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Harvard Case - Crowdfunding: A Tale of Two Campaigns

"Crowdfunding: A Tale of Two Campaigns" Harvard business case study is written by Andrew Zacharakis, Gabriel Quintana, Tommy Ripke. It deals with the challenges in the field of Entrepreneurship. The case study is 12 page(s) long and it was first published on : Sep 30, 2016

At Fern Fort University, we recommend that both Kickstarter and Indiegogo leverage their unique strengths and adapt their strategies to capitalize on the evolving crowdfunding landscape. Kickstarter should focus on solidifying its position as the platform for high-quality, creative projects, while Indiegogo should embrace its versatility and expand into new market segments, particularly in the emerging markets.

2. Background

This case study explores the contrasting approaches of two leading crowdfunding platforms, Kickstarter and Indiegogo. Kickstarter, known for its focus on creative projects, has a stringent project approval process and a ?all-or-nothing? funding model. Indiegogo, on the other hand, adopts a more flexible approach, allowing a wider range of projects and offering both ?all-or-nothing? and ?flexible? funding options. The case highlights the different strategies employed by both platforms and their impact on their success and growth.

The main protagonists of the case study are:

  • Yancey Strickler, co-founder and CEO of Kickstarter, who champions a curated approach to crowdfunding.
  • Slava Rubin, co-founder and CEO of Indiegogo, who advocates for a more inclusive and flexible platform.

3. Analysis of the Case Study

Strategic Analysis:

  • Porter?s Five Forces: The crowdfunding industry is characterized by low barriers to entry, intense rivalry among platforms, and a growing number of alternative funding sources. The bargaining power of both creators and investors is moderate, while the threat of substitutes is increasing.

  • SWOT Analysis:

    Kickstarter:

    • Strengths: Strong brand reputation, curated platform, high-quality projects, loyal user base.
    • Weaknesses: Limited project diversity, ?all-or-nothing? funding model can be restrictive.
    • Opportunities: Expanding into new markets, diversifying project categories, developing new features.
    • Threats: Increasing competition, evolving crowdfunding landscape, potential regulatory changes.

    Indiegogo:

    • Strengths: Flexible funding options, diverse project categories, international reach.
    • Weaknesses: Less stringent project approval process, potential for lower-quality projects.
    • Opportunities: Targeting specific market niches, leveraging technology for better project discovery.
    • Threats: Maintaining brand credibility, managing risk associated with flexible funding.

  • Value Chain Analysis: Both platforms operate on a similar value chain, involving project submission, review, marketing, fundraising, and payout. However, their core competencies and value propositions differ significantly.

Business Model Innovation:

  • Kickstarter: Focuses on curation and quality as its core value proposition. Its ?all-or-nothing? model incentivizes creators to deliver high-quality projects and encourages investors to support only those they believe in.
  • Indiegogo: Emphasizes flexibility and inclusivity. Its ?flexible? funding option allows creators to receive funds even if they don?t reach their target goal, providing a safety net for projects that might not be as commercially viable.

Competitive Strategy:

  • Kickstarter: Utilizes a differentiation strategy, focusing on attracting creators and investors seeking high-quality, creative projects.
  • Indiegogo: Employs a cost leadership strategy, offering a more affordable and accessible platform for a wider range of projects.

Globalization Strategies:

  • Both platforms have expanded internationally, but their strategies differ. Kickstarter has adopted a focused approach, focusing on key markets with strong creative communities. Indiegogo has taken a broader approach, targeting a wider range of markets, including emerging economies.

Digital Transformation:

  • Both platforms are leveraging technology to enhance user experience, improve project discovery, and optimize fundraising processes. This includes using AI and machine learning to personalize recommendations, analyze project data, and detect fraudulent activities.

4. Recommendations

For Kickstarter:

  • Solidify its position as the platform for high-quality, creative projects: Continue to curate projects rigorously, maintain its ?all-or-nothing? funding model, and focus on building a strong community of creators and investors.
  • Expand into new markets with strong creative communities: Target countries with a vibrant arts and culture scene, such as Japan, South Korea, and Brazil.
  • Develop new features that enhance the user experience: Introduce tools for project management, collaboration, and communication to improve the overall experience for both creators and investors.

