Crowdfunding is becoming increasingly mainstream, recently tied to social giant Facebook after their recent acquisition of Oculus VR, a successfully crowdfunded gaming headset. With the skyrocketing adoption of crowdfunding and the incredible success that crowdfunded companies are having, there is little doubt that it is truly an industry on the rise. Crowdfunding websites raised a staggering $5.1 billion dollars last year alone and crowdfunding campaigns of all types are getting funded on a daily basis.
Whether you’re crowdfunding your college tuition a dollar at a time or raising a Series A round from accredited investors, there is now a crowdfunding platform to meet your needs. The most exciting advancements this year relate to business crowdfunding — which has become an incredible tool for entrepreneurs looking to launch new products and grow and scale businesses.
What is Business Crowdfunding?
When Kickstarter launched in 2009, it set out on an incredible mission, empowering artists and creative projects to gather support for their ideas through rewards crowdfunding. Businesses began tapping into rewards crowdfunding to gain initial customers and test their idea. They use crowdfunding to rally friends, family, and fans around their startup company. They offer them compelling rewards like an opportunity to be one of the first to own a new product or invention.
Many businesses found that they needed to raise larger rounds of capital in order to fulfill their crowdfunding rewards and the increased customer demand resulting from their rewards fundraise. They turn to equity crowdfunding to find investors, ramp up production, and grow and scale their businesses.
Equity Crowdfunding and the JOBS Act
Equity crowdfunding became legal when President Obama signed the JOBS Act on April 5, 2012. The Act was created to help promote and support entrepreneurship and small business growth.
Title II of the JOBS Act went into effect on September 23, 2013 and companies can now advertise publicly that they are seeking investment. Known as “General Solicitation,” public equity crowdfunding campaigns are an incredible opportunity to extend an entrepreneur's network and better inform accredited investors about new and exciting investment opportunities.
The Future of Business Crowdfunding
Crowdfunding is off to an even stronger start this year with an expected industry growth rate above 92% in 2014. Every day, more entrepreneurs are turning to business crowdfunding to get their creative ideas and early stage companies off the ground.
The way that businesses find funding has fundamentally changed through rewards and equity crowdfunding combined, creating a win-win funding landscape. Crowdfunding backers can now own a piece of their favorite company through equity investment. Entrepreneurs can now convert their best customers and advocates into catalysts to move their business forward.
We’re thrilled about the future of equity crowdfunding as well as the incredible success that businesses have experienced through crowdfunding. To celebrate, we’ve created the definitive list of the top business crowdfunding campaigns below. The most successful business crowdfunding campaigns can be found on Kickstarter, Fundable, and IndieGoGo.
The Top 10 Business Crowdfunding Campaigns of All Time
Famous for being Kickstarter’s breakout success, the Pebble E-Paper Watch raised $10,266,845 in 37 days. Crowdfunding backers jumped at the chance to be one of the first to own a Pebble watch, one of the first affordable smart watches on the market. As months passed, backers became upset when production of the watch was stalled and they were left empty-handed. It raised questions about their ability to fulfill large orders on a short timeline with limited capital, and led to the announcement that “Kickstarter Is Not a Store.” Pebble delivered their first round of smart watches 10 months after their crowdfunding campaign ended.
2. Ouya
The Ouya open-source game console took the gaming community by storm, raising over $8.5 million in 29 days via Kickstarter. Ouya was able to deliver their game console to rewards crowdfunding backers within 10 months of launching their fundraise.
3. Pono Music
Pono is a recent Kickstarter success, promising to deliver a music listening experience unlike any other — so you hear the music as the artist intended. With over $6 million raised in just 30 days, the high res music player is scheduled to be delivered to crowdfunding backers this October.
4. Bitvore
Bitvore provides an answer to the big data dilemma faced by businesses, allowing them to monitor and analyze large continuous streams of data. They launched an equity crowdfunding campaign on Fundable and closed a $4,500,000 round to further develop their product.
5. The Dash
The Dash are the world’s first wireless smart in-ear headphones. Part music player, part fitness tracker, The Dash raised $3,390,551 in 50 days. The rewards crowdfunding campaign on Kickstarter promises that The Dash will be delivered in October and November of this year.
Formlabs launched a Kickstarter campaign to bring an affordable 3D printer to the masses, raising $2,945,885. Backers who pledged $2,299 or more received a Formlabs printer in spring of 2013. Formlabs were an early-mover in the 3D printing movement and one of the first 3D printers to be developed through crowdfunding.
7. Oculus Rift
The Oculus VR is a virtual-reality headset that puts players into their favorite games. With $2,437,429 raised in 30 days, the Oculus team went on to raise additional investment capital and was acquired by Facebook. The $2 billion acquisition was controversial and many crowdfunding backers that contributed to the Oculus campaign expressed their desire to benefit from the company’s success since they were the first supporters of the company.
8. 3Doodler
The 3Doodler is a 3D printing pen that lets anyone draw in 3D. As you draw the device extrudes heated plastic, which quickly cools and solidifies into a strong stable structure. With $2,344,134 raised in 34 days, over 26,000 Kickstarter backers received their rewards within a year after the fundraise ended.
The Canary Smart Home security system found crowdfunding success on the IndieGoGo platform in summer of 2013. Over $1.9 million was raised in 34 days for the device, which contains an HD video camera and multiple sensors that track everything from motion to temperature and air quality.
10. Scanadu Scout
Rewards crowdfunding proved a powerful tool to bring the Scanadu Scout from prototype stage to consumers. The device tracks vital signs including temperature, respiratory rate, EKG, and emotional stress and sends a report via smartphone. With $1,664,574 raised in under 60 days, Scanadu Scout will be sent to backers spring 2014.
*Disclosure: I’m the CEO of Fundable and work exclusively with businesses looking to raise capital through crowdfunding. Keeping this article business focused, I did not include creative art projects and video games, as well as removing companies that did not achieve their goal.
