Types of Minimum Viable Products [Series]: Preorder/Crowdfunding (2024)

Let’s continue our series on minimum viable products (MVPs) and how today’s entrepreneurs build them. We began this series by taking an overarching look at the seven primary types of minimum viable products and then drilled into more detail with email campaign MVPs and single feature application MVPs. Now, let’s look at pre-order/crowdfunding MVPs and how you can use them to launch a product with minimal risk and investment.

This MVP type is a great way to generate monetary interest for your idea before you spend additional time and money creating the full product or service.

The basics of pre-orders and crowdfunding:

• Pre-order: When customers place a monetary order in exchange for a yet-to-be-launched product. The revenue obtained from pre-orders can fund the building and release of the product.
• Crowdfunding: Funding your business idea through small investments from a large number of people.

What do you do to create it?

At its most basic, for a pre-order/crowdfunding MVP, you will:

• Present the concept or prototype of a product you want to create
• You can create your own landing page to gather pre-order information, or use a crowdfunding service like Kickstarter or IndieGogo
• Those who are interested will contribute money in order to make the product a reality
• This money is then used to develop and launch the product into the market

The goal: Generate paying interest and demand for your product/service prior to launch, which shows promise for the growth of your business.

The catch: You’ll need a very compelling concept (prototype, screenshots, product renderings, etc.) and solid marketing efforts to break through the noise of other businesses trying to gather pre-orders or crowdfunding.

You can use incentives to generate early contributions and locate early adopters. Many crowdfunding campaigns will offer tiers that give certain rewards to funders based on the amount contributed to the campaign.

Many crowdfunding campaigns will become a form of pre-order if a customer donates a certain amount.

Crowdfunding campaigns will also often present a roadmap for development based on the amount raised (in other words: the more money raised, the more features the product will have). These incentives and the roadmap help encourage more significant contributions.

But keep in mind that the launch of a product is not always guaranteed under a crowdfunding system. Some crowdfunding sites will refund funds if a pre-set fundraising goal is not met by a specific deadline.

A pre-order or crowdfunding minimum viable product is excellent for directly testing the most critical assumption of your product. More importantly, It can prove that people are willing to pay money for it.

You can also easily scale a crowdfunding minimum viable product as further monetary commitments can be linked directly to further product feature developments.

• Generate funds and excitement without going beyond a basic concept and presentation
• Directly test your product’s ability to generate interest and sales
• Create built-in loyalty for your launch
• Better position to scale your product along with the funds generated.

• Need to commit to delivering your product if you get enough pre-orders or funding, which means you’ll need to have a plan in place to launch
• Competitive space for pre-orders/crowdfunding; it can be easy to get lost in the noise of other crowdfunding projects

These are some real-world examples of pre-order and crowdfunding minimum viable products in action.

Oculus: Oculus is currently a billion-dollar VR headset and digital entertainment company that started as a crowdfunding project on the site Kickstarter. Their Kickstarter campaign raised more than $2.5 million and the business was purchased by Facebook shortly afterward.

Oculus began with duct-tape VR headset prototypes and the founder’s gaming industry connections. The founder of Oculus was able to demo his prototypes at E3 (a large tradeshow for the gaming industry) and the demo went so well that interest grew online. A Kickstarter campaign was launched to capitalize on the hype.

Even with a clunky prototype and lackluster specs, the concept was so exciting that the crowdfunding project raised more than $250,000 in the first day. After shipping the initial product to backers, Oculus built on this success and began the development of a more refined product based on customer feedback. Soon after, Facebook (now known as Meta) acquired Oculus for $2 billion.

Cards Against Humanity: Cards Against Humanity also generated significant interest through Kickstarter. Though the initial campaign of the card game Cards Against Humanity was seeking just $4,000 for a launch, they quickly raised more than four times that amount thanks to clever promotions and word-of-mouth.

With the extra funding, the creators were able to add additional cards to the game to increase its value. Post-launch, the creators used customer feedback and suggestions to develop multiple well-received expansions to the game. In the first two years after launch, Cards Against Humanity generated an estimated $12 million in revenue.

The benefit of pre-orders and crowdfunding is clear: People will be giving their hard-earned money to use your product or service. But, you’ll need to find a problem to solve in the marketplace that you can clearly articulate and can generate some interest around.

That means you must know your customers’ pain points like the back of your hand, and have confidence that you are capable of solving them.

Unlike the other MVPs, you will be asking for money without a product to immediately offer in return. So whatever you’re building needs appeal to potential customers who philosophically believe in it, or have a strong desire to see it exist.