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Thoughts on Product Presales To Raise Capital

Discussion in 'Financing Your Startup' started by Alaine, Mar 24, 2016.

  1. Alaine

    Alaine Entrepreneur

    I saw this on a blog earlier and think believe that though it isn't for everyone, it can be a great way to raise capital for your new business if only you know how it is done right.

    Actually that's why I'm posting this. To learn how it's done. And I'm sure there are others who might find the answers provided helpful.

    Do any of you have some experience pre-selling products? How can someone who is just starting out gain the trust of prospective customers, get them to fork out money even though they aren't sure they'll be getting the product they are buying?

  2. jona

    jona Entrepreneur

    The only way that a new business could do something like this is by using a service like Kickstarter because that's basically what Kickstarter is, a way to raise capital by offering your investors rewards, if the reward itself is a finished product then this is basically a pre sale. Apple can get away with pre sales for something like the new iPad before it comes out because they have enough brand awareness that people want the product even before actually looking at the product in person, but if you are a new player you have to create a heck of a kickstarter video and presentation to get people to give you money.

    Before you do it you need to have performed a serious feasibility study to see how viable your product actually is once people give you the money and what infrastructure you need to actually honor all those pre sales that could occur. Remember that you also need to reach a funding threshold, that is, you need a people to fund you with a certain amount of money for the Kickstarter to go ahead.

    So, yeah, crowd funding with something like Kickstarter is the way to go, but it is a lot of work and your idea has to be great.
    Alaine likes this.
  3. T J Tutor

    T J Tutor Administrator Entrepreneur

    Yep, @jona is right. In fact, there are a number of crowdfunding opportunities like Kickstarter. As well, feasibility studies, focus groups, development trials are a must these days as well.

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