Click around crowdfunding sites and you’ll find campaigns to fund vacations, make documentaries and build 3-D printers.
You’ll also find the Paragon Induction Cooktop, a project by an arm of General Electric. It can cook sous vide, sear, deep fry, poach, braise and warm up food — all controllable by a handy mobile app. As of Friday morning, it had raised nearly $311,000 from 1,900 backers on its Indiegogo site.
GE isn’t the only large company raising money through sites like Kickstarter and Indiegogo, normally places where people fund pet projects, and startups test their first products
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In the last few years, Honda used Indiegogo to fund upgrades for technology at drive-in movie theaters, networking hardware firm Securifi raised more than $855,000 on Kickstarter for a router, and a Sony program took in nearly $65,000 for an Internet-connected do-it-yourself device.
While individuals and small firms turn to crowdfunding because it’s a convenient way to drum up cash, companies like General Electric — which is more than a century old and generated $148.6 billion in revenue last year — usually aren’t doing it for the money.
“Whereas a startup will use Kickstarter to get capital, larger corporations will use it to find out if there’s demand for a product,” said Robert Siegel, a lecturer in organizational behavior at the Stanford School of Business. “Oftentimes, it’s a way to get better feedback on customer interest in a potential product.”
The Paragon appliance is made by General Electric’s FirstBuild, which was started last July as “an online community dedicated to conceiving, engineering and building the next generation of major appliances.”
Paragon is FirstBuild’s first product to use crowdfunding. Backers who pledge $199 or more can submit advance orders for the appliance, and there’s a forum where people can test a related mobile app and give feedback and ideas.
For now, the Paragon will be made under the FirstBuild brand, but if it’s successful, it could someday be mass-produced under GE’s flag.
The idea is to get inside the heads of early adopters, said Venkat Venkatakrishnan, the director of FirstBuild. Those are the people who are passionate about new technology and have ideas and feedback to offer.
To some, the corporate presence may counter the egalitarian ideals of crowdfunding. Why should corporate giants — that have entire departments dedicated to research and development — need to solicit funds from would-be customers?
“Some people think that it’s taking away from other projects, smaller projects that are on Kickstarter,” said Zachary Strebeck, a San Francisco attorney whose focus includes game development and crowdfunding. “Others would say this is bringing you all these new people to (crowdfunding) and they’re going to be poking around the site and seeing what else is there.”
In its Indiegogo campaign, FirstBuild discloses its corporate affiliation halfway down the page.
“We get it. We are a subsidiary of GE, so why are we doing an Indiegogo crowdfunding campaign?” the site reads. “Crowdfunding on Indiegogo gives us the opportunity to validate that a cutting edge group of early adopters wants Paragon before we make hundreds of thousands of them.”
Corporations are moving to crowdfunding at a time when large companies are growing increasingly wary of competition from startups. Because they are smaller, startups often have better communication with customers and understanding of their desires than big companies.
“The maker movement is growing, and people are creating their own goods and they’re getting baked by crowdfunding. That is more of a threat to corporations if they don’t check” it, said Jeremiah Owyang, the founder of Crowd Companies, a council focused on how large companies can use the collaborative economy.
Crowdfunding is just one of the ways larger corporations are acting more like startups, Owyang said. They’re also working with startups and adopting features of the on-demand economy.
It’s also a safer way for big companies to make mistakes, Owyang said.
“It’s an option to leverage the crowd, but if it doesn’t work — well, it’s a crowd project,” he said.
While crowdfunding isn’t a replacement for the traditional model, it’s an efficient way to validate the product.
“If you’ve got a product where maybe you’re not ready to manufacture it at scale but you want to get feedback from consumers, it’s just a more efficient way than running a focus group,” said Siegel, who worked for GE from 2004 to 2007.
Traditionally, the process of market research, including focus groups and product testing, can take 12 to 18 months. With crowdfunding, it can be done in about three months, Venkatakrishnan said.
“It’s the real people who are telling us what they want by writing the check,” said Taylor Dawson, who plans marketing strategies and getting products to market at FirstBuild.
Found at SFgate