For Indiegogo:

  • Embrace its versatility and expand into new market segments: Target specific niches, such as social impact projects, early-stage startups, and emerging technologies.
  • Develop targeted marketing campaigns to attract new user segments: Utilize social media, influencer marketing, and content marketing to reach specific audiences.
  • Leverage technology to improve project discovery and funding efficiency: Implement AI-powered tools to personalize recommendations, analyze project data, and optimize fundraising campaigns.

5. Basis of Recommendations

These recommendations are based on a careful consideration of:

  • Core competencies and consistency with mission: Both platforms should focus on their core strengths and leverage their unique value propositions.
  • External customers and internal clients: The recommendations address the needs of both creators and investors, ensuring a positive experience for all stakeholders.
  • Competitors: The recommendations aim to differentiate both platforms from their competitors and capitalize on emerging trends in the crowdfunding industry.
  • Attractiveness: The recommendations are likely to enhance the platform?s attractiveness to creators and investors, leading to increased user engagement and revenue growth.

6. Conclusion

The crowdfunding industry is evolving rapidly, and both Kickstarter and Indiegogo must adapt their strategies to remain competitive. By leveraging their unique strengths and embracing innovation, both platforms can capitalize on the growing demand for alternative funding sources and achieve sustainable growth.

7. Discussion

Other Alternatives:

  • Mergers and Acquisitions: Both platforms could consider merging with or acquiring smaller platforms to expand their reach and capabilities.
  • Strategic Alliances: Partnering with other companies in related industries, such as venture capital firms or financial institutions, could provide access to new resources and markets.

Risks and Key Assumptions:

  • Regulatory changes: New regulations could impact the crowdfunding industry, requiring platforms to adapt their operations.
  • Evolving consumer preferences: The preferences of creators and investors are constantly changing, requiring platforms to stay ahead of the curve.
  • Technological advancements: New technologies could disrupt the crowdfunding landscape, requiring platforms to invest in innovation.

8. Next Steps

  • Develop a comprehensive strategic plan: This plan should outline the key objectives, strategies, and tactics for both platforms.
  • Invest in technology and innovation: Both platforms should prioritize investments in technology to enhance user experience, improve project discovery, and optimize fundraising processes.
  • Build strong relationships with stakeholders: This includes creators, investors, and other industry players.
  • Monitor industry trends and adapt strategies accordingly: The crowdfunding industry is dynamic, and both platforms must be agile and responsive to change.

By implementing these recommendations, both Kickstarter and Indiegogo can navigate the evolving crowdfunding landscape, achieve sustainable growth, and continue to empower creators to bring their ideas to life.

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Case Description

Crowdfunding is considered an alternative to traditional angel and venture capital funding that has helped get many business ventures off the ground. The basic idea of crowdfunding centers on pitching a business idea to a large group of people and seeking financial support. Although crowdfunding has existed for hundreds of years, it has recently gone to online platforms. The most successful platforms to date have been Kickstarter and Indiegogo, which have helped many ventures raise initial funding. This case is concerned with two different startups, one started by a twin sister duo (Marla and Annie) and the other by a Babson College student (Hanson). Enerchi Bites is a startup featuring a new food product that was developed out of a passion for fitness and yoga. Identical twin sisters (Marla and Annie Feldman) started experimenting with different combinations of foods with a chia-seed base. Once they had developed three different flavors, they began distributing their products at various yoga conventions. They quickly built some buzz about their new products and were faced with the problem of scaling their new venture. They decided to try a Kickstarter campaign where they would attempt to raise $10,000. They figured this was the amount they needed to help scale up their operations. After the completion of the Kickstarter campaign, the sisters found the final results disappointing as they netted only about $5,000 after expenses from advertising and the rewards that were due to the campaign backers. Think Board is the creation of a Babson student, Hanson Grant. This business venture was born out of one of Hanson's earlier ideas. He had created white board t-shirts. He found that the t-shirt idea was not going to work and was thinking through how to use this to his advantage until his friends connected the dots for him. If he put pieces of the material together, he ended up with an oversized dry-erase board that could be printed to feature any pattern.

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