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Community raised $550K in a week
The growth came from working insanely close with the users and the communities around the product. That closeness built so much brand and product loyalty that people wanted a stake in what he was making.
When the seed round came, the community put in $550K of it in under a week.
Before that, he had grown to 40,000 users without much noise, and his users knew him and the product well enough to back both.
Why can ordinary users now invest in startups?
For decades in the United States, securities rules largely limited private startup investing to accredited investors, defined by income or net worth. The JOBS Act of 2012 created regulation crowdfunding, which lets ordinary people buy small stakes through registered online platforms. Companies can raise money from their own customers and fans this way. Regulation crowdfunding took effect in May 2016.
How does ownership create product loyalty?
In a 2012 paper called The IKEA Effect, Michael Norton, Daniel Mochon, and Dan Ariely found that people valued products they had assembled themselves more than identical ones built by others. People who help shape a product through feedback and testing take on a similar sense of ownership. That sense can turn customers into advocates. The researchers ran their experiments with items including IKEA boxes and origami.
How do close user relationships improve products?
MIT professor Eric von Hippel spent decades studying where innovations come from and found that users themselves develop a large share of them. In his studies of scientific instruments, users, not manufacturers, created the majority of major innovations. Users know their own problems in detail and often build a fix before any company does. He calls the most advanced of these people lead users.
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