,500 people who contributed to the $10 million financing will be receiving at least one Pebble watch. And 31 people pledged $10,000 or more to pre-order the watches in bulk.
Pebble is significant for a few reasons.
Kickstarter is no longer just about funding someone’s dream. The founders were able to raise far more than the bare minimum needed to launch the product. This is fundamentally different than what Kickstarter has stood for in the past.
Kickstarter is now a way to assess real-time demand. Pebble used pledges on Kickstarter as pre-orders and it was able to test its product without making an expensive gamble.
Kickstarter users expressed demand by opening their wallets 66,501 times in under 30 days.
Kickstarter could solve a very expensive problem for retailers: inventory. With Pebble, 66,501 people pledged to buy a product that doesn’t exist from just a prototype (like true investors).
With Pebble, people proved they don’t need to hold a product to pull the trigger and make purchases. They also proved they’re willing to wait for products they really want.
We’re moving towards pre-order only shopping, where products are only created if there’s demand.
Another startup, Moda Operandi, is already doing this for fashion. It posts clothing from runway shows and lets people pre-order the items. The designers only make the clothing that’s pre-ordered, and shoppers buy the items knowing the item will take time to make, and it won’t be delivered quickly.