Under Construction: Investor communication when crowdfunded campaigns are not yet ready for market

As a devoted fan of Sid Meier’s Civilization series working in the crowdfunding area, I couldn’t help but stumble across an interview with Sid Meier in which he is expresses his uneasiness about using a crowdfunding platform to fund a game.  According to Meier, he would “be a little concerned with [crowdfunding] if [he] committed to X, Y and Z and [he] found out down the road that Z didn’t work well.”

In business speak, Meier’s concern is over the pivot—after moving forward with one concept, pivoting to another that is more feasible and potentially profitable.  Meier’s concerns about the pivot are laudable.  He feels an obligation to his funders who were promised X, Y,  and Z even if just X and Y is a better product. 

Our CEO, Sara Hanks, recently addressed this issue in her post about the perils of the pivot.  Pivots are a challenge to companies seeking crowdfunding because they have taken on investors who were previously informed of company plans in the offering materials.  Deviations from the plans can irk investors and raise securities law concerns.

Nevertheless, a company may have very strong reasons to pivot and revise its concept.  If the company is not yet at its final go-to-market product or service, disclosing that information to crowdfunding investors is the best course of action.  Crowdfunding investors should be informed that the company is still open to revising its product or service and that the plan included in its offering materials may change.

After all, investment crowdfunding is a source of finance that works best for companies that benefit from community engagement.  Engaging with investors through regular communication will help keep them happy and maintain their interest in the company.  Keeping promises is important, but investors still want a successful product.  With disclosure at the outset and communicating down the road, companies can utilize crowdfunding without running afoul of investors when plans change.

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