Sense and Crowdfunding

Yesterday we spoke of crowdfunding in its usual sense -- as reward-based donations or pre-orders of products that promoters want to manufacture.

Also yesterday, the deadline ended on a very successful Kickstarter campaign.  It succeeded not only in selling a new innovation but in demonstrating that there is a potentially immense market for the product as it rolls out in greater volumes.

The product, pictured above, is called Sense, which is supposed to help people get a better night's rest.  Sense is a little thingie that sits on your nightstand and monitors light, temperature and sounds as you sleep.  It connects with a "sleep button" that clips to your pillowcase and keeps track of your movements during the night.  It can provide calming white noise and waken you at the end of your natural sleep cycle.  It also assigns you a sleep score each morning.

Sense was designed by a group of designers in San Francisco who no doubt want to launch it in a broader market.  People who donated $99 to the crowdfunding campaign will receive an early Sense model later this year.

The Sense designers set out to raise less than $1 million, but Kickstarter followers were so enthusiastic that the campaign pulled in more than $2.4 million.  Apparently there are many insomniacs among us.

The Sense team gets several benefits out of this crowdfunding success:

     -- Proof of interest in the Sense concept,

     -- A very large initial audience for its beta product,

     -- An assured stream of feedback, positive or negative, that will allow for good word of
         mouth or product tweaks to refine Sense as it makes its way into the mass market and

     -- Enough money to avoid the hassle of lining up venture funding as the company
         establishes itself.

It is this last bit -- the power of an initial investment -- that interests me.

If you were a sound sleeper but liked the Sense concept and wanted to buy stock in the company, you could not do it.  To date, only certain people can invest in new companies online, and only certain crowdfunding sites can sell stock to this limited number of investors.

But that may be changing.

Tomorrow:  Equity Crowdfunding