Crowdfunding has quickly moved beyond a trendy buzzword into a mainstream fundraising model. In less than five years, Kickstarter has attracted more than five million contributors pledging close to $1 billion, funding more than 55,000 individual projects. Rival fundraising platform Indiegogo can boast of a campaign that single-handedly generated $12 million in pledges. Numbers like these make crowdfunding an attractive option for first-time entrepreneurs and established businesses alike. But what, exactly, does it take to successfully fund a project?
To find out, I’ve asked creators of some of the most highly successful crowdfunding technology projects – each raised more than $300,000 - to discuss their experiences using Kickstarter and Indiegogo, and share the secrets of their success. Whether you’re looking to raise a few thousand, or a few hundred thousand dollars to bring your product to market, here’s some hard-earned wisdom to consider well before launching your own crowdfunding campaign.
1. Solve a real problem
As with any sales venture, the first key to success is creating a product that people want to buy. “Your responsibility is to produce a solution to a problem,” advises Adam Sager, whose home security device, Canary, raised more than $1.9 million on Indiegogo. “You need to be able to tell people right away how the product is going to solve a real problem that they have.” If you can’t communicate the essence of your product and what it does in a sentence or two, you’re not going to attract significant interest from backers.
Many entrepreneurs have looked to their own personal experiences in identifying a problem to solve. Peter Dering, an avid traveler and photography buff, came up with the idea for his original Capture Camera Clip – an updated version garnered more than $800,000 on Kickstarter - because he got tired of having his DSLR hang precariously from his neck, swinging into things while backpacking through Asia. “I thought this was a problem enough people had,” he says, “and that my idea for a product could solve it. Identifying a problem, and designing a solution that is solid, equals success.”
It’s great if your product can ride the wave of an emerging trend, but make sure you’re not too far ahead of the curve. “If your idea is too far ahead of its time, you’ll have to spend resources telling people why they need it,” says John Van Den Nieuwenhuizen, whose second version of the Hidden Radio, a wireless portable speaker, has raised more than $500,000 on Kickstarter. “When we came up with the idea for Hidden Radio back in 2008, we didn’t invent the category,” he says. “There were Bluetooth speakers already on the market, but they weren’t attractive and didn’t sound good. We felt we could make a beautiful design that had better sound.”
2. Do your homework
The success of any crowdfunding effort is inextricably linked to the amount of hard work you put into testing and refining your idea long before launching the campaign. “Every hour of planning you do before the campaign saves you 100 hours of work after it,” says Phil Bosua, who raised $1.3 million on Kickstarter to launch the Lifx LED smart bulb. Van Den Nieuwenhuizen’s vision for a portable Bluetooth speaker began with sketches a full five years before his crowdfunding campaign. “You need to do your homework,” he says. “Once my partner and I had a design we liked, we submitted it to some design blogs. The response was very positive, with people asking how they could buy it, and all we had at that point was a rendering. We made our first prototype with a trip to the hardware store. It took us a year of looking in the U.S. and Asia to find the right manufacturer. But by the time we launched on Kickstarter, we were literally ready to begin production if we got the funds.”
The challenges you’ll face after the funding campaign are daunting and must be addressed early on. “You’ve got to have an e-commerce site up and running, a supply chain and distribution network, and way to handle fulfillment and warehousing,” Dering cautions. “Miss any one of these, and you’re dead. You need to be prepared to make your backers happy, and getting as many ducks in a row as you can before starting the campaign, allows you to ship your product to them quickly.”
Seeking advice from those who have more experience is always a wise move. Gabriel Bestard-Ribas, whose Goji smart lock raised more than $300,000 on Indiegogo, did just that. “I got advice from people who had run successful campaigns, asking for feedback on my idea,” he recalls. “But I also talked to people who had failed at crowdfunding. I learned what things to avoid, which is important.”
One thing to avoid is waiting for your campaign to start before doing any marketing. “Build your customer database well before going on Kickstarter,” suggests Van Den Nieuwenhuizen. “Even if you don’t have a prototype yet, you can release drawings or renderings on Facebook and Twitter. You get validation of your idea while building an audience and momentum for your crowdfunding launch.”
3. Bring money to the table
“Kickstarter shouldn’t be your first source of money,” says Dering. Indeed, every entrepreneur I spoke with for this story had already acquired some capital before launching their crowdfunding campaign. Jonas Gyalokay, creator of AIRTAME, a wireless HDMI streaming dongle, raised more than $1.2 million on Indiegogo. But before that, he and his team had already poured in tens of thousands of dollars into the project. “We invested our own money, using loans and pension savings as well as profit from some of our earlier companies, to buy food and pay our bills,” he says. “Another company I co-founded invested $10,000 for a 5% stake in AIRTAME. That paid for office space and some of the hardware we needed in an early stage of development.” Your funding sources don’t have to be complicated. Bosua and his small team started Lifx with, “$35,000 that came from maxing out our credit cards,” he recalls.
Marc Barros is a serial entrepreneur, whose Moment smartphone lens campaign attracted more than $100,000 in just its first 28 hours on Kickstarter. ”We spent about $80,000 to get to the Kickstarter stage, with prototypes, samples, and additional engineering support to help solve our problems,” he notes. For those looking at mass market production, Barros advises, “You should think about needing $500,000 to get from the idea stage to shipping a final product. Whether you raise that from your backers, investors, or supply partners, that’s about how much you need (with some wiggle room) to make and ship. You’ll encounter mistakes along the way and a little bit of extra cash makes sure you can deliver.”
