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Businesses, Brushed Off by Banks, Look to Customers for Funding

Bia Sport, creator of a women's GPS sports watch, decided to take a risk when it looked to raise $400,000 earlier this year through a Kickstarter campaign.

Bia Sport already had a significant target customer base as well as backers. However, when the company went to raise its seed round of financing, investors wanted to see that there was a market for the product.

"I wish that we could say that we approached Kickstarter as this brilliant market strategy," says Cheryl Kellond, co-founder of Bia Sport. "We went there a little bit as a last resort."

That said, Kickstarter was a good platform to "prove to investors that we were developing a product that not only was there a market for, [but] that we could access that market and get them to buy," she says.

What Kellond didn't expect was the amount of education she and her partner had to do about crowdfunding.

"We were very fortunate. Our product appeals to a very defined set of customers -- women who want to swim, bike and run. They're also socially connected in reality and very connected through social media," Kellond says. "The biggest barrier we hit was explaining the crowdfunding model" to key industry bloggers and enthusiast Tweeters.

Although the campaign was successful, Kellond is less interested in the equity-based crowdfunding model.

"For this company, I would not. The kind of money we want to raise for our platform is really more amenable to venture capital," she says, as well as the potential to sell directly.

"We've got a tremendous asset in our 2,000 Kickstarter backers, and 4,000 put their name on the waitlist since the Kickstarter campaign closed," she adds. "[We have] a lot of potential to a group of evangelists to do direct sales."

And while an enthusiast backing a campaign is one thing, should they be investors in a company? That's bound to create, at the very least, some control conflicts. But perhaps in some cases it will be more beneficial than overwhelming.

Ryan Payton, founder of Camouflaj, a small video-game developer located in Bellevue, Wash., was able to garner more than half a million through a Kickstarter campaign to help fund its creation of mobile game Republique.
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