Ten years ago, launched the modern era of crowdfunding by creating a place where anyone could pitch their idea, product, or creative endeavor to the entire world, asking for the funds to make it reality. Today there are no shortage of crowdfunding sites, and even though Indiegogo isn’t as large as rival Kickstarter, it’s still tremendously influential, offering entrepreneurs not just a funding platform, but also support beyond their campaigns, with tools to ease the transition from concept to launch.
Indiegogo has always had a more worldwide audience than its peers, and now current CEO David Mandelbrot wants to take things further with more outreach to inventors in China as he leads the venture-funded company to profitability. Mandelbrot joined Mashable’s MashTalk podcast to talk about how crowdfunding has evolved since in the past decade, how the company approaches quality control, and what he thinks of Indiegogo’s “anything goes” reputation.
This interview has been edited for length and clarity.
Mashable: Where did you start getting involved in crowdfunding, and how did that sort of transition into Indiegogo and then the CEO gig?
David Mandelbrot: Earlier in my career I spent about seven years at Yahoo, starting in the late 1990s, so I’ve been working in online tech for over 20 years now, but the way I got involved in Indiegogo was, I was at a start-up before Indiegogo call Tynt and we had a board member who was also on the board of Indiegogo and he was based here in New York, we were based in San Francisco, Indiegogo was based in San Francisco, and every time he would come to one our board meetings, his name was Lewis, I would say, “Hey Lewis, what else are you doing while you’re here in San Francisco?” And every time he would say, “Oh, I just had a meeting over at Indiegogo. That is the most amazing business. So exciting what they’re doing, the way they’re empowering entrepreneurs.”
So he’s inspiring you?
Every time he would come he would be like, “Alright let’s talk about Tynt, but let me really tell you about what’s going on at Indiegogo.” In the end Indiegogo got acquired and then, I’m sorry, Tynt got acquired, and then Lewis introduced me to the founder of Indiegogo and things just progressed very rapidly from there.
Well, one of the founders. Wasn’t there, like, three people?
Yeah there was three cofounders of Indiegogo, one is named Slava Rubin. He was at the time the CEO of Indiegogo. We also had two other cofounders, Danae Ringelmann and Eric Schell. Danae and Eric were both business students at the Haas School of Business at UC Berkeley when they had the original idea for Indiegogo.
Are any of them still involved?
Yes, actually both Slava and Danae are both still very active members of the board and Eric Schell is our head of product at Indiegogo, overseeing all of our product development.
So how did you get convinced? You keep hearing about how what a great place — what was it that sort of persuaded you?
Yeah you know it’s interesting for me it’s always been about working with businesses that are doing something that’s transformative. So when I went to Yahoo in the late 1990s I was actually really excited about how the internet was gonna change the way we consumed our media.
That was the place to be in the late 90s.
It really was.
Maybe not a few years later.
It’s sort of sad, I know. I wonder if at some time people will remember you know that there was a time when Yahoo was sort of at the center of so much of what was happening.
It sounds like you’ve got that taste of wanting to be around innovation.
Absolutely, and I think that industries are most interesting at the moment when they’re going through real transformation and what was so interesting to me about Indiegogo that I could see from the very beginning was the potential that Indiegogo had to really change the way entrepreneurs launched their businesses. The typical way that entrepreneurs always launched their businesses, I’m going to overly simplify ’cause of course each entrepreneur’s journey is different, but the typical way that entrepreneurs used to launch a business is they would get an idea, maybe they would start working on it a little bit, and then they would go out and raise financing and then they would develop the product and then they would hopefully get a distributor and get that product into retail stores and then at the very end of this long process that could last years, that product would show up in a store and only at the very end of that process would you find out if there was an actual market for that product, if there were gonna be customers.
What was so interesting about Indiegogo was the way it was radically transforming that model. The way an entrepreneur could determine extremely early in the life cycle of their product or their business, whether there was gonna be a market for that product and I could see early on what we’ve now come to see over the last ten years, which is it that it would have a really transformational impact on the way entrepreneurs brought their products to market.