4. Set a smart funding goal
When setting your funding goal, don’t confuse how much money you’d like to raise with how much you need to fund your project. “I made a distinction between ‘expectation’ and ‘hope’ when setting my funding goal,” Dering says of his first campaign. “I expected to raise $10,000 but my hope was to be the top-funded project in Kickstarter’s history.” The browse pages of both Kickstarter and Indiegogo highlight not just a dollar amount, but your funding’s percentage relative to your initial goal. People love to back a winner, so blowing past your funding goal by 300% in the early days of your campaign can actually help attract additional backers. Of course, you need to set an amount high enough to cover the costs of actually manufacturing and delivering your product, but your goal should be one that you’re confident you can reach.
5. Make an effective pitch
“Why do people support crowdfunding?” asks Bestard-Ribas. “Because they are drawn to a vision. One they want to engage with. Many people think of their campaign as just selling a product. But you’re really launching your company to the world.” Your presentation will have a huge impact on the success of your campaign. The financial cost of producing it is virtually zero. You can shoot the video pitch on your phone if you need to. But the amount of time and thought you put into this presentation must be significant.
“We crafted a very focused message,” says Sager, “and presented the product to show how it could impact people’s lives in a direct way. We didn’t start by talking about features. Instead we led with how we were solving a problem. It’s also important,” he continues, “to make your team visible. Be very transparent and let potential backers know who you are. Trust is a big part of crowdfunding.”
Of course, when it is time to talk about features you need to emphasize what makes your product stand out from the crowd. Bestard-Ribas stresses that there are benefits to having competitors. “There were three competing products that debuted before us,” he says. “They generated a buzz around the idea of a smart lock, so people understood our product already. What we had to do was propose why we were better. The competing models ranged from plain-looking to ugly. We had a beautiful, sleek design plus the ability to take and send photos of anyone activating the lock and entering your home. So those are the two features we emphasized.”
Rewards/perks are huge calls to action for potential backers. Get creative. Gavin Fish, VP of Sales and Marketing for Light Harmonics, whose campaign for the Geek Pulse, a portable DAC, has raised more than $1.17 million on Indiegogo, has taken full advantage of services unique to that platform. “One of the reasons we switched to Indiegogo for our second campaign was that backers could choose multiple perks.” Fish also made use of Indiegogo’s tracking tools to offer even non-contributors a chance to earn free products by referring friends who did become backers.
6. It’s not (always) about the money
Crowdfunding has several benefits beyond access to capital. “We were already well-funded as a company,” says Fish. “And we knew the high-end audio customer well. With the Geek line, we were looking to deliver a mainstream, affordable product, but we didn’t know what the mainstream consumer would buy. For us, the feedback from backers was much more significant than the money we raised. Near the end of our Geek Out campaign, for example, many backers began asking for a larger unit with more features. That feedback led directly to our second product in the lineup, the Geek Pulse.”
Bestard-Ribas also emphasizes the importance of the contributor community. “The feedback we get is 10-fold more valuable than the money we raised,” he says with conviction. “Normally, you’re working in the dark until you bring a product to market. With crowdfunding we get customer feedback before the product is finalized.” And it wasn’t only customers he was able to build relationships with. “The press coverage that our campaign received opened doors to partnerships,” he continues. “We had retailers and distributors reach out to work with us before the product was finished, which helped us to better fit their needs. Our partnership with Staples is an example. They got in contact with us during the campaign and now our product is part of their [app] ecosystem.”
7. Make the campaign your top priority
Managing an active crowdfunding campaign is an intense process. “It’s not only full-time for one person, it’s full-time for everyone in the company,” says Gyalokay. Sager agrees. “When we ran our campaign, the entire team was 100% focused on crowdfunding,” he recalls. “We sent out multiple surveys to our backers. I personally answered 3,000 emails in the first week.” Although it can be a nearly overwhelming experience, the campaign offers a valuable opportunity to engage with your backers. “We believe that if we can have a dialogue with the market, we can be successful,” says Fish. “We decided to host a separate forum for our backers, to continue the conversation beyond the crowdfunding campaigns.”
“Feedback can drive product design,”says Dering. He recalls having to decide between two competing features in a new camera strap that was still in development. “We sent out a Kickstarter survey with a choice of A or B, and our backers overwhelmingly picked a winner,” he recalls. The challenge with feedback, of course, is knowing when to say no. “You’re going to have to decide which requests make sense to implement with this version of your product and which ones are better to save for version 2,” cautions Sager. “We made the simplicity of our product the priority and stuck to solving a specific problem instead of trying to meet everyone’s feature request.”
Social media and email can be very effective in spreading the word about your campaign. “We prepared 100 personal emails each to send out when we launched the campaign,” says Gyalokay. “We made sure each one was personal and had a good dose of humility, while stating how important this project was to us and our lives. And of course we ended with a strong call to action.” Sager adds, “you need to make your campaign as easy to share as possible. That means all someone has to do is click one button. Don’t make it any more complicated than that.”
Heed the advice of these crowdfunding veterans and perhaps your idea will be the next crowdfunding success story.