Becky Center is the CEO of Indiegogo, an online crowdfunding platform that's helped over 800,000 entrepreneurs bring their ideas to life. Motley Fool host Deidre Woollard caught up with Center to talk about:

  • How tighter lending environments lead to entrepreneurship booms.
  • What drives backers to participate in funding campaigns that pay off in rewards rather than equity.
  • How the laboratory-like nature of crowdfunding can help predict "the next big thing" before it goes mainstream.

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Becky Center: Our whole ethos is the people choose and we don't want to moderate. As much as possible we don't want to moderate because that's what we were built to prevent is we don't want there to be a small group of people who decide who gets financing. We want the world at large to choose, but that in some ways we have to moderate to protect our users and they look to us to do that and to make sure that we don't have fraud and all of these things that we try to work against.

Mary Long: I'm Mary Long and that's Becky Center, CEO of the crowdfunding platform Indiegogo, which has helped to fund over 925,000 entrepreneurial ideas. Deidre Woollard cut up with Center to discuss the sweet-spot that crowdfunding caters to. How praising the failure can set entrepreneurs up for success? Why we might have crowdfunding to thank for e-bikes and your new favorite glamping spot?

Deidre Woollard: I was looking back at the history of Indiegogo. It's been around since 2008, which is incredible. What do you think is part of the keys of the longevity of both the company and have crowdfunding in general?

Becky Center: Oh, great question to start us off with. It's so funny to hear of a start-up that's been around as long as we have now. But crowdfunding, I think, has had a lot of longevity because of the emotional attachment to it. Not only is it an interesting use of technology and an interesting way to finance things into fund raise. But it definitely brings people in because I think that our users really connect with the spirit of creativity, innovation, entrepreneurship, and the types of campaigns that we have in our site are always changing, always different, and the community at large loves to support it. I think that's a big testament to the space that we play in and the type of company that we are and who we get to work with.

Deidre Woollard: I think it's interesting because you think of Indiegogo projects as being relatively small. But one of the stories that you have, I think it's one of the most incredible is next, you see the ads for the underwear all over the place. They were acquired in a deal valued at 400 million last year. But they started in Indiegogo, like way back over a decade ago. I thought that was interesting. Does Indiegogo serve this role between like the idea than the venture capital and then maybe the next step going public or getting acquired? Where does the Indiegogo sit in that journey?

Becky Center: The journey is different for everyone. We have campaigns that are as small as a few hundred dollars. That would be very much on the small end. But maybe a typical campaign is going to be raising $10,000-50,000. Especially when we started, we started in film. Really the history there was that our original co-founders had participated in the film industry and saw that a lot of times those with very interesting stories, they didn't have access to capital to be able to actually produce them and tell those stories. This idea of a meritocracy and that the people could decide what they wanted to hear and they would fund raise if you're making a film, that would be maybe in that $50,000 range. But what has happened over time is crowdfunding has expanded to so many different industries and ideas and types of campaigns. They can be upwards of a million-dollars, multi-million dollars. Where we sit in that journey is, oftentimes it's really passed. We always say like turn your ideas into reality, but it's often past just the idea phase. It's usually like, it's not like I woke up one day, have an idea, and I'm crowdfunding. Usually there's quite a bit of work. If it's a film, you've probably already written your script and you're getting ready to higher talents or in crew. But if it's an idea for something like Nix or for a consumer products, you're usually maybe even at prototype phase, you've put a lot of thought and design and sweat equity into it and now you need the capital. But typically you're not quite there yet to get traditional VC financing. A lot of times what could happen is you might even try to get VC financing and they would say, you're not there yet. You don't have revenue yet. You're not maybe investable in that way. Put some points on the board, show some proof. That's a great sweet spot for crowdfunding where you would say, I'm going to go, I'm going to put it out there and we call them backers, but my backers are my fans. They're my audience and they're going to help fund me to be able to do it. Meanwhile, they're also my consumer. Now I can go back, have a success story to say, hey, I crowdfunded a certain amount of money and I actually went on to make this product, sends it out, People were happy with it. I have a real proof point and a great story and people can often then go on and do any number of things. Whether it's maybe traditional VC financing, maybe they're going to get a small business loan or they go into equity crowdfunding. Or when they go on to IPO, or to sell or to have an Amazon shop, there's just a million different directions that can go. But we sit in that more than just an idea. But I'm still trying to get my audience validation and my proof point out there. That's where crowdfunding sweet spot is.

Deidre Woollard: It reminds me of Shark Tank, and how they always ask the people that they ask. They want to see some numbers on the board. They want to see some interests and so it seems like Indiegogo is a good way for people to at least prove that there's interest, that there is audience there for whatever they're thinking of.

