Crowdfunding is becoming a mainstream funding mechanism used for testing markets, products and opportunities not only for start-ups but also industry giants, as Sony’s E-paper FES watch experiment shows.
Sony is in the midst of a strategic shift where the emphasis is on profitability from a few rich domains rather than having toe-holds in a multitude of markets.
Earlier this week it emerged the Japanese tech giant is to get out of low-end activities like TVs and mobile and will focus instead on high-end smartphones, its burgeoning PlayStation business and image sensors. The latter area is one in particular where Sony can rediscover its entrepreneurial and innovative edge.
If you know your technology history, Sony’s origins post-World War II were quite humble. Sony, a combination of the Latin word “Sonus” for sound with the American nickname for boys “Sonny”, began by focusing on one product, a transistor radio called the TR-55.
When they first started working together in an electronics shop in a department store in Tokyo, founders Masaru Ibuka and Akia Morita had just US$530 in capital and a total of eight employees.
By the late 1950s they had cracked the US market as American teens began buying portable transistor radios in huge numbers. And thus a global technology conglomerate was born.
Eureka, as shouted by the crowd
If you look at start-ups who attempt to gain funding for ideas that range from the sublime to the ridiculous, they are looking for that one breakthrough moment where people “get” the idea and “want” the product. The cash is one aspect, but not the whole picture.
The exercise is as much about validation for the idea as it is about raising money and many companies who are backed by venture capitalists are being encouraged to float their ideas on sites like Kickstarter or Indiegogo as a way of proving the market is ripe for the opportunity.
In Sony’s case it emerged this week that it was behind the mysterious FES Watch, a device made entirely out of e-paper material by an enigmatic but unknown entity called Fashion Entertainments.
Five Sony engineers had been investigating e-paper as a fabric after Sony initiated a company policy to allow employees to work on side projects and the company would provide a portion of the funding.
The team created a crowdfunding page for the watch’s development that has raised just under 3m yen (€18,821) so far.
The team’s secret project was “outed” following a report in The Wall Street Journal.
According to the project’s page, the FES Watch is now available for pre-order with the first sales expected in May next year.
Sony’s foray into crowdfunding puts it in the likely vanguard of a whole new movement in technology where teams will validate, test and fund ideas using crowdfunding.
This is very much in keeping with the spirit being embraced by companies like Intel where engineers are being encouraged to embrace the maker’s revolution to nurture their inventive spark.
The new ‘rite of passage’ for inventors
The Sony experiment calls to mind comments made by Danae Ringelmann, founder and chief development officer of San Francisco-based crowdfunding site Indiegogo at the recent Web Summit.
Ringlemann pointed out that all sorts of people are now using Indiegogo, from entrepreneurs to artists, non-profits and activists.
But more telling, crowdfunding is now being considered a “rite of passage” for a product or idea, not just about raising cash.
“Indiegogo is becoming a permanent part of the financial ecosystem, not because it’s an alternative form of financing but because it is also an incredible risk mitigation strategy.
“Hardware entrepreneurs are using Indiegogo not just to get the funding to launch but also to mitigate their market and execution risks.”
If anything Ringlemann opined that crowfunding is being seen as a way of correcting an anomaly in finance systems, where because of the hierarchical and broken finance system ideas were going unborn every day.
She said the world is embracing “an open sustainable and scalable approach where all opportunities have a chance of rising to the top.”
We are entering an interesting time where the right to float ideas has been democratised and makers, from the inventor in his or her garage or bedroom to a passionate team hidden in the crowded ranks of a conglomerate, can make their ideas flourish.
Not one person will have the power to kill an idea. The crowd will decide. Bring it.
Video interview with Danae Ringlemann, co-founder, Indiegogo
Crowdfunding image via Shutterstock