There’s been a lot of products that have been funded through crowdfunding and then become these massive success stories. I guess if you’re a VC or a bigger company you can look at these projects and say, “Okay, this thing made 400% above its goal — that’s a good sign.”
Absolutely, you know what’s interesting is almost every party that’s sort of part of the entrepreneurs journey, every third party that the entrepreneurs engaging with whether it’s an investor, a distributor of that product, if they’re a product entrepreneur, the retailer, they’re all basically making a bet essentially on whether there’s gonna be a market for that product in the end. You know the VC is anticipating there will be a big market for this device and the distributor is thinking a lot of retailers will be interested in this device.
The reason that crowdfunding and Indiegogo in particular is so transformative is it makes that part of the analysis so much easier. So what’s exciting about Indiegogo is in part that so many entrepreneurs on Indiegogo have been able to go on and raise venture capital financing. Entrepreneurs on Indiegogo have raised over a billion dollars in venture capital financing after their Indiegogo campaigns.
But what’s also exciting is the way the entrepreneurs have a much easier time getting their products into Target stores, into Amazon, into Brookstone, into many retailers that otherwise might have had more questions about those products. They can look at the success on Indiegogo, say I can see that there’s a market for that product, I wanna carry it in my store.
From everything you’ve said, it’s very clear how like crowdfunding changed a lot in the entrepreneurial process, particularly with products. But how do you think crowdfunding itself has changed since it started getting very popular about ten years ago?
There’s a few ways it’s evolved. For one thing the landscape has changed a lot over the last ten years, so when Indiegogo launched a little bit over ten years ago, Indiegogo was actually the first crowdfunding platform. There was no Kickstarter then, there was no GoFundMe then, if you count Patreon there was no Patreon at that time. Indiegogo was the pioneer of crowdfunding and over time other companies started to focus on crowdfunding. Kickstarter jumped in I think about a year later. GoFundMe a few years after that.
The main evolution in the landscape has been that as crowdfunding has evolved, different companies have developed their own individual areas of focus. So for example GoFundMe now is exclusively focused on personal causes and non-profit fundraising, and in fact Indiegogo earlier this year, we actually sold off the portion of our business that was focused on non-profit and personal cause fundraising to a company called YouCaring that was subsequently acquired by GoFundMe so that’s part of GoFundMe’s business now. Kickstarter has really maintained a focus on what they call creators. So those are filmmakers, musicians, the fastest growing category actually on Kickstarter over the last few years has been tabletop game developers.
Oh really? Like these kind of like handheld things?
No not handheld things, like actual tabletop games, like Monopoly. And then Indiegogo in particular over the last three years has really developed a focus on product entrepreneurs and helping those product entrepreneurs identify if there’s a market for their product, and really take their idea all the way from an idea in their head all the way to a manufactured product that’s getting into the hands of their backers.
You mentioned Kickstarter, and I feel like you guys were first, and then they came in and then they kind of swooped up all the attention and the glory. Why did that happen?
You know things changed a lot around, I believe it was 2012. 2011 or 2012 was when the people really started to notice Kickstarter and the main thing that transformed things was that Kickstarter had a single campaign on Kickstarter that was very successful which was a campaign for this product called the Pebble Watch.
You might remember that, and at that time that became the most successful crowdfunding campaign of all time as of 2011 or 2012. It raised over 10 million dollars and so what happened was Kickstarter sort of opened up people’s eyes to the potential of crowdfunding and for a while their name was somewhat synonymous with crowdfunding.
So did they just get lucky then? Because I think there was a perception that with Kickstarter, there’s a certain bar that needed to be met there that maybe didn’t exist on Indiegogo. Is that wrong? Or is that actually a strength?
For a long time and even now in some ways, Kickstarter has had and continues to have a very different approach to how they accept entrepreneurs onto the platform. For, you know, Indiegogo has not only tried to be as open as possible a platform but a also very flexible platform. So on Kickstarter there’s basically one way to offer crowdfunding campaign. You need to provide your product to Kickstarter. Kickstarter actually evaluates who can be on their platform, and who can’t be on their platform.