Becky Center: Hundred percent and I just found out recently that we had a Bombas campaign way-back wide who went on to do Shark Tank and by the way, wearing them right now. [laughs] Like love that [laughs] company love those sacks. It definitely happens like that where we are an early part of the journey and we're super proud to see some of those companies go onto massive success. But we also say praise the failure and that's what's special about crowdfunding is that we give entrepreneurs that quick signals. So if they're not seeing the interests and they're not able to get the audience and to make it work with crowdfunding, then they learn something and they go back and they can try again. That's OK too. That's respected and understood in the industry.

Deidre Woollard: Yeah, failure is always a lesson and sometimes a better lesson than success.

Becky Center: Exactly.

Deidre Woollard: Well, do you see like with funding being harder to get with venture capital has been drawing up, there's not as much of an IPO path anymore? Are you seeing different types of companies looking at Indiegogo as an option?

Becky Center: We are. I think the interesting thing there is we're seeing it on both ends. The macro economic environment just we feel like quite a bit. On one end, I think we're seeing a lot of people who say, big tech jobs aren't for me, there's been a layoffs, there's instability. Maybe this is the time to pursue a passion. Maybe I always dreamed of being an entrepreneur and now is the time. We're seeing that on one hand new people getting into entrepreneurism. On the other hand, we're also seeing companies who perhaps felt they were a little more well-established into your point. Other means of financing is a little bit harder to get and they're going back and saying, what else can I do? That's been a really interesting spot for us, is where we'll see entrepreneurs who think, they think they may be passed crowdfunding because they are already selling in market. But they've got a new product line, a new color line, a new version, the deluxe version, the pro version or whatever. They're always putting something new. Whenever there's something new, crowdfunding is still a really great source for them. They might not have thought that otherwise, but this environment is encouraging that because you're able to again put it out a little lower risk, you're able to put it out and see if there's interest before you go and put all of your funding into actually producing. That's a really great spot that we're getting some assist from the current environment and seeing people turn to crowdfunding in a new way.

Deidre Woollard: What's interesting too, because I feel like Indiegogo is similar to some of the big publicly traded platforms like an Uber or an Etsy and Airbnb. In that you've got the supply and demand, you need to have the companies that are putting things out there, but you also need to have your backers. How do you balance making sure you get that supply demand thing right?

Becky Center: Yeah, two-sided marketplaces. I come from a backer in two-sided marketplace, so it's a really special thing for me as well personally but it's always a challenge as a company. We need the campaigns and the entrepreneurs to be on the site to draw in the backers because they're backing the entrepreneurs. But the entrepreneurs are coming to us because we have a backer audience. It is that kind of chicken and egg phenomenon that makes it hard for newer marketplaces, I think now 15 plus years we've got a really good establish user-based, but constantly as a company, we're always trying to balance where we spend our resources and what we invest in. It's got to be a win-win. Everything we do has to be good for both sides of that supply and demand entrepreneur backer. They went together and actually, we went together with them. We're constantly thinking about that tug-and-pull and making sure that we do everything we can to have the best experience on both ends. I think as a CEO who's deciding how to spend company resources, it's always like this scale where you tip a little in one direction, tip in the other and try to keep it balanced so that you don't end up going too far on either side and neglecting the other.

Deidre Woollard: Who is your typical backer, do they back multiple campaigns, or are they just coming in from the company and then going from there?

Becky Center: A lot of times what we tell our campaign owners, with crowdfunding, you're going to see about the first one-third, your actual network. Typically that's your friends and family and the people that you know that are going to support you. Then the next one-third is coming usually from our platform, so these are like loyal Indiegogo who just love to come back and see what's new and supporting. It's typically people with a little bit of discretionary income and they are really mission-driven or they are niche interests driven. So we've got folks who are very eco-friendly and they love to see the next thing that is eco-friendly or they are photography enthusiasts and they love the next camera lens and this, so we've got this niche audience. That's usually the second third and then the last third is the viral effect from those first two thirds, so then they tell their network and they spread the word and there's this by reality. That's the typical distribution, is around one-third coming directly from the person who's running the campaign. One-third coming directly from our group of loyals. Then the last third is the word has been spread and it catches eye.

Deidre Woollard: I was looking at some of the press releases and things that people do to promote their launch and things like that. It seems like there's a couple of different strategies in terms of how the companies get the hype going.

Becky Center: Yeah, and they'll ask their backers to tell their friends and usually there's an emotional part of it, so people are willing to do that and they like to be a part of it and that's another reason why you back a crowdfunding campaign. You get this inside peak. It's funny you mentioned Shark Tank because I talk about that and I feel like the same reason we love. I personally love watching Shark Tank, there is a thing it's so fascinating to hear people stories and what they go through and there are lessons learned and it's the same thing when you back a crowdfunding campaign, you start getting updates and you get to see, you get pictures from the manufacturing facility or you learn like, oh, we, we're trying this and then we hit a setback and now we try that. That stuff is just so interesting and it's fun to be a part of, so people feel really invested their part of the community, and then they help tell their friends as well.

