How Crowdfunding Validates New Products

What is crowdfunding and how can it be used to validate a new product on the market?

Crowdfunding is a general term used to define a project that raises money from a large group of people. In 2015, crowdfunding accounted for 34.4 billion dollars raised according to Massolution’s 2015 Crowdfunding report.i

Essentially, crowdfunding helps individuals, businesses, and entrepreneurs infiltrate a huge marketplace that is growing exponentially every year. It has gained so much popularity that it has begun to surpass venture capital companies in usability. It attracts new customers at a fraction of the cost of traditional marketing. Kickstarter and Indiego together receive 600,000 unique visitors every month, making this a lucrative source of potential customers to tap into.

Other perks, outside of the great cost per acquisition, are the promotional opportunities that drive traffic for no additional fee. In this highly involved, vibrant community, backers are more likely to share your story on social media which in turn enhances the viability of the product campaign and adds value for the customer.

Two beneficial keys to crowdfunding that help entrepreneurs and businessmen alike is the source of customer feedback and data procured through advertising.

With that said, crowdfunding is a very powerful tool used to validate new products or make improvements on existing products or services. According to the Council of American Survey Research Associates in regard to crowdfunding "US businesses alone spend 6.7 billion dollars each year on market research and 18.9 billion dollars worldwide".ii

Crowdfunding offers a low risk, cost effective way to perform market research and establish product validity which in turn produces an increase in sales and ultimately profits.

Questions to ponder when considering crowdfunding for your new product:

  1. Who is your target audience?
  2. By what means will your customer receive your product?
  3. What questions or concerns might the consumer have regarding the products, that could be answered ahead of time, to attract a larger crowd?

All the data that you can collect during the research process and the actual launch of the campaign only serves to create the groundwork for the future success of your product or business. The added bonus to this equation is that the “backer” of your campaign already knows the product and understands it can be a work-in-progress, always evolving and improving. The investors, or “backers” are willing to invest their ideas, money, and social network to safeguard a successful end product. During this period of asking questions, seeking out insight and making adjustments, major product breakthroughs can occur which improve the product but also better conveys the marketing message to your community or tribe of followers.

How to build a successful crowdfunding campaign:

1. The Product is Essential

Having a strong product is fundamental for success. If the product does not prove to be interesting or doesn’t aim to solve a major problem facing society or the world, then it will fail to get funded. The product must be something people care about and want to see be brought to market. There must be a demand or the product is dead without a future to look forward to.

2. The Video is Pivotal

Video, as seen on social media is the new trend and it is here to last. It serves to better attract and engage your audience by providing a visual component to your marketing plan, to your script and story. Of course, stories provide the “human” element to the product, but video surpasses all the other jargon that bombards individual daily lives today and sells the product with a short, creative clip that has the power to influence the masses.

3. Create Buildup

This is a must do on your agenda. Start building and seeding the market at least 3-6 months in advance of going live with the product campaign. This period is all about building momentum and notoriety. The primary goal here is to get funded as quickly as possible, which builds more and more traction.
An important side note that can be easily overlooked is the importance of the email list. Keep your contacts up-to-date with the progress of the product and include this audience in the behind-the-scenes footage. This type of inclusion builds loyalty and a connection to product.

4. Launch Time

It won’t be easy; campaigns take a lot of time and dedication to execute well. Plan on upwards of six months before the product and audience is in place and then relish in the official launch!iii

The Master of Science in Entrepreneurship is an advanced graduate degree that furnishes students with the tools to gain the proficiency needed for successful and effective entrepreneurship careers in a vigorous international business setting. It is a stimulating program devised to provide students with a specialist understanding of the field of entrepreneurial business management.

GBSB Global’s Master of Science in Entrepreneurship is not merely a set of several management disciplines but it was established to promote creativity and entrepreneurship skills. Students benefit from close links of GBSB Global’s professional network through industrial visits and interaction with professors – qualified entrepreneurs themselves.

Entrepreneurial skills have never been more important than they are in today’s dynamic world. The Master of Science in Entrepreneurship from GBSB Global prepares students to be successful entrepreneurs in a global context whether it is starting a business or developing an entrepreneurial project within an existing organization.

Written by Emily Dawn Szajda, GBSB Global Content Manager

[i], [ii]Ford, William. 06 January 2016. 5 Reasons Why Crowdfunding is the Best Way to Launch Your New Product. Launchboom. Retrieved from
[iii]Bradford, Laurence. 14 December 2016. How to Use Crowdfunding To Validate Your New Business Idea. Forbes. Retrieved from


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