Tech Industry

Indiegogo co-founder: 'We've made failure more efficient' (Q&A)

Danae Ringelmann believes crowdfunding lets entrepreneurs find out what works and what doesn't without having to bet their life savings on being right.

Danae Ringelmann, Indiegogo's co-founder and chief development officer, speaks at Web Summit in Dublin, Ireland.
Danae Ringelmann, Indiegogo's co-founder and chief development officer, speaks at Web Summit in Dublin, Ireland. Stephen Shankland/CNET

DUBLIN -- The way Danae Ringelmann sees things, Ubuntu's failure to raise $32 million on Indiegogo for a smartphone project was actually a success.

That's because Indiegogo, the crowdfunding startup she helped found, helps separate good ideas from duds in a relatively painless way. "We've made failure more efficient," Ringelmann said in an interview at the Web Summit tech conference here last week.

Of course, there are plenty of examples of Indiegogo projects that passed the popularity test, too, including a Nikola Tesla museum, the Skully augmented-reality motorcycle helmet and solar roadways. Just getting funded is only an early step. There's no guarantee that successfully raising funding means successfully delivering the goods.

Indiegogo, like its rival Kickstarter, helps people who need funding raise it from people who are interested in the project -- films, books, electronic gadgets and even cross-country flights to a hospital specializing in a particular surgical procedure. Interested parties commit money in exchange for perks like handmade nails, musical recordings, a day in the boxing ring or an early prototype of an open-source camera design.

CNET News' Stephen Shankland sat down with Ringelmann, Indiegogo's chief development officer. The following is an edited transcript of their talk.

Q: You launched Indiegogo in what, 2007?
Ringelmann: I started working the original idea in 2001. I quit finance to go full time in 2006. The co-founders and I launched the beta in 2008. It changed a lot from the initial conception, but the reason for being is totally the same. We believed that finance is broken. It's not efficient. It's being hampered by a gatekeeping process where all financial asset allocation decisions get made by individuals who end up being bottlenecks for the free flow of capital. We wanted to decentralize the decision-making process. It lets people fund what matters to them. We felt that the world would be much more fair world: ideas rise to the top in a much more merit-based fashion.

We've stuck with being an open online funding platform. Most people take a curation approach, but that's against our ethos. We'd become a gatekeeper ourselves.

So what's changed?
Ringelmann: Our product. When we launched the beta, we picked one vertical to focus on -- this was before the word "crowdfunding" existed. We eventually expanded beyond film, which was the vertical we started in. We also made the classic entrepreneur mistakes -- weighing down your product with features. It was not a minimum viable product [an initial product that works but is limited; an early stage in today's approach to product development]. We homed in on a good user experience, but the big skill set the three co-founders and I lacked was design.

I think there's more attention paid to user experience and design these days. It used to be programmers and hardware engineers were the rock stars, but it seems that designers are getting some of that star power in Silicon Valley.
Ringelmann: Design has always been important. What's changed is our knowledge and appreciation of that. Brilliant products that don't have execution go nowhere.

One of the benefits of Indiegogo is that you get to test your design and product market fit before you fully launch. It's invaluable. You can test your pricing and test your features. We've had campaign owners change road maps mid-campaign because of feedback. It makes you smarter faster.

We've seen Indiegogo evolve as a funding platform for traditional venture capitalists. With traditional investors making investments, sometimes we're seeing those investments being contingent on doing Indiegogo campaigns.

What do you have that your big rival, Kickstarter, does not?
Ringelmann: There, you can't swap perks. Take Sonny Vu's Misfit Shine [a wearable activity-tracking device]. When he launched Shine, he thought the silver version was going to be the best seller, but he offered different perks in colors. He found that people far prefer the black version and were willing to pay $50 more. He offered a perk, and 100 people claimed it, then he added another perk mid-campaign -- the same perk at a higher price point. You can't do that on the other platforms.

He raised $7 million in venture financing and used Indiegogo to improve his market fit. The Shine was also supposed to be not ostentatious. But mid-campaign, the funders asked, "What else would you like?" and people demanded bracelets and accessories. They unlocked a revenue stream they didn't know existed.