We take a different approach in part because when the company was founded the goal was to essentially eliminate the gatekeepers so rather than, our idea was why should the VCs be the only people to determine what products get funded and what products don’t, and it’s our feeling that if we evaluated each product for whether it was acceptable or not to our platform we would just be inserting ourselves as the gatekeeper, and with Kickstarter doing that, in our mind they’re inserting themselves as the gatekeeper rather than letting the public essentially decide what products get funded.
So Indiegogo has always been a open platform where any entrepreneur can actually run a campaign on Indiegogo. What we have changed in the last couple years though to make the opportunities much more clear to backers is that we now require entrepreneurs to be very direct about which stage they’re in, in development.
So if you just have a concept, but you haven’t actually developed a working prototype of your product yet, you need to disclose that to backers on Indiegogo. If you have a prototype, we actually verify that you have a working prototype. If you say that you’re in production we actually ask for a production version of the product so that we can validate it. So we’re actually a more open platform but also with a set of rules to make sure that backers that back campaigns know what they’re in for.
So there’s more nuance to it, but it’s more democratic in a simple way — why not just let the people decide?
Absolutely and what’s wonderful about Indiegogo is that because we have this different set of rules it enables products that might not have gotten the opportunity to launch on other platforms or be successful on other platforms to be successful. One example that comes to mind was a campaign that ran I believe about three years ago on Indiegogo was for a product called the Flow Hive, and the Flow Hive was a new type of beehive actually and apparently there had been no real innovations in beekeeping or beehive development in the last 50 years.
Don’t tell Apple.
And a father and son team from Australia came up with an idea for a better beehive. They put in on Indiegogo, they needed $50,000 to be able to set up a manufacturing facility in Australia to be able to manufacture the first beehives. Now at that point when they hadn’t quite gotten to real manufacturing of the product yet, they might’ve had a hard time being able to launch on Kickstarter, they launched on Indiegogo.
They raised, within two months, they raised 13 million dollars to make beehives from an evolving and emerging beekeeping community all over the world, and at Indiegogo we’ve got thousands of stories like that, of entrepreneurs who you might never have thought would have been successful but the public actually got this democratic opportunity to identify what they were really interested in and directly communicate that to entrepreneurs.
So, I have to ask: How do you guys make money?
I’m glad you’re asking! You know we actually just announced this morning, we just had our first profitable quarter in Q3.
Indiegogo makes money in a few different ways. The first thing, and the primary way that we make money is that we get fees that are a percentage of the amount of funds raised on our platform. So our standard fee is a 5% fee, and so 5% of whatever the entrepreneur is able to raise on Indiegogo goes to Indiegogo. The entrepreneurs on Indiegogo, and we really like that fee structure because it means that we have a shared interest in the success of those entrepreneurs on Indiegogo. If they’re not successful on our platform then they don’t need to pay us and if they’re extraordinarily successful on our platform then they pay us more. So that’s the primary revenue stream.
So if it’s 5%, and you’ve raised over the years $1.6 billion, what is that…?
That’s 80 million. But that’s just the primary way. In addition, as more entrepreneurs are using Indiegogo as a platform to go direct to consumers, which is really the big movement that Indiegogo is a part of. Now entrepreneurs are bypassing traditional retail, traditional distribution mechanism and they’re selling their products directly to consumers online and as we do that, there are more and more services that those entrepreneurs need. If they’re marketing their product on Indiegogo, the often need help with marketing. Critical to a successful campaign on Indiegogo is having a really good video that demonstrates the benefits of that product. Indiegogo now offers solutions to entrepreneurs to develop a really good video.
Is that like you have an in-house staff of editors, shooters?
Yes it’s a combination of both expertise in house and in outside video. It used to be that if you were a product entrepreneur and you wanted to raise interest in your product, you know say 15, 20 years ago, the only way to do it was with brand marketing and by creating a television commercial. Most of the entrepreneurs on Indiegogo now are able to produce a video for somewhere in the neighborhood of $20,000 or in a lot of cases less. The most most successful campaigns, those videos are watched by millions of people.
