# Validation for Businesses – Taking the Crowdfunding Route for Success
Author:  Pal Sinha, Barnali 
Author URL: https://financedigest.com/author/pal-sinha-barnali
Published: 2017-10-14
Category: BUSINESS
Category URL: https://financedigest.com/category/business
Meta Title: Catching the Crowdfunding Wave: The Rise and Impact of
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URL: https://financedigest.com/validation-for-businesses-taking-the-crowdfunding-route-for-successhtml

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By **Joel Hughes**

Crowdfunding emerged in the wake of the 2008 financial crisis as traditional funding methods became even trickier to access. As a result, entrepreneurs began hunting down capital elsewhere, which gave rise to crowdfunding as the funding knight in shining armour. Fast forward to 2017: crowdfunding has grown into a multi-billion dollar industry and has become park of the entrepreneurial toolbox.The latest figures show that crowdfunding contributions [now surpass](http://crowdexpert.com/crowdfunding-industry-statistics/) that of venture capitalism, and it’s estimated that they will reach a whopping [£73 billion](http://www.infodev.org/infodev-files/wb_crowdfundingreport-v12.pdf) by 2025.

**Catching the Crowdfunding Wave**

Crowdfunding is not only here to stay, but its fast growth is set to continue. What is crowdfunding and why does it matter for businesses? People often think of crowdfunding simply as a [way to raise money to finance](https://www.financedigest.com/6-ways-to-finance-your-dream-vacation.html "6 Ways to Finance Your Dream Vacation") a new product. While funding is obviously a core element of crowdfunding, the [benefits](https://www.financedigest.com/the-four-benefits-of-digital-transformation-in-the-finance-industry.html "The Four Benefits of Digital Transformation in the Finance Industry") are not strictly financial. [Successful crowdfunding campaigns offer enormous potential for businesses](https://www.financedigest.com/tips-on-how-startups-can-turn-their-business-into-a-success.html "Tips on how startups can turn their business into a success"), particularly for product validation.

‘Crowdfunding’, in general terms, means raising money from a large group of people. There are two types, reward-based crowdfunding and equity crowdfunding. While equity crowdfunding offers an [investment opportunity and a chance to share in a company’s potential](https://www.financedigest.com/investment-potential-in-emerging-markets.html "Investment potential in emerging markets") success, reward-based crowdfunding allows consumers to back the latest innovations by pre-ordering new products before they hit stores. These products are usually available at a discounted price,and the early sales fund product [development](https://www.financedigest.com/tire-recycling-downstream-products-market-to-observe-strong-development-by-2019-2027.html "Tire Recycling Downstream Products Market to Observe Strong Development by 2019-2027") and production. By giving consumers the chance to vote with their money, reward-based crowdfunding validates that there is actually [market demand](https://www.financedigest.com/all-terrain-vehicle-market-demand-supply-growth-factors-latest-rising-trend-and-forecast-to-2027.html "All-Terrain Vehicle Market Demand, Supply, Growth Factors, Latest Rising Trend and Forecast to 2027") for a new product.

**Getting [Product Validation](https://www.financedigest.com/product-design-verification-and-validation-solution-market-2021-present-scenario-and-growth-prospects-2025.html "Product Design Verification And Validation Solution Market 2021 | Present Scenario and Growth Prospects 2025") Right**

Bringing a product idea to life requires a lot of thought, research and effort. Typical [market research](https://www.financedigest.com/bacillus-coagulans-market-research-report-2022-global-forecast-till-2028.html "Bacillus Coagulans Market Research Report 2022 – Global Forecast till 2028") is expensive, and not necessarily representative of the target consumers for a product. By using crowdfunding,businesses can get an idea of the [market before jumping in and launching a product](https://www.financedigest.com/new-product-launches-to-put-the-marker-pens-market-in-a-good-stead.html "New Product Launches To Put The Marker Pens Market In A Good Stead"). Businesses are turning to crowdfunding platforms, such as [Indiegogo](https://www.indiegogo.com/), to get in front of target consumers and receive feedback from them, which can be gold dust for product development and business strategy. This way, businesses end up with a stronger, market-ready product, and thus reduce risk when launching a brand new innovation.

GE’s Firstbuild used Indiegogo as a tool for [market validation](https://www.financedigest.com/frameplay-announces-new-attention-metric-in-video-game-environments-validated-in-partnership-with-dentsus-attention-economy-team-by-first-to-market-studies.html "Frameplay Announces New Attention Metric in Video Game Environments, Validated in Partnership with dentsu’s Attention Economy Team by First-to-Market Studies") with the Paragon Induction Cooktop. The team surpassed its fundraising goal, which indicated that there was [market demand](https://www.financedigest.com/car-bulb-market-demand-supply-growth-factors-latest-rising-trend-and-forecast-to-2028.html "Car Bulb Market Demand, Supply, Growth Factors, Latest Rising Trend and Forecast to 2028") for it, whilst using valuable backer feedback information to make tweaks to product design.After acquiring thousands of backers and more than $300k in sales through the crowdfunding platform, the business was [confident with the value proposition for consumers](https://www.financedigest.com/asian-shares-rise-after-consumer-confidence-boosts-nasdaq-to-record-high.html "Asian shares rise after consumer confidence boosts Nasdaq to record high") and progressed to production stage.

**Embracing the Crowd**

By taking an idea directly to ‘the crowd’, businesses can get a clear sense of how a [product will be received by target consumers](https://www.financedigest.com/bagasse-tableware-products-market-will-top-us-3-75-bn-by-2031-as-consumers-proclivity-for-eco-friendly-and-single-use-product-purchase-grows.html "Bagasse Tableware Products Market will top US$ 3.75 Bn by 2031 as Consumers’ Proclivity for Eco-Friendly and Single-Use Product Purchase Grows"). A fully funded campaign validates a product by demonstrating that [consumers](https://www.financedigest.com/welding-consumables-market-continue-to-be-largest-product-segment-in-consumer-market.html "Welding Consumables Market Continue to be Largest Product Segment in Consumer Market") actually want the product –paying  fora product before it is even available. An unsuccessful campaign, on the other hand, suggests that a product needs some more thought before it’s [market ready](https://www.financedigest.com/digital-marketing-for-finance-and-insurance-firms-is-changing-are-you-ready.html "Digital marketing for finance and insurance firms is changing — Are you ready?"). Crowdfunding is fast becoming the go-to route for [businesses looking to validate a product or service for an ultimate success](https://www.financedigest.com/why-start-ups-fail-5-barriers-to-business-success-and-how-to-overcome-them.html "Why start-ups fail: 5 barriers to business success and how to overcome them")


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