Chinese hardware manufacturers are turning to crowdfunding to act globally
China’s tech giants have had a tough time in western markets in recent years. Huawei and DJI are facing trade restrictions, while TikTok and WeChat are threatened with banning their apps in the US. Overall, Chinese companies with an overseas presence are increasingly concerned about mounting geopolitical tensions.
At an event held by the California-based crowdfunding platform Indiegogo for Chinese consumer goods manufacturers in Shenzhen, companies from the likes of startups making portable power plants to 53-year-old home appliances, Midea, listened carefully as Indiegogo’s Chinese executives shed light in the dark talked about how to woo western consumers.
“The first phase is to let the world hear us. We did that, ”Li Yongqin, general manager of Indiegogo China, admonished a room of entrepreneurs. “Next, we’ll bravely ride the tide and take on the challenge of finding the brands that are loved by users around the world.”
For Midea, crowdfunding provides a very straightforward way to understand consumers, said Chen Zhenrui, who oversees the group’s overseas e-commerce initiative. Platforms like Indiegogo and Kickstarter offer individuals and organizations the ability to raise capital from large numbers of people to fund a project. In most cases, backers receive perks or rewards from the project they fund.
Midea raised $ 1.5 million last year for a new air conditioner launched on Indiegogo. That’s an almost negligible amount compared to its annual revenue of 280 billion yuan ($ 42 billion) in 2019. However, the support of its 3,600 supporters on Indiegogo was more of a proof of the concept.
Within a few weeks, Midea learned that a compact air conditioner that sits securely on the windowsill, blocks out noise and saves energy, could attract many American consumers. Like other established Chinese home appliance manufacturers, Midea has been exporting for several decades.
But “in the past, a large part of our foreign business was in the traditional B2B export area. I think we are still a long way from being a world class brand, ”said Chen.
When Midea first launched on Indiegogo, a user left comments on their campaign page describing the project as a scam: How could a Fortune Global 500 company be on Indiegogo?
“We got to know each other through communication rounds. This user gave us a big boost, ”Chen recalled, adding that Midea used a dozen suggestions from Indiegogo supporters to improve their product.
More and more traditional manufacturers from China are giving crowdfunding a chance. Padmate, based in the southern coastal city of Xiamen, built a new earphone brand called Pamu as a white label manufacturer of sound systems from the start.
Edison Shen, a director at Padmate, said traditional exports are getting harder as old-school distributors are pressured by new retail channels like e-commerce. By creating their own brands and reaching out to consumers directly, factories could also improve profit margins. Padmate went on Indiegogo in 2018 and raised over $ 6.6 million in one of its wireless headphones campaigns.
Most of the projects on Indiegogo will go beyond the crowdfunding website with 9 million backers to mainstream platforms, listings on Amazon, and advertising on Google and Facebook. Although the core services of these American big tech firms are not available in China, they have all built some sort of operational presence in China, regardless of whether they are in-store employees in the country like Amazon or whether they work through local ad retailers like Facebook.
Indiegogo itself opened its China office in Shenzhen five years ago and has since raised over $ 300 million in China-based projects through its platform, said Lu Li, general manager for Indiegogo’s global strategy. China is the company’s fastest growing market today, accounting for over 40% of the campaigns that raised over $ 1 million in 2020.
Kickstarter, a rival to Indiegogo, also saw a surge in projects from China, reaching a record $ 60.5 million in 2020. The Brooklyn-based company recently looked for a contractor in Shenzhen or the neighboring city of Hong Kong to support its research into the Chinese market.
“In recent years, more and more Chinese companies have got the hang of crowdfunding and using their brand globally, in other words, ‘blockbuster’ campaigns [from China] are also on the rise, ”remarked Li.