Deidre Woollard: Like you mentioned before, it doesn't always work out. So what happens to the backers? What happens when a campaign go sideways or the product never gets being created or something like that?

Becky Center: It does happen and it's a really tough experience for the backers when that happens because typically the entrepreneur has spent the money, and so they've gone out and they've bought the materials and they've tried to production on and it's jut either it's gotten more expensive than they expected it to be, it's not viable or it just didn't come out to the quality they were expecting. There's a number of reasons why sometimes these things go wrong. So what we suggest in those times is we really suggest that the entrepreneur be super transparent, communicate, explain what happened. This is a really interesting thing because for them, it's a failure. We just talked about, it's really emotional, they put their lives into it for awhile. The natural inclination is to pull back and maybe retreat and be a little quiet. We try to encourage, be more vocal and share what you're going through because your audience, your backers, they will then understand and they'll support you to try again the next time. That's what we try to encourage our terms of use require your communication but we try to really encourage that transparent communication with the backers so that they can understand what happened. More times than not, it's more of a delay than not not delivering at all. I think the timing is probably the biggest challenge we see is someone thinks it's going to take six months and then it's nine months and then it's 12 months. That can be really frustrating if you're super excited. But that's just what happens when you're trying to do something new for the first time in your part of that journey, I think especially like the repeat backers, they understand that that's a part of crowdfunding and they're pretty patient. But that open communications, the most important thing.

Deidre Woollard: Yeah, it's interesting. It reminds me of investing really in any start-up or any new company. You're just running that risk and you have to understand that that's part of how it is. When I think it's interesting to make a distinction between Indiegogo, which is rewards-based crowdfunding. There's a lot of other types of crowdfunding, including equity crowdfunding where investors are investing in a company they're hoping to take part like when the company is acquired or sold. Talk a little bit about the difference between those two.

Becky Center: Absolutely. When we started Indiegogo, the vision, the original idea was actually what we now call equity crowdfunding. That was the original idea for crowdfunding, and what crowdfunding is a phrase that didn't really exist back then. But it was not possible to do that because certain legislation required an investor. It's gets complicated but to be an accredited investor and the result of this legislation. Almost the idea of what we know today as perks-based crowdfunding came out of that necessity. What perks-based crowdfunding is means that if you're making a film, you would say, if you give me $100, maybe I'll put your name in the credits, or maybe I'll send you a movie poster or a copy of the DVD backward of people [laughs] cared about DVDs [laughs] now would be streaming. But that was the original idea and that evolved into this, oh, also not just film but books, comics, music, physical products, art instantly, all these different things where I could promise you a perk in exchange for helping me to finance this. Article fighters actually were part of working with the government and passing the jobs Act and making it possible for what is now equity crowdfunding. But we, as Indiegogo, have stuck with perk space. Just to elaborate on that a little more, equity crowdfunding means you're giving somebody and you're a part owner of that business, and so later on when there are returns, you're not necessarily guaranteed but you might get money back for your ownership. Other companies do that and as I was mentioning earlier, sometimes a path that an entrepreneur might go on is they'll run at perks crowdfunding campaign first, get some good proof points and traction. Then they'll run in equity crowdfunding and then they'll get investors. It's the same thing like what we were saying where the investors want to see that you've made some traction.

Becky Center: But for us, for perk-based crowdfunding, your perk cannot be monetary. It could be a thank you card. It could be anything, but it can't be monetary, can't be a promise of ownership.

Deidre Woollard: Interesting because the rules on crowdfunding are changing too. There has been talk of having a fruit for the accredited side, having a test now. It seems like there's a bit of an evolution of how people think about equity crowdfunding as time goes on.

Becky Center: I think it's a constant evolution and the platforms themselves want what's best for like you've said, both sides, they want to make sure that investors understand the risks, what they're getting into, and same with legislation and the industry is so fascinating and I think it's always evolving. We're always evolving too, our terms and what will allow. A really fascinating thing is we do have a big trust and safety team and constantly new things come up. Crypto comes up and now we have to say, can cryptocurrency be a perk? Currently no. But we're constantly looking at that and can digital, can an NFT be a part and in the future, we'd like to be able to support everything as it evolves. It's a really interesting space and wanting to be an open platform and our whole ethos is the people choose and as much as possible we don't want to moderate because that's what we were built to prevent is we don't want there to be a small group of people who decide who gets financing. We want the world at large to choose, but that in some ways we have to moderate to protect our users and they look to us to do that and to make sure that we don't have fraud and all of these things that we tried to work against.

