Big VC-backed startups can take a page from the books of babes. Crowdfunding babes, that is. Taking preorders for a new product through a crowdfunding campaign has morphed from a way to get production money into much much more. Early stage entrepreneurs now use it even when they don’t need the cash. It’s their way of making sure the public wants the product by making them vote with their wallet. It provides market validation that said entrepreneurs can then take to VCs when raising money. It gives them an avenue for getting press. It’s a marketing scheme.
There’s no reason why bigger venture-backed startups can’t use it for all those new purposes too.
Startup founder and CEO Jane Park realized exactly that with her nail polish and beauty product subscription company Julep. Julep has more than enough money in the bank to fund new projects — it raised three series to the tune of $20.6 million.
Despite being flush with cash, Park decided to turn to crowdfunding to test whether Julep’s latest product iteration, the Plie nail-polishing wand, would stand the market-fit test. “How do we compete with organizations with much bigger marketing budgets?” Park says. “For us it means being more collaborative, letting customers in as early as possible, letting them help in a real way.”
The experiment has been largely successful, with the campaign raising its $75,000 goal in a 24 hour period. At this point it has raised $105,641 from almost 5,000 funders. The polishing wand is new for Julep and unlike anything they sell at the moment. Its bend and fold design helps people polish their nails without smearing it everywhere.
“We had no idea if five people would want it or 500,000,” Park says. “Our model only works if we get the initial quantity right from the get go, so this gives us accurate information on our customers’ behavior.”