Oh, they’re just fun to watch. I feel like the crowdfunding formula is almost like a reality show plus cool gadgets. I mean it’s like this sort of addictive format you can watch them one after another for hours.
They actually really are fun to watch, and they’re fun to watch because it’s fun to see the most innovative products that are coming to life, it’s also really exciting to see the entrepreneurs behind those products. When we’re marketed to during the Super Bowl, there’s paid models and actors that are demonstrating that product, there’s something actually really rewarding about getting to see an entrepreneur actually explain this product that they have dreamed of and how they are trying to bring that product to life.
You know part of why Flow Hive was so successful is that the backers on Indiegogo just fell in love with the founder and wanted the founder and his dad to be successful with this campaign. Earlier this year we had the most successful campaign on Indiegogo on any platform over the last two years for an electric bicycle called Mate X and the founder of that company is a female entrepreneur. She is a mom with three kids and backers get excited about supporting an entrepreneur like that. So yes, there’s something about the videos that’s just fun to watch, in part because it creates a better connection between the backers of those products and the entrepreneurs that are building those products and providing them to users.
Well congrats on your first profitable quarter, by the way.
How many countries is Indiegogo in now?
About 230 countries. People back projects and offer products from over 230 countries and I’ll actually tell you one of the most exciting things about Indiegogo is that last quarter 48% of all of the transactions on Indiegogo were cross border. So what we’ve created is a true world wide marketplace for entrepreneurs to be able to reach new customers by going direct to consumer.
Why have you had so much success in terms of being international so quickly? Is there a secret to doing that?
You know you asked earlier about how the crowdfunding industry is changed over the last ten years. As we at Indiegogo got really focused on product entrepreneurs, people are recruiting new products and wanted to learn if there was market for those products and go direct to consumers with those products. Our worldwide strategy became much more clear, the most clear example is China actually, needless to say, not only is a lot of product manufacturing happening in China but now there’s been manufacturing in China for decades. There’s a lot of great product innovations that are coming out of China.
I bet you could go down to the Shenzhen market, grab all the components you need and if you’re an inventor, you know, bam, see if something works. Then all you need is Indiegogo to help you out.
It’s absolutely true, and so what we did, part of why it’s worldwide is that Indiegogo really invested in making Indiegogo a worldwide platform. In the beginning when I first joined Indiegogo a little over five years, we used four different payment processors, in part to ensure that we could support transaction processing in those 230 countries. We’ve since been able to streamline it somewhat, but we have a real commitment to being a worldwide platform from the beginning and then in markets like in China, where there’s a strong base of entrepreneurs.
We’ve actually hired people that are dedicated to that Chinese market and so you mentioned Shenzhen, we have dedicated people working for Indiegogo, there’s a little bit of a complicated legal structure to be able to do this in China, but that are based in Shenzhen to create a streamline way for China-based entrepreneurs to be able to reach a U.S. market with their products.
I know Amazon has done a lot in the last couple years to sort of open up its marketplace to international sellers, a lot of them out of Asia, and they’ve received backlash for it because some of these are knockoffs of other products, and they’re either not as good, or even if they are as good, they’re really undercutting the innovation happening here because of the rapid commoditization. Do you see a similar backlash possibly on your side, and are you doing anything to guard against that?
We did see that. One of the things that’s still so exciting about working with a relatively early stage company is that we can be really flexible, so we did see that. We started to see a lot of knockoffs on Indiegogo, we also started seeing a lot of distributors or resellers that were using Indiegogo as a way to just distribute products…
I feel like this is your “fake news” problem. It’s nice to be democratic and be hands off but at the same time you have to take some kind of active roll in ensuring some quality control.
