Technology

Indiegogo tries to sell crowdfunding to major firms

Indiegogo Image copyright Indiegogo
Image caption Indiegogo wants to work closer with major corporations

It is perhaps best known for helping small businesses get a leg-up. This week though, the crowdfunding site Indiegogo formally announced its intention to work more closely with the world's biggest corporations.

The firm said it wanted to help them crowdfund their own research ideas and get customers to vote with their wallets on which to develop by pledging cash to back their favourites.

While Indiegogo will hope the move proves lucrative, one expert warned that it also risked crowding out entrepreneurs.

And other people have speculated that few people would be interested in funding projects on behalf of multi-billion pound companies.

Indiegogo said that firms would be able to ask its users to suggest ideas for which it could then seek financial backing and input from potential customers. They could also put out their own projects to gauge the potential market and attract funding and would receive promotional and strategic support from Indiegogo staff, it said.

The firm said the programme was open only to Fortune 1000 and Global 500 companies. While it has said that the prices it planned to charge would be prohibitive to smaller firms, it declined to elaborate on Thursday, beyond saying that fees would "vary based on what the client is looking to accomplish".

An Indiegogo spokeswoman said the site's users, who she described as tending to be "early adopters" of new technology, would be attracted by the same things that draw them to start-up projects on the site - getting their hands on the products early, as well as "other perks".

Image copyright Getty Images
Image caption Zach Braff defended his decision to crowdfund a film

When it officially launched Enterprise Crowdfunding on Wednesday, Indiegogo chose to highlight four firms that have used it so far: General Electric's FirstBuild, the toy firm Hasbro, the Anheuser-Busch-owned Shock Top and Harman International Industries.

Each campaign was trumpeted as a success story. The firms - or their parent companies - made combined profits of more than $27bn (£18.6bn) in the latest year for which they have produced accounts.

Some reports have expressed scepticism that the promise of earlier delivery would be enough to convince Indiegogo users to back such well-funded corporations.

Indiegogo said its site was a "reward-based crowdfunding platform", meaning that its users expected to receive an "item or service in return for their contribution", as opposed to a return on an investment.

"As you can see by the success of campaigns like the ones by GE or Hasbro, the Indiegogo crowd is willing to get involved, they are early adopters and they want to be involved in the decision-making process and have access to innovative products or services first hand," its spokeswoman said.

And Slava Rubin, its founder and chief executive, said the site was created for anyone "from the inventor working out of her garage to the largest Fortune 500 companies".

Nevertheless, the issue has been raised before. The actor and filmmaker Zach Braff was criticised when he began crowdfunded his new film on Kickstater in 2013.

Many people expressed anger that someone who was perceived as not needing the money was asking people to fund his work. Despite that, Wish I Was Here was backed to the tune of more than $3m (£2.05m) by more than 46,000 people.

Image copyright Getty Images
Image caption Slava Rubin said Indiegogo was for anyone

According to Duncan McCann, a researcher at the New Economics Foundation, the greatest risk was that entrepreneurs who rely on sites like Indiegogo would be crowded out.

While he was not surprised that large firms might seek to offload some of the costs of research and development, he said that the effect would be minimal. "Even if they got tens of thousands of people paying, it is not going to cover those costs. It is about understanding the market very quickly, which is a real benefit. It also brings a guarantee of a certain number of purchases and it generates loyalty."

He added: "What you get is the established players moving in once people are comfortable with the concept. It will be interesting to see how it plays out. Will we see people going to other platforms?

"My worry is not so much that big players have a way of doing something smarter, my problem would be if it pushed out the real entrepreneurs, who will be the real future engines of the economy.

"Customer loyalty is also disappearing, so engaging people with products is a really big benefit. The big companies really cannot lose."

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