Deidre Woollard: Because it's it's hard NFTs exist in that odd blurry area between it out. Maybe it's art and maybe also it's not quite as security, but it's somewhere in the middle.

Becky Center: Exactly. We're not compliant for security. Now we don't allow securities, but we do allow arts and so we're always evaluating and reevaluating and trying to expand where we can.

Deidre Woollard: You mentioned that the start was in support for films. It's still a big part of Indiegogo. Has the way that a film campaign is successful, evolved, and what makes a film campaign worth that someone's going to put money into a film?

Becky Center: I think it has distribution like I said, it used to be DVDs or you had to go through a big house to get your film scene and now it's so easy to stream it and to get it out there. I think what we're also seeing is more like a webisode-style film, where people are putting out smaller bits at a time and that's just a reaction to the audience and this binge Netflix-style audience. We'll see people do a campaign for a webisode and if they raise, they'll keep going with the story that I think is really interesting and a bit newer. I'd say a lot of the film is cause-driven. It's got some following because there's something that they're putting out that's really resonating with people more than your typical can maybe commercially successful film in the theater. We definitely have a lot of our audience just has again, like it's eco-friendly or if it's exposing disadvantaged communities or some interesting thing that hadn't been thought of before, those tend to be what resonates, and crowdfunding.

Deidre Woollard: That makes sense. Well, your team shared with me some of the campaign data on things outside of film and I thought it was really interesting that transportation was such a hot category. The number of projects year-over-year 66 funds raised up 954%. That's like e-bike scooters, smart helmets. Why is this such a hot category for Indiegogo?

Becky Center: I'm going to be so bold as to say Indiegogo, almost set the e-bike category early on e-bikes are super expensive to go out and make. They're expensive to purchase as well. But people had this idea for e-bikes in crowdfunding was a great way into it to see, well, I really get the audience. Do enough people want this price-point bike before I put my all into making it? They did and they have been consistently successful. Now we're seeing follow-on with e-scooters. I think there was something with an e-surfboard. [laughs] Just like this is just so fun for people. I've rode an e-bike this weekend and I loved it and anything that is like this transportation outdoors, get outside, I think COVID really helped with that as well. People wanted to continue being active but needed a safe way to do it. Again, our audience is super eco-friendly and so they love these alternative transportation products and they're just continuing to evolve and to go. It continues to get a lot of traction. Another really interesting category that has just started developing is glamping. We've had a couple of hugely successful glamping projects on our site this year. Really beautiful, unique outdoor lodging structures that the crowd says, yes, I would want to spend some time there, so I'll help put some money in. Those are really fascinating to me. These entrepreneurs on the land, they've got the drawings, they've got the permits, and they're like just about ready to go, but they need the funds to go ahead and actually build the property. What they're doing is saying, if you give me a certain amount of money, maybe it's $700 or something that when we're up and running, you will get two nights. That's how they're financing to build the property and they're able to know that there's demand. Then, on the other hand, those backers are grading are really good early bird rate on a really interesting experience that they want to see happen. That's a really cool one that we've been watching unfold and helping with these entrepreneurs. How do we make it successful? How do we help make sure that they've thought of hidden costs or other hurdles they might come across? It's been fascinating to work on that space, but these little niche categories pop up and that's where you have to listen to your audience because we could never have predicted. We have to watch and see and then help it grow.

Deidre Woollard: Interesting to see how trends like that happen. Last question for you. Indiegogo has been around since 2008, looking forward five years, what do you dream the company would be and what milestones would you be looking for along the way?

Becky Center: Looking forward five years, I hope that we can as a company stick with our entrepreneurs for longer. We talked about a few really successful campaigns. By the way, we learned recently, we have a film like a short that went on to win an academy award. That's amazing. Then we have all these cool things that have happened and it's your children leave the nest, but I would hope as we have been focused on our platform in this one spot. I would hope that we have grown and we're there with the entrepreneur for longer and similarly with the backer, we would hope to be with them seeing them. Again, sometimes it's I use the word niche, but sometimes it's you're supporting an e-bike, you probably only need one e-bike. I don't know.

But I think I would only need one e-bike for a while. But I would love us to just make sure that we've got enough variety and we're offering enough that the backers are wanting to work with us more and more so increasing that backer frequency and increasing the entrepreneur longevity so that we're there to support and not to spread ourselves too thin, but we're just a part of this ecosystem and a part of this journey more and more to have more folks become successful.

Mary Long: As always, people on the program may have interest in the stocks they talk about. The Motley Fool may have formal recommendations for or against so don't buy or sell stocks based solely on what you hear. I'm Mary Long. Thanks for listening. We'll see you tomorrow.