Chinese Manufacturers Embrace Crowdfunding for Global Expansion

Over the past few years, Chinese technology companies have encountered increasing difficulties in Western markets. Restrictions have impacted firms like Huawei and DJI, while TikTok and WeChat face potential bans within the United States. Consequently, Chinese businesses operating internationally are becoming more cautious regarding escalating geopolitical tensions.

Indiegogo Event Highlights New Strategies

A recent event hosted by crowdfunding platform Indiegogo in Shenzhen brought together Chinese consumer product manufacturers. Businesses, ranging from startups specializing in portable power solutions to established appliance leader Midea, actively participated. Indiegogo’s China management team provided insights into effectively engaging Western consumers.

“Our initial objective was to ensure our voice was heard globally, and we have achieved that,” stated Li Yongqin, General Manager of Indiegogo China, addressing the assembled entrepreneurs. “Now, we must confidently embrace the opportunity to build brands that resonate with users worldwide.”

Crowdfunding as a Direct Consumer Feedback Mechanism

For Midea, crowdfunding provides a “direct pathway to understanding consumer preferences,” explained Chen Zhenrui, who leads the group’s overseas e-commerce efforts. Platforms such as Indiegogo and Kickstarter facilitate capital raising from a broad audience to support project development. Typically, contributors receive benefits or rewards linked to the funded project.

Last year, Midea secured $1.5 million through Indiegogo for a new air conditioning unit. While this sum represents a small fraction of their 280 billion yuan ($42 billion) annual revenue in 2019, the support from 3,600 backers served as a valuable proof of concept.

This campaign quickly demonstrated the appeal of a compact, window-mounted air conditioner offering noise reduction and energy efficiency to American consumers. Midea, like many Chinese appliance manufacturers, has a long history of exporting its products.

Shifting from B2B to Direct-to-Consumer

However, Chen noted that “historically, a significant portion of our international business involved traditional B2B exports. We still have considerable progress to make before achieving recognition as a truly world-class brand.”

Initially, Midea’s Indiegogo launch faced skepticism, with one user questioning the legitimacy of a Fortune Global 500 company utilizing the platform.

“Through ongoing dialogue, we established a connection. This user’s feedback proved instrumental,” Chen recalled, adding that Midea incorporated a dozen suggestions from Indiegogo backers to refine their product.

Expanding Beyond Traditional Export Models

An increasing number of Chinese manufacturers are exploring crowdfunding opportunities. Padmate, located in Xiamen, transitioned from a white-label sound system producer to establish its own earbud brand, Pamu.

Edison Shen, a director at Padmate, explained that traditional export channels were becoming more challenging due to the disruption caused by new retail models like e-commerce. Creating their own brands and engaging directly with consumers allows factories to enhance profitability. Padmate raised over $6.6 million on Indiegogo during a 2018 wireless headphone campaign.

Leveraging Major Tech Platforms

Successful Indiegogo projects typically expand to mainstream platforms, including listings on Amazon and advertising on Google and Facebook. Despite limited service availability within China, these American technology companies maintain operational presences in the country, either through direct staffing, like Amazon, or partnerships with local advertising resellers, such as Facebook.

Growth and Market Expansion

Indiegogo established its China office in Shenzhen five years ago. Lu Li, General Manager for Indiegogo’s global strategy, reports that China-based projects have raised over $300 million through the platform. China is now the company’s fastest-growing market, accounting for over 40% of campaigns raising over $1 million in 2020.

Kickstarter, a competitor to Indiegogo, also experienced a surge in projects originating from China, reaching a record $60.5 million in funding in 2020. The Brooklyn-based company is currently seeking a contractor in Shenzhen or Hong Kong to conduct market research.

“In recent years, an increasing number of Chinese companies have mastered the art of crowdfunding and are successfully building their brands globally, leading to a rise in ‘blockbuster’ campaigns from China,” Li observed.