Crowdfunding is fully saturated; amidst the fray, a few gems emerge. Think contributions to technology that will shape our future lives, as opposed to obligatory donation to your best friend’s animated vlog memoir.
The life-shaping occurs only if the product makes it from idea to the development stage, which is a far more difficult task than getting backers excited about your product.
Apparently, raising $2.4 million through Kickstarter and $93.4 million through VC funding is not always enough, as we saw with Facebook’s purchase of Oculus last week. Nate Mitchell told VentureBeat in an interview last week: “The partnership will let us bring all those impossible ideas we want to try into the product.”
Backers are frustrated; but supporting a Kickstarter in no way entitles a contributor to equity in a company. Initial contributors are worried the original aim of the product will change with the influence of Facebook—moving away from gaming and more towards a communication platform. The only people who are reaping tangible benefits are the early stage VC backers, who contributed within a year of when Oculus earned funding.
This week, we are looking at what happens after the donation thermometer reaches 100%, and founders get to work. We talk with a crowdfunded product, Birdi and a company that helps crowdfunded products become realities.
Birdi is a smart device startup whose crowdfunding campaign introduced the world’s first smart air monitor, which is so much more than a smoke detector. It tracks for emergencies, like fire and elevated carbon monoxide levels, as well as air quality, and provides recommendations to improve individual and neighborhood health and safety.
1. Why did you choose to crowdfund versus going a different funding route?
Mark: Indiegogo was an obvious choice for us. They have opened the door for companies like ours to improve the stale technologies that we’ve all gotten used to. The Indiegogo platform is unique in that it gave hardware startups like Birdi dedicated help, working with the community to bring a product to market that’s driven by real peoples’ needs and perspectives.
Marketing a crowdfunded company is an entirely different animal, you are selling consumers on an experience, not just a product. The most successful campaigns allow backers to feel like they are banding together towards a common goal, in the case of Birdi: cleaner air.
A few tips from Jess:
- Paid/SEM won’t work as Google doesn’t allow you to drive to a site that solicits funds.
- Tap into the amazing teams that work at the crowdfunding platforms
- Create an amazing video
- Budget for social media—it’s not free!
If We Build It…
So many products are going with crowdfunding that, in late 2013, the only crowdfunding platform specifically aimed at hardware development, Dragon Innovation, was born. So far they have an impressive roster of clients from Pebble watches to Makerbot.
We had Scott Miller (CEO and co-founder) drop some intel for burgeoning companies looking to get their ideas funded.
1. What contributes to successful crowdfunding campaigns?
Preparation! Crowdfunding hardware products is like using a power tool: in the hands of a well trained expert, it can accomplish amazing things (product market fit, raise capital, create engaged community, generate investor interest, etc). However, if the entrepreneur is not well prepared, especially on the manufacturing side, after the campaign, like a power tool that is misused, it can create significant damage. One of the ways we’re trying to combat this is through our Dragon Certified Program. We believe that if a company has been Dragon Certified, they are far more likely to fulfill on their crowdfunding campaign, but more importantly, lay the foundation for building a successful company.
2. Since you help companies post-crowdfunding, what are a few common pitfalls that arise from campaign to product ship date?
Certainly what we call the “unknown unknowns.” When setting their funding thresholds, entrepreneurs tend to not include all costs required to manufacture their product, such as tooling, compliance, labor, factory profit and end up raising insufficient money required to deliver.
Another common roadblock is not planning every step of the schedule ahead of time. For instance, some components (i.e. processors) may have a twelve week lead time for ordering, the injection mold tooling often takes eight weeks to build. These are key things to know ahead of time, prior to establishing a delivery date.
3. Do you think companies owe a certain level of transparency to their backers?
Absolutely! This transparency is essential to keep crowdfunding from destroying the Hardware Revolution.
Crowdfunding for Good
Our friends at KITE took a look into the new breed of crowdfunding platforms; one of their highlights was Watsi, a company focused on collaborative healthcare.
The Watsi platform lets anyone donate money towards funding low-cost medical treatment for patients in need from rural areas or developing nations.
Watsi currently runs on monetary gifts from corporations, private donors, and foundations, and unlike other crowdfunding sites, 100% of every donation made goes directly to the patient in need.
After the patients receive their donations and treatment, Watsi provides each donor an update on the progress of the patient’s recovery and improved quality of life.
To learn more about KITE, visit http://getKITE.co.