When the principals behind Peppermint Energy decided to tap into crowdfunding in 2012 to boost their start-up solar enterprise, they found money, but they also discovered another type of equity.
“What became obvious to us is that the type of people who support crowd-funding initiatives can be very helpful to vet out what is, what is not and what should be,” said Chris Maxwell, president of Peppermint. “We used our Kickstarter campaign to get market feedback, to get a bunch of people to tell us whether we are on the right track.”
As commercial lending remained tight over the past few years, hundreds of crowd-funding websites have sprung up, each vying to find its own personality and user base. Some cater to creative projects (like Indigogo.com), while others focus more on charities (Razoo.com) and others allow small investors to buy into commercial endeavors (Crowdfunder.com).
Companies based on sustainable products or services — such as Peppermint, which makes a solar generator about the size of a laptop computer — are finding that crowd-funding platforms can give them something traditional financing can’t: By asking their potential customer base to invest, sustainable start-ups are solidifying their market and giving their companies a more direct connection to the consumers most interested in what they make.
Peppermint Energy formed in 2011, and in 2012 the company launched a Kickstarter campaign to raise $25,000 in capital to manufacture their generator, the Forty2, which can power appliances as diverse as a big screen TV for tailgating football fans or a refrigerator for a family living in a developing country.
The campaign surpassed its $25,000 goal in five days and garnered $83,000 in a month. But Peppermint found something just as valuable in the community that sprang up around the project.
“We raised money, which is nice to get some of the production work going, but we also had now a baked-in community of people who were willing to be vocal, answer questions and give us feedback,” Maxwell said. The company kept in touch with 125 people who live around the world and continue to give Peppermint insight into customer demands before the company ramps up production of the solar gadget.
“We were able to get feedback from someone in Germany, versus the U.S., versus South Africa. And all of those environments are very different,” Maxwell said. “So, we can build the spec to withstand the heat of Africa as well as the snow of Germany or Poland.”
When Crowdsourcing.org commissioned a study of existing sites in early 2012, it found nearly 500 crowd-funding services had launched since 2007. Those sites raised $1.5 billion in 2011 and were expected to attract twice that much investment in 2012. Of those sites, most have a reward- or donation-based system, meaning an investor basically gives because he or she believes in the project.
Australia-based Zeoform could choose among those hundreds of sites, but instead has decided to run its own crowdfunding campaign. The company offers an innovative, versatile raw material made of cellulose and water held together by hydroxyl bonds — which they say has the potential to replace plastic and wood in a variety of applications — and probably could land traditional financing if the brand was willing to keep the technology in a proprietary way.
“It’s a pretty amazing development in the green-building and eco-products market,” said Emma Evans, product development manager for Zeoform. “We have decided to open source the material and the knowledge so that the technology is proliferated much more rapidly than if we decided to own this material and sell it only to certain people.”
The decision to share their patented process put Zeoform at a distinct disadvantage to get venture capital since most investors want the highest return on their money and aren’t interesting in sharing technology with potential competitors.
“We thought, we want this technology to be embraced by everyone, so what better way to get money to build a factory than to get funds donated by everyone,” she said. “This way, we get to tell everyone about Zeoform, and it makes huge business sense to us as well because we get forward orders for our factory; we’re building a market already and have a massive fan base of people who want Zeoform.”
Zeoform is more of a technology company than a products company, which doesn’t fit well with the leading crowd-funding sites, Evans said. Plus, since rallying fans and customers is a goal of the campaign, keeping them at the company’s site seemed to make more sense than sending them to another site to donate. The company is hosting its own campaign with a physical launch planned in Los Angeles on Oct. 19; the ultimate goal is to raise $10 million to build a zeoform factory and teaching lab.
Zeoform’s financial goal dwarfs that of Elkarti, but the owner of the small fashion company also is looking to use crowd-funding to reach and rally consumers interested in the sustainability of his product.
Ahmed Abidine designs and imports leather crafts from Morocco, where his family has worked with tanners and leather workers for years. The process is more natural and less polluting than modern tanning methods but takes more time.
Over the last few years, Abidine has built the company little by little and Elkarti items now are carried in four shops and online. A few thousand dollars from crowd-funding could allow Abidine to ramp up inventory and make a splash in the market.
He’s held off on holding a campaign, however, until he feels that he can tell the story of how Moroccan leather is made and the commitments Elkarti has made to sustainability.
“I want to create a lot of social impact,” he said.
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Published Oct 8, 2013 2pm EDT / 11am PDT / 7pm BST / 8pm CEST