Guest Post: Through Crowdfunding New Businesses Can Test Ideas with the Toughest Critics -- Customers and Investors

Two weeks after the Haiti earthquake, Anna Stork and I teamed up to start LuminAid Lab out of a shared belief that portable solar lighting could greatly add to the safety and survival of victims of a disaster or crisis. As students and novice entrepreneurs, we faced the 'chicken-and-egg' problem that many small companies confront in scaling up a business without an initial, deep source of cash. We had designed an innovative solar light that would help in aiding disaster relief victims, but we lacked the funding to manufacture our product at a meaningful scale.

We launched our company in January 2011, and last November we launched our "Give Light, Get Light" crowdfunding campaign on a donation-based website, IndieGoGo.com. We established a goal of financing the manufacturing of our first 1,000 lights through the pre-sale of 500 lights. The remaining 500 lights would be donated to partners who offered to field test the product. 

To our surprise, we reached $10,000 within the first week of the campaign and over the next 30 days, we raised more than $50,000, sold 1,500 lights, and had another 3,300 matched to our partners as donations. While we had field tested several dozen lights and continued to optimize our prototype prior to the campaign, we had not anticipated this type of support and call to action from those who participated by sponsoring lights. These donated lights have been sent to schools, orphanages, and development projects around the world.

Crowdfunding provided us with access to our first 1,200 customers, individuals and organizations with whom we now communicate constantly as a result of their pre-purchase of the LuminAID light. While the money gained from the successful campaign was a big financial boost to our efforts, the even more valuable outcome of the campaign was establishing a connection with the first and earliest supporters of our company. We leveraged crowdfunding as a platform that bridged the gap between testing our idea and truly understanding what motivated our first customers to purchase our product.  We are carrying forward this knowledge of what our customers care about as we scale our marketing, sales and distribution efforts. Crowdfunding also allowed LuminAID Lab to engage technology and social media in launching our business and ultimately enabled us to sell our light to people in more than 25 different countries.

It was an honor to have been invited to represent LuminAID Lab at the signing of the JOBS Act at the White House in early April.  Provisions of the JOBS Act will allow small businesses like ours greater access to investor capital through crowdfunding – not just donations, but true investments. Our own experience illustrates the value of establishing crowdfunding as a viable source of funding – it will enable new businesses to truly test out ideas amongst the toughest and most thorough critics: the very first customers and investors who share a part in a company's failure or success.


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Related Topics: Economy, Startup America
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