Crowdfunding as Economic Signaling

Going off of Katy Peace's article on crowdfunding platforms like Kickstarter and Indiegogo, I think there is a way to use the power of crowdsourced funds beyond the simple creation of initial capital. Socially-oriented projects can utilize these platforms as a way to create economic signals that could be very useful in attracting larger potential investors. Take for example some of the different projects that have been overfunded. One of the ones I picked out was the Revolight, a set of programmed LED clip-on lights that attach to bicycle wheels and project lights brighter and farther (in the direction the bike is travelling, than conventional bike lights that are currently available. The creator of this project only needed $43,500 of start-up capital to make his product come to life. His project was successfully funded in the 3-month window Kickstarter gave him and was received 395% more than his original goal. The reason I chose his product is it's similarity, in simplicity and novelty, to many product solutions covered in class. The successful funding of his project, $215,000 in 3 months by only 1,400 individuals, is a strong factor to take to a potential investor. It provides a sample of how popular his product could be and show the groundswell it has already created. When approaching a potential investor with nothing but a product prototype and a dream, it can be very difficult to make the case and have them pull out their wallet. But I believe going to them with a crowdsourced project can prove on a small scale the attractiveness and profitability of an idea as well as having a group of invested advocates. While I agree with Katy that many of the projects on Kickstarter and Indiegogo are focused on the creative sector, I see no reason why the platform could not be used effectively for socially focused ventures.