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How Established Businesses Can Benefit From Crowdfunding Call it crowdfunding 2.0. Established companies are using Kickstarter and the like to launch new products, paid for by a built-in customer base before they hit the production line.

By Vanessa Richardson

Opinions expressed by Entrepreneur contributors are their own.

bitrebels.com
Wave, a wristband and smartphone app

Paul Fulton could have easily turned to his Silicon Valley connections to help bankroll a new product from his startup Cloudsona, which makes and sells wireless wristbands that synchronize with light shows at concerts, clubs and sporting events. The man knows people; he has held top positions at Compaq and 3Com and worked as an entrepreneur-in-residence at the Mayfield Fund before founding a software company that was later sold to Cisco. But to fund and launch Cloudsona's latest product, Fulton turned to Kickstarter.

Cloudsona's crowdfunding campaign asked for $75,000 to produce Wave, a wristband and smartphone app that uses color codes to indicate who's calling or messaging the phone. Kickstarter contributors who pledged $28 were promised first-production units of Wave; those who pledged $8,000 got the VIP package--special treatment at a Las Vegas nightclub, complete with limo, bodyguard and a hotel room on the Strip.

Call it crowdfunding 2.0. Established companies are using Kickstarter and the like to launch new products, paid for by a built-in customer base before they hit the production line. But according to Fulton, the appeal is not limited to raising funds. "Just as important, we're looking to get feedback," he says. "This campaign is about market messaging and product viability. It's forcing us to think about how this product should be sold."