Moment Kickstarter No 5: Why Do Big Companies Use Crowdfunding?

Moment Kickstarter No 5: Why Do Big Companies Use Crowdfunding?

The company that make some of the most popular conversion lenses for smartphones have just announced the launch date for their next Kickstarter campaign. Moment launched on Kickstarter back in 2014. Since then they have run 3 more campaigns, with this being their fifth.

But why do successful companies use crowdfunding when they should have the money in the bank? Or if they don’t have enough cash floating around, they can surely do what companies always did in the past – borrow money with the intention of paying back the loan once sales kick in. Is this just big company greed?

Each of Moment’s previous 4 campaigns have shown a steady increase in the amount raised and the number of backers. They started at over $0.5m raised and went past $1m in the last campaign, with over double the number of backers.

One thing we know then – Moment are good at this crowdfunding thing.

So, although we know this strategy annoys some people, the fact that the number of backers increases each time shows their fans like backing them on Kickstarter, in increasing numbers. This time, Moment are being mysterious about the product they be launching, but I will try to guess what they could be raising funds for.

But first, let’s try to understand why a company as successful as Moment continues using Kickstarter when they don’t need it. After all, Moment have been well and truly Kickstarted already. It’s less of a kick and a start these days, and more like Weareonarollhelpuskeepgoing.

1. Marketing

If you know how to use Kickstarter, as Moment clearly do, then a crowdfunding campaign can be a great way to test the water. You can present a new product to people and get an immediate reaction. You also get a conversation going online about your product, which is essential in modern web-based marketing.

Yes, it’s not just about the conversation between the company and the customers, it’s also about the customers talking to each other. In fact, probably much more about that than anything. Hence the deliberate mystery about what the product will be.

And by the way, running a crowdfunding campaign will increase sales of their existing products. So it’s not just about selling their new device, whatever it may be. The excitement created by the campaign will generate more sales across their product range.

Using the web to sell your products means thinking differently to the way companies used to.

2. Reducing Risk

No matter how big your company (unless you are literally swimming in cash like big tech companies such as Apple) launching a new product involves a risk. Using the old method, a company used their existing cash in the bank or borrowed, using the success of their company to date as collateral to borrow against.

But how does a company gauge the success or failure of the product? Surveys and focus groups can be useful, but are also notorious for turning up poor information. Just look at companies trying to predict election results to see how badly they can get their predictions wrong. There’s often a gap between what people say they want and what they will actually put their cash down for.

So companies invest big in a product people have told them they want, only to find the real demand far less than predicted. An event like this can even bring down a previously successful company. Or lumber that company with so much debt and warehouses of unwanted products, they can do nothing but limp along for the foreseeable future. Companies can end up like washed up gamblers trying to win back the money they lost using $1 stakes.

With a crowdfunding campaign, on the other hand, that risk is all but averted. Money initially needs to be spent on design, marketing and advertising, but not the far larger amount on manufacture and packaging (and storing products).

This is especially true if your marketing is very much online. And we know Moment do online better than most, with their successful YouTube channel and Instagram. As they know virtually all their customers are online and are connected in some way to their social media and email list, it makes absolute sense to avoid risk by running a crowdfunding campaign.

3. Why Change A Winning Strategy?

Kickstarter has worked so well for them before, why not keep using it? From their 3rd to their 4th campaign, they doubled their backers and amount raised.

My guess is that Moment are still on the way up. So this next campaign, whatever the product is (unless they seriously misjudged), will haul in even more $ and backers than previous campaigns.

Adam Simons is head of emerging brands at a multi billion dollar company called at Clorox. This is what he has to say about using Kickstarter: “The Kickstarter thing just kind of naturally evolved, where we said it made sense as an awareness driver, as a way to build one-to-one connections with consumers in a way that’s very important to us and, frankly, as a way to cut against the grain of typical product launches in CPG.”

Their Veri Veri Teriyaki Kickstarter closed with 741 backers pledging $29,094. A drop in the ocean for such a big company. And we can hardly claim greed as their motivation, because this is probably about Simmons’ yearly Sushi expenses.

Perhaps it’s a shame Kickstarter and other platforms have moved so far from their initial idea of giving a voice to those with minimal resources. But then so has most of the rest of the internet.

At least, we at MoMo are still working for that purpose.

So what’s in the new Moment Kickstarter?

I have no inside knowledge, so I’m guessing like everyone else. One suggestion is that this new product could be a gimbal. They have a full range of lenses, cases and even a camera app to rival those by FiLMiC Pro and MAVIS. So perhaps they’re now ready to take on Zhiyun and DJI.

Or are they going to make a move on Beastgrip and go for the cage/grip market? With new phones coming with inbuilt wide, ultra wide and telephoto lenses, are Moment hurting already? Are they losing sales to those phones? Something to do with audio? Or perhaps a serious DoF adapter could give them a product that will never come inbuilt into a smartphone…

If you have an inside knowledge or guesses, leave a comment below. Otherwise, you can sign up to their email list hoping to find out the secret ahead of the crowd.

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