Do you have an idea for a new product but lack the funding to make it real? A growing number of independent musicians, and other entrepreneurs, are using an innovative new approach that you may want to emulate.
It’s fun, and many would argue fair, to say that the ‘barriers to entry’ have significantly diminished when it comes to starting a business. This is because technology has made it more efficient to gain widespread support for an idea. Depending on the business, you may not need much capital either. It wasn’t long ago that many businesses required a real-world storefront and other costly investments that are eliminated with online commerce.
This evolution is radically impacting many industries, including the music business. While mainstream media (Fox/Glee) and big box retail (Wal-Mart/Target) prove there’s still room to creatively sell the music itself, most artists make their living from a combination of ticket sales, merchandise, sponsorships and licensing deals. Despite the minimal revenue these artists earn from their recorded music, it remains an essential tool for building a fan base, which ultimately allows them to profit from other channels.
Unfortunately producing an album is still capital intensive and artists often lack the funds to book studio time, hire a producer, develop album artwork, etc. With this in mind, many have turned to the online funding platform Kickstarter, where they make their case to fans and offer rewards in exchange for financial support.
From the ‘fan’ standpoint, there are two main reasons people support projects according to Kickstarter:
‘Rewards – Project creators inspire people to open their wallets by offering smart, fun, and tangible rewards (products, benefits, and experiences).’
‘Stories – Kickstarter projects are efforts by real people to do something they love, something fun, or at least something of note. These stories unfold through blog posts, pics, and videos as people bring their ideas to life.’
The kicker is that project creators only receive funding if the overall monetary goal is met. This motivates supporters to spread the word and it builds a sense of community around the project. By funding an album, each person is essentially endorsing the artist, joining a group of like-minded supporters and pre-paying for the final product.
This is very similar to the social shopping dynamic that’s driving the group buying space (Groupon, Living Social, TownPool, etc.). Similarly, the first time you experience Kickstarter you wonder why it took so long for this model to gain momentum.
While this works well for artists, I believe there’s a huge opportunity to test a variety of ideas and launch a diverse range of products through the site.
With Kickstarter, it’s no longer necessary to pre-order inventory or even build a working prototype. You are only limited by your ability to effectively articulate a vision and inspire a commitment from those that identify with your value proposition.
A few people have experimented with this approach and successfully funded specific products. The most popular example was an idea to create a watchband that turns the iPod nano into the ultimate digital timepiece. While the original goal was to raise $15,000, the TikTok+LunaTik secured just shy of $1,000,000 (yes, that’s one million!) from over 13,000 supporters in only thirty days on Kickstarter!
More recently I came across a project based on the idea that someone might want a printed summary of his or her Facebook activity. For a $25 commitment, you can pre-purchase a book that includes your wall posts, comments, photos, etc.
To be clear, I’m not saying anyone can be successful using this approach. Obviously a printed Facebook book, and other niche products, will have limited appeal. However, another barrier to entry has been eliminated for those that successfully leverage this platform.
As Kickstarter states ‘It allows people to test concepts (or conditionally sell stuff) without risk.’
That is a big idea.