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Are Big Businesses Next in Line for Crowdfunding?

Raz Godelnik headshotWords by Raz Godelnik

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The Rise Of The Sharing Economy

Would you be surprised to see an expense line item showing up on Coca Cola’s or Nike’s P&L for a Kickstarter campaign? Well, right now you won’t find one on any big company’s expense list but this option might soon be less hypothetical than you think.

It all started with the groundbreaking success of the Veronica Mars Kickstarter campaign. Rob Thomas, who created this TV series about a student who moonlights as a private detective, has managed to raise more than $3.7 million - so far - to make a feature film with the same characters. This campaign broke almost every Kickstarter record, including meeting its funding goal of $2 million in just about 12 hours.

The campaign’s huge success was just one of the reasons it became the talk of the day. The other one was where the money is headed – to Warner Brothers. The money raised, as Wired explained, “will go into a production account set up by Warner Bros., the studio that owns the concept and will distribute the movie if it gets made.” In other words, every one of the 57,183 backers that pledged so far to fund the movie is basically donating money to Warner Bros.

In addition to raising questions on whether or not this is a fair use of Kickstarter, this campaign also showed the potential for big businesses to raise funds on crowdfunding platforms. Prior to this campaign, the crowdfunding scene was dominated by entrepreneurs, artists and small businesses. Now, there’s a good chance the status quo is going to change.

To get an idea why big businesses might find a crowdfunding campaign appealing, let’s look at what Warner Bros. will get out of the deal. First, there’s the money it will receive as a result of the campaign, although I don’t think this is the main benefit for WB. While $3.7 million is by no means small change, it is not that much when it comes to making movies, where even low-budget films can run tens of millions of dollars.

For Warner Bros., the biggest benefit is the free market testing. After refusing for years to produce this film, the movie studio told Thomas eventually that “if you can show there’s enough fan interest to warrant a movie, we’re on board.” The campaign is also an engagement tool that can get the Veronica Mars fans more involved and invested in the film. In this case they are both financially and, more importantly, emotionally, invested. And it all comes with very little risk, especially if you’re not the one that is directly asking for the money. It also requires no investment – could it get any better when it comes to market testing?

Now, the same cost-benefit analysis can apply to many new products so don’t be surprised if marketing executives around the world reading about this campaign start thinking "hey, this Kickstarter thing sounds interesting, why won’t we give it a try?" It’s true they need to figure out how to do it in a smart way that will create excitement rather than resentment, but if a TV series with a small fan base and poor ratings managed to do it so well, why not a new Coke drink or a new innovation from Nike?

While these sorts of crowdfunding initiatives would be quite experimental for big companies, it won’t be the first time they are look for new ways to enhance their relationships with consumers. Take for example the long list of corporate crowdsourcing initiatives: GE, Unilever, Heineken, Unilever’s collaboration with Carrotmob, and Dell’s IdeaStorm community, which helps the company improve its products.

Yet, while some would see possible entrance to the crowdfunding space as a natural extension of the other crowdsourcing and engagement efforts mentioned above, others would argue that this is something completely different. After all, this is not just a creative way to get consumers more involved in the development process of a new product or service, but one that asks them to pay for it. It’s not that consumers don’t get anything out of it – the Veronica Mars fans are getting plenty of perks from digital downloads of the film all the way up to speaking roles in the fim.

The main issues I see here is transparency. When the money goes mainly into the pockets of a big corporation, this corporation should be mentioned as one of the creators or producers of the campaign to ensure backers know exactly where their money is going. In this case, the campaign landing page lists the producer as the project owner.

Furthermore, unlike other areas in the sharing economy, where corporate interest brings legitimacy, I’m not sure if further involvement of big corporations can actually benefit the sharing economy. Isn’t it more likely that it is the other way around and they benefit from the reputation of platforms like Kickstarter?

Given Warner Bros.'s success, we are likely in for more corporate crowdfunding campaigns, unless Kickstarter spins off a new channel for big corporations offering rewards or even equity after the SEC finally gives it a green light.

In the meantime big companies should present crowdfunding campaigns on their websites or create unique websites for that matter just like they do with special campaigns. They should leave Kickstarter for those who don’t see it as just another item on their expense list.

[Image credit: Wikipedia]

Raz Godelnik is the co-founder of Eco-Libris and an adjunct faculty at the University of Delaware’s Business School, CUNY SPS and the Parsons The New School for Design, teaching courses in green business, sustainable design and new product development. You can follow Raz on Twitter.