A Brief Talk about Crowdfunding
Crowdfunding has become more and more of a common way for business founders to get their projects funded directly by wide population. The emergence of big crowdfunding platforms like Kickstarter and Indiegogo enabled project founders to “engage directly” with their potential customers. At the same time, people were finally able to invest in projects that they actually like. Through crowdfunding platforms, they can find projects from 3D printers to a block of soap that smells exactly like meat (yes, they made it from animal fat. I myself remembered backing a project called “Exploding Kittens” years ago simply for fun (I loved the name) and it ended up becoming one of my favorite games of all time.
Fun memories aside, the existence of crowdfunding platforms is a breakthrough for companies, big and small alike. There are several advantages and disadvantages of utilizing crowdfunding platform for businesses:
Pros:
- It can be an easy and fast way to raise finance
- It is a fast method to see potential customers’ reactions, and positive reactions usually result in free marketing (through social media, for example)
Cons:
- It can be costly if not done right: donation incentives and marketing initiatives often need sound strategy
- It is difficult to alter the business offerings, since public already has expectations of what the project will be (less flexibility)
Into the “Gray” Side of Crowdfunding
With the market development of this while crowdfunding concept, the “freedom” that crowdfunding platforms provide to individuals as a potential project founder might not always result in what our society’s “social norms” deem as ideal. There are many cases already in which people use the donations from crowdfunding platforms to do illegal activities. The most common form of this is scams: “founders” promise a great project and “run away” after reaching donation target of thousands of dollars. This is commonplace, and there are legal remedies already; but a more interesting case is when a founder raises money for a controversial project rather than an illegal one.
Controversial crowdfunding projects in most cases don’t actually break the law and are not outright illegal. Sometimes, they are just “teasing the boundary line” or not in accordance with acknowledged social values.
Sugarbook: When “Controversial” Meets “Attractive”
A simple example to illustrate a controversial project is to look at the newly established social networking platform Sugarbook. The startup built an app and website on the premise that a decent percentage of online dating puts importance of “having money” before considering moving on to more serious commitment in a relationship. Put simply, the app serves as the bridge to enable “sugar daddies” to meet young women.
The controversial nature of the business’ premise alone was able to attract attention from many places, wanted and unwanted. On one side, there is social unrest: many public officials stated that this app will be “watched” as many fear that this kind of apps tend to attract elements related to keywords like “prostitution”, “exploitation” and “women safety”. But, on the other hand, the attention this business got gained it lucrative funding and customers. The Sugarbook app states that it already has around 10,000 members already in New Zealand. Many other similar sugar dating apps also reflect the popularity of controversial businesses that somehow found their market.
The Business Perspective of Controversial Projects
The example of Sugarbook might provide us some business perspectives on a question that at the moment is perhaps boggling our mind: how does that even work? The first question that might appear is perhaps: “Is the business model any different?”. The answer is yes and no. For projects that gain their funding through crowdfunding platforms, the business model is still the same and separate. Crowdfunding platforms approve projects and get fee from project founders, then “display” the projects for people to see and invest. In our example case earlier, Sugarbook in itself doesn’t have much different business model to other dating and social networking app like Tinder: individuals can join to access networks of other like-minded individuals, and there is usually a premium service version that get the company more fees.
There are several explanations on why controversial-concept businesses work well knowing there are social or even legal consequences that can hinder the business from profitability, or even, sustainability. The first reason would be the attractiveness of being “controversial”. The word “controversial” is often associated with being “different”. And recent social movements encourage the notion that being different is attractive. This association thought-train is what enables controversial anything, including business projects, to gain more attention and traction in shorter time than “normal and boring” ones. Another reason that is still related to the first reason is the prevalence of social media in the spread of information on internet. Facebook, for example, has been reported by many sources that it is prone to spread of fake and controversial contents. With similar reasons that say “controversial” can mean “different” and “attractive”, social media plays a strong role in getting these types of businesses public attention.
Lesson Learned for Future Crowdfunding Project Founders
What we can learn from this is that while crowdfunding might seem to be an easy way out for our project’s financial needs, it isn’t always the case. The competition is already crowded; project founders still need to execute strategies to differentiate from others. Controversial businesses like Sugarbook teaches us that even with a controversial business premise that is seemingly harmful for business sustainability still manages to find its market (and investment to keep it going) and come out the winner of the situation (at least for now). Taking all these seemingly-trivial factors, like in this case, having a different and attractive marketing initiatives, into considerations is important to thrive, when everything is out in the open especially with crowdfunding platform system.
Who knows, maybe even you can be the next sensational founder of the $55,000 Potato Salad project in Kickstarter.
Written by: Theo Cavin Yudianto (495880)
Sources:
https://money.cnn.com/interactive/media/the-macedonia-story/
https://www.theverge.com/2014/10/1/6880201/potato-stock-kickstarter-potato-salad-zack-danger-brown
https://www.techinasia.com/sugar-daddy-app-sugarbook-funding-for-expansion
https://lawpath.com.au/blog/pros-cons-crowdfunding-business
Consumer Value Creation 