Crowdfunding Can be Used for Market Research Too

Over the past couple of years, crowdfunding has emerged as a quick and agile way to raise money- whether for a new business, charity, or artistic project. While many have been quick to point out the various “side benefits” of turning to the online community for funding, such as generating customer interest and building brand loyalty, one under-emphasized aspect of crowdfunding is that it provides a virtual litmus test of the success of a potential business or idea.

What is Crowdfunding?

Crowdfunding is a method of raising funds for a business venture or a project by requesting a small amount of money from a large number of people (in this case internet users). By tapping into the power of the internet, entrepreneurs can pitch their ideas to a large group of people, who, if interested will respond by donating money to help them reach their target.


Unlike more traditional forms of business capital, the money raised through crowdfunding is not directly repaid. Recipients instead may offer their investors a specified item or service in exchange, such as a free sample of their product or an advance copy of a CD. In some, crowdfunding models, such as the one supported by Sellaband, where people invest in music artists and bands, investors also get a cut of the artist’s future sales revenues.

How Can Crowdfunding Be Used for Market Research?

Crowdfunding presents your business idea to the public during the initial planning stages. Not only does it raise funds, but it also raises product and brand awareness. Entrepreneurs can utilize established social fundraising platforms, see what the response is, and then have a general idea of what the market demand will be. Moreover, with some sites, such as, funds are only given out once the full requested amount has been raised. It thus creates a virtually risk-free situation for the entrepreneur or artist.

Where a crowdfunding attempt is unsuccessful, entrepreneurs can poll online users to determine where the problem may lie. Perhaps they need to be building more of an online reputation, or maybe the product needs to be tweaked, and it also could be that the product is just not a viable idea and should be scrapped.

Whatever the case, crowdfunding is proving to be a powerful tool, not just in terms of raising money, but also as a way to help weed out those business ideas that will float, and those that won’t.

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