Crowdfunding experiment

Tomáš Veselý - podpořen AI
Jan 3
3 min read

We're building a comprehensive knowledge library about product development as part of our mission. The library is for anyone looking to make better decisions — primarily decisions about product development. Whether you're an inventor, a product manager, or a Chief Product Officer, using the right research methods and experiments increases your chances of building the right things for the right audience. Today we'll introduce the Crowdfunding validation method.

When to Use This Experiment?

This method is used primarily to validate the market's real Willingness to Pay before committing to costly production. It is an effective risk-management tool, converting uncertain assumptions about demand into hard financial data. It demonstrates market traction and the causal link between the value offered and purchasing behavior.

Basic Experiment Principles

The core idea is to present a product that doesn't yet exist — or isn't finished — to the public on a specialized crowdfunding platform, with the goal of raising a target amount through pre-orders. Potential customers are motivated to finance the prouct development in exchange for the product itself or other rewards, which validates market demand.

How the experiment works:

Platform selection: choose a suitable crowdfunding platform (e.g. Kickstarter, Indiegogo, Donio) based on the product type and target demographic,
Preparing materials: create visual and text assets (video, prototype photos, the story behind the product) that explain the value proposition and the problem being solved in detail,
Setting goals and rewards: define the minimum amount needed to make the project happen and set up reward tiers ("perks") for backers,
Launch and promotion: publish the campaign alongside marketing communication to drive traffic to the campaign page,
Data collection and interaction: monitor conversions, questions, and community feedback throughout the campaign while keeping communication with potential customers active,
Evaluation: after the campaign ends, analyze whether the target amount was reached and what the contributors structure looked like. If the target was met, the product can be assumed to have commercial potential. It's also important to look at individual contributions, which help estimate the price of the new product.
Risks and limitations: keep in mind that a successful campaign is a commitment to deliver the product; failing to deliver can damage reputation and lead to legal consequences. Platform fees also need to be factored in, as does the fact that a campaign's success may be driven more by the quality of the marketing than by the quality of the product itself.

As a validation framework, crowdfunding works best when users make a one-off payment for the product. This is the most accurate way to validate demand. Crowdfunding comes in many forms: Donation-based crowdfunding, Rewards-based crowdfunding, Equity-based crowdfunding, Debt-based crowdfunding, or Recurring crowdfunding.

Real-World Experiment Example

Link to research: Oculus Rift: Step Into the Game

The Oculus Rift project is often cited as a textbook example of market validation through crowdfunding. Before the campaign launched, virtual reality (VR) was seen as technologically interesting but commercially unsuccessful. The Kickstarter campaign was designed primarily to test interest among developers and tech enthusiasts (early adopters), not the mass market.

Data from the experiment: The campaign launched in August 2012 with a goal of raising USD 250,000 to produce developer kits. That goal was surpassed in just 4 hours. By the end of the campaign, a total of USD 2,437,429 had been raised from 9,522 backers — nearly ten times the original target. This massive validation of willingness to pay for an unfinished prototype proved the market existed and attracted investor attention. In 2014, less than two years after the experiment, the company was acquired by Facebook (now Meta).

What Can Be Tested With This Experiment?

Willingness to Pay: verifying whether customers are actually willing to pay for the solution, not just declare interest.
Market Demand: determining the overall size of the addressable market and the level of interest in the product category.
Pricing Strategy: testing different price levels using tiered rewards and finding the optimal price/value ratio.
Feature Preference: identifying the most desired features or product variants based on which reward versions are chosen most often.
Messaging Resonance: finding out which part of the marketing message (video, copy, benefits) converts visitors into paying backers most effectively.