Absolutely, and yes we’re democratic but part of being democratic is also being hands on to ensure that we don’t have fake news, so it’s a policy on Indiegogo that you need to be the original entrepreneur of the product and we have a dedicated trust and safety team that reviews the successful projects on Indiegogo and ensures that is the actual entrepreneur that is running that campaign.
We don’t allow distributors or resellers on Indiegogo and of course if we get notice of copyright violation or patent infringement we’re fully compliant with the DMCA rules and in a lot of cases we’ll take campaigns down if there’s any type of IP infringement happening on our platform. So we did start to see that; we responded very quickly and there shouldn’t be any products on Indiegogo that are not products that are being offered by the original entrepreneur behind that project.
So this may be old news, but I remember about five years ago now the Kickstarter guys came out and basically wrote a blog that said, “This isn’t a store.” I think they were getting a lot of bad press for various things not really living up to snuff at the time. Was that an overreaction do you think? Has it gone into more this is a store with caveats? What should consumer expectation be?
Yeah that’s a really good question. So it’s interesting, we’ve done plenty of research with the backers of projects on Indiegogo and while people have many reasons for backing a campaign, maybe they know the entrepreneur, maybe they wanna make sure that product gets built, what we learned from engaging directly with our backers is that the primary reason that backers back campaigns is because they want to get the product. That’s why they’re doing it. So when you’re in a situation like Kickstarter had a few years ago where they had this project called the Coolest Cooler…
Oh yeah, infamous.
Yeah it raised 13 million dollars and even with the 13 million dollars was not able to deliver that product to the backers. That’s a bad experience for users. You know frankly Kickstarter can say we’re not a store but when people spend 13 million dollars on a product that they don’t get, they’re going to be very unhappy, regardless of what you say.
So what Indiegogo, you know, recognizing that this is a risk with entrepreneurs, we started working closely with companies that could help the entrepreneurs that the most successful entrepreneurs on Indiegogo manufacture and ship those products, so a lot of entrepreneurs went into trouble because, and I think this was the case for Coolest Cooler, because they haven’t really thought through all of the components that they need for that product or how much manufacturing is gonna cost.
So on components, Indiegogo has formed a partnership with Arrow Electronics, one of the largest component distributors in this country. Arrow, for free, will actually review your bill of materials if you’re an entrepreneur on Indiegogo and make sure that you thought through every single component that you need to manufacture that product. They will make sure that those components are not close to the end of life, requiring you to re-engineer the product.
We formed partnership, if you’re a successful entrepreneur on Indiegogo and say you sell 10,000 of your product or you get 10,000 backers for your project, you’ve gotta figure out how to ship to 10,000 backers, so we formed a partnership with Ingram Micro to make sure that entrepreneurs have a solution for doing the logistics of literally shipping 10,000 products.
That’s a lot of stamps.
It is a lot of stamps! And as a result now backers are much more likely to get their product than ever before because we know that for backers to be truly thrilled with the experience that they have on Indiegogo they need to get their products, regardless of what we say. So whether they receive the products that’ll make them most happy and I’ll add on that, in our marketplace we do guarantee fulfillment of the product, and of course the customer satisfaction level is much higher in our marketplace than it is for overall crowdfunding.
So one of the things that I think has changed a lot in crowdfunding, it’s not that new anymore, but is the established companies coming in and like oh this is actually a great place to sort of try out new, like part of their development process, I’m thinking specifically of the Bose Sleepbuds. They had a campaign, I think it was early this year or late last year.
Late last year.
I went to their launch event, and they told me all about the Indiegogo experience and it was really interesting because it always a very different product for them, and they concluded they should do crowdfunding [as part of the development process]. That whole idea seems to have really caught on.
It has, yeah. Within Indiegogo we refer to this as our enterprise business but we’re really talking about really well established companies that are using Indiegogo as a platform for product validation.
My favorite example most recently, just last quarter was Gillette. So Gillette as I’m sure most people know, you know Gillette of course is in a competitive business in the razor business, and particular with some recent direct to consumer brands that have come along, and Gillette is of course always innovating with razors and Gillette developed a new heated razor, and the old model would have been to get all the way through development and then do a big marketing campaign for their new razor.