I see a tension these days in services that curate versus those that don't. For example, Google Play is uncurated, more like the Web itself, which makes it kind of a Wild West. Apple's App Store is more tightly controlled, but it can take a long time for programmers to make updates, including important security fixes. Why did you go with the uncurated approach?
Ringelmann: We believed that curation is not bad in and of itself, but when it's the only option, it can hinder the growth of an industry. People with big or little, niche or mainstream ideas can fail simply because they didn't know the right person that would align with their vision. What the Internet is so good at is breaking down the barriers and letting ideas, people and information connect in a relevant fashion. We wanted to bring that relevance to funding.

Danae Ringelmann, Indiegogo's chief development officer, believes crowdfunding needs to do better at matching projects with people who'll be interested in them.
Danae Ringelmann, Indiegogo's chief development officer, believes crowdfunding needs to do better at matching projects with people who'll be interested in them. Stephen Shankland/CNET

And anybody can curate, too. Anybody can create a partner page and use that to endorse or showcase the campaigns they want. We have hundreds of partner pages. We have hardware accelerators to amplify the hardware companies they believe in, for example. By being open, we can be open to any idea as well as any curator who wants to layer on top of the platform.

But does being open expose you to abuse?
Ringelmann: We use trust and safety systems. We catch fraud faster than any human system could do. We have fraud rates of far less than 1 percent -- fake accounts, stolen credit cards. We catch it before the credit card payments even settle. It's all automated and aggregated.

I get many product pitches every week touting this or that idea launching on Kickstarter or Indiegogo. It feels to me like getting breathless announcements in 1998 that some company or other just launched its website. Is the crowdfunding novelty gone?
Ringelmann: Where it'll evolve is around relevancy. There are things you care about more than other things. We consider ourselves an amplification engine. Our job is to help you [somebody raising funds] find that audience, build that audience and grow bigger -- to help you contact bloggers, reporters, association leaders or individuals who happen to care about topics similar to you.

Where we're going to evolve is greater sophistication around relevancy. Right now the media is a little obsessed about the size of things. But if you're a small coffee shop and you want to raise $10,000 to expand, raising that $10,000 is what matters. It's not getting on CNN or CNET. We're building an engine that allows you to extend and reach your relevant audience.

How many campaigns are running at any given moment?
Ringelmann: We have over 8,000 campaigns running. In total, there have been over 200,000 campaigns.

You offer a lot of categories -- film, gadgets, comics. Where is the action happening?
Ringelmann: One has been hardware -- gadgets and wearables. We have a Bluetooth-connected smart luggage called Bluesmart that's raised $700,000 [Note: it's now surpassed $850,000].

Another category that's truly grown is film -- Indiegogo has gone back to the core. The financing of independent and large films is not as efficient as it could be.

Another is an industry we're calling personal cause. It's more robust in America than outside America, even though well over a third of our business is international. It involves paying for things like funerals or health procedures.

How many employees do you have?
Ringelmann: We recently crossed the 85 mark.

And what's Indiegogo's valuation?
Ringelmann: We haven't disclosed that. We closed series B financing earlier this year, bringing in $40 million from visionaries like Richard Branson, Megan Smith [the Obama administration's chief technology officer and former vice president of business development at Google] and Max Levchin [CEO of financing startup Affirm and co-founder of PayPal].

Are we in a tech bubble? Are startup valuations and acquisition prices too high?
Ringelmann: With access to information, funding is definitely opening up. It's the decade of being an entrepreneur. It's never been a better time. When you remove barriers there will be more people coming into the system, but it means you'll get stronger, more robust ideas.

The beauty of the time we're in is that if an entrepreneur fails, the most you lose is your time. In the old world when access to funding was difficult, most people didn't get a chance to start. Who knows how many brilliant technologies didn't get invented? We have people who come on Indiegogo and give us feedback that what they learned in three weeks otherwise would have taken three years and their life savings. We've made failure more efficient.