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Patent practitioners are often asked questions about business topics outside of intellectual property. One question I hear frequently is how to get funding for a new product. A newer source of startup capital is “crowd funding” through websites such as Kickstarter.com, Peerbackers.com, and IndieGoGo.com. These are examples of crowd-sourced funding platforms where backers financially support creative projects, including new product ideas. An inventor will post his idea and a financial goal for a set period of time to one of these websites, and if enough supporters back the idea by pledging small amounts, typically $25-$50, then the goal is reached and the credit card of each backer is charged. The crowd-funding website takes a cut, such as 5-10%, and the inventor gets the rest. If the goal amount is not met in time, none of the backers are charged and the project fails.
As an incentive to back the project, backers receive rewards determined by the inventor and the pledged amount. For example, at a $25 level the backer might get one of the first production units, or a signed copy of the patent, or some such. This seemed like a great way to test market an idea before spending money on it… “raise the flag” and see who salutes. If there’s demand for the product, the campaign should succeed and you’ll be on your way. If you can’t raise the goal amount it might be an indicator that the product would be a flop anyway and you’ve learned this without having to finance product design, tooling, and an initial production run. Pledges are not investments or loans, so there are no further obligations (after the rewards are delivered, of course).