What Gillette is realizing, which is what most great direct-to-consumer brands now are doing that it’d be worthwhile to get out to consumers earlier. So Gillette actually launched their heated razor on Indiegogo, they launched a project actually for their heated razor and they’re doing it in part to get their first customers, but of course Gillette has a very robust distribution system, drug stores and all kinds of stores all over the world.
What the enterprises are really using Indiegogo for is similar to what Bose, like Bose launched a campaign on Indiegogo, is to connect with consumers early, and get their feed back and figure out if the price point works for consumers, to figure out which features are most important to consumers, to get consumers to test that product. That Bose campaign, Bose did something pretty amazing. Bose actually sent an early prototype to all of the backers of that campaign that bought the headphones to get feedback. They collected that feedback and then after they got that feedback and they made some modifications to the headphones, they then sent all the backers the actual commercial version of those headphones.
Right, that was pretty sweet. Like a big company can sort of afford to do that too. I don’t know if every startup can model their campaigns after that, but…
Exactly, but for them it was a great way to connect with customers.
Oh, and establish so much goodwill.
Absolutely, and if I’m Bose, or Whirlpool has run two campaigns on Indiegogo, I love the Whirlpool example. Whirlpool, known for their washers and dryers, launched a kitchen appliance that was a composting machine on Indiegogo actually, and they did it primarily so they could connect with early adopters and get feedback on the product and I asked them how would you connect directly with consumers before Indiegogo, what would you do if you couldn’t do it on Indiegogo? If they’re selling products through Best Buy, Best Buy doesn’t tell them who the customers are. If they’re selling, for any of the other enterprises that are selling through Amazon or Walmart, they hold that information very close to the vest. So what Whirlpool told me is that the primary, before Indiegogo, the primary way that they would find out who their actual customers were, was from people sending back those warranty cards.
I have to ask though, I know with this idea there’s been a bit of a backlash from sort of the “true” Indies — like, “This is supposed to be our place for startups and people just starting out, and how do we stand out when there’s these bigger fish swimming in our pool?”
Honestly, directly we’ve heard very little negative backlash from the entrepreneurs on our platform and you know we’ve had over 800,000 people that have raised money for different things on Indiegogo and we’ve had almost no negative feedback directly, and the main reason is that the entrepreneurs recognize that these established brands bring a lot of new users to the platform and while they may come to see that big enterprise campaign from Bose or Whirlpool or General Electric or Lego or some of the other big brands that have used Indiegogo, while they’re there they tend to browse around.
I was looking at some stats. There’s something like 22% of your users back more than one campaigns?
Absolutely and if they back one of these large enterprise campaigns then they often elect to join our email lists and they’re getting notified regularly of the latest and greatest innovations on Indiegogo. So what those large enterprises do actually is they really help build the community of early adopters on Indiegogo that then get turned on to innovative projects from small and large entrepreneurs alike.
So what’s next for you guys?
So a lot of things. You know the big things that are coming up for us is continuing our worldwide expansion. We’ve been thrilled to see the tremendous growth that we’ve had in China and we’ll continue to explore how we enable entrepreneurs from all over the world to reach audiences elsewhere in the world.
We’re also continuing to implement to form new partnerships to help entrepreneurs be more successful in manufacturing their products and shipping those products so you’ll see over the next year more announcements of partnerships to enable entrepreneurs once they’ve raised a lot of money to be more successful. You’ll also see us rolling out even more services to make the whole crowdfunding experience easier for entrepreneurs.
And you’ll start to see us in the beginning of next year exploring more and more with guaranteed shipment of products as we have more established entrepreneurs using Indiegogo, they’re less reliant on the funds that they raised in their campaigns to be able to ship their products and they’re able to actually guarantee that that product will ship. For example, Lego launched their first toy aimed at adults on Indiegogo a couple months ago.
“Aimed” at adults?
I’ve learned from experience not to say that Lego is launching their first adult toy on Indiegogo.
That would be really off-brand for them.
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