Ending Soon! Save 33% on All Access

Use Crowdfunding to Gauge Interest for Your Idea If people are willing to open their wallets, that's invaluable information for investors.

By Stephen Key Edited by Dan Bova

Opinions expressed by Entrepreneur contributors are their own.

It seems like everyone is using crowdfunding to kick off their new business venture, be it a new coffee shop, grocery store or gadget. But there's been significant debate about just how useful crowdfunding really is. For every successful project, there are many more that never get off the ground, even if they are able to raise some capital.

The reality is that the majority of entrepreneurs need more than financial support to launch their ideas. They lack the experience needed to create and execute a business plan. And with a few exceptions, like very simple or small ideas, they seriously underestimate how much money is needed to get a business off the ground.

Related: Take a Step Back. Set a Realistic Goal for Your Crowdfunding Campaign.

Lately I've been thinking that crowdfunding has another, potentially more dependable benefit: It's a great way to test desire for your product or business. You can create all the surveys you want and ask all of your friends and family for their opinions, but the only way to be sure you have a good idea is to know that people are willing to reach into their pockets to pay for it.

In that way, crowdfunding could be the very best way of testing your idea. If you set up a crowdfunding website, you'll quickly discover if people want your idea -- and how many. They are literally willing to pay for your idea. That's priceless information. And it can be used to your benefit in many ways.

For one, potential licensees and investors want to know that consumers are willing to pay for your idea. So crowdfunding can be used to attract attention to your product. Partnering up with a more powerful, experienced company is a great way to ensure that your product makes it to market, because they will have working relationships with manufacturers, distributors and retailers. Investors want to work with products that have less risk. What better way to reduce risk than to say, "All of these people want this product. They were willing to pay for it. They'll pay for it in retail, too."

Related: Thinking of Crowdfunding? This Review Site Helps You Choose Wisely

If your product doesn't attract a lot of interest, that's helpful to know, too. Does your product really have what it takes? Did you do a good enough of a job promoting it? Crowdfunding shouldn't be the only way you test your idea to determine if you should pursue it, but it's a solid one.

Some major companies, such as Wal-Mart, are already using the concept of crowdfunding to test potential retail items: They have a voting program called "Get on the Shelf."

The internet has afforded us the power to leverage the voice of an incredible number of people in a very short amount of time. Think critically about how you can leverage the voice of the people to promote your business idea. Crowdfunding probably isn't enough, but it's a great start -- especially if you begin to think about it more creatively.

Related: In Crowdfunding, Who is Responsible for Preventing Fraud?

Stephen Key

Co-Founder of inventRight; Author of One Simple Idea Series

Stephen Key is an inventor, IP strategist, author, speaker and co-founder of inventRight, LLC, a Glenbrook, Nevada-based company that helps inventors design, patent and license their ideas for new products.

Want to be an Entrepreneur Leadership Network contributor? Apply now to join.


Is Consumer Services a Good Career Path for 2024? Here's the Verdict

Consumer services is a broad field with a variety of benefits and drawbacks. Here's what you should consider before choosing it as a career path.

Business News

'Creators Left So Much Money on the Table': Kickstarter's CEO Reveals the Story Behind the Company's Biggest Changes in 15 Years

In an interview with Entrepreneur, Kickstarter CEO Everette Taylor explains the decision-making behind the changes, how he approaches leading Kickstarter, and his advice for future CEOs.

Business Models

How to Become an AI-Centric Business (and Why It's Crucial for Long-Term Success)

Learn the essential steps to integrate AI at the core of your operations and stay competitive in an ever-evolving landscape.