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Hardware Startups: Crowdfunding — The Power of ‘The Crowd’
As the popularity of crowdfunding has grown, hardware startup entrepreneurs in particular have found success tapping into ‘the crowd’ and moving their products from concept to shelves. A successful crowdfunding campaign begins with one key component: planning. Start planning and preparing for your campaign months in advance so that when it is time to go live, you have a well-polished campaign that highlights your brilliant product.
If you are ready to tap into the power of ‘the crowd’ below are four essential items that can’t be overlooked:
A functional prototype is necessary when you are trying to get people excited about a new product. While people can indeed envision a product from a great description, there is no substitute for the actual thing. This prototype not only shows potential investors what your product can do, it is also necessary for the marketing material on your crowdfunding page.
An Exciting Video
Our second point correlates directly with the previous one, you can’t have an exciting video unless you have a functional prototype. The video portion of your page is where you let your product shine. The more descriptive and creative your video is, the more people are going to get truly excited to contribute to your campaign.
Early Customer Connections
Don’t wait for your crowdfunding page to go live before you start connecting with your customer base—this is too late. Connect early-on with potential customers to help build anticipation for your product and campaign. This is the time where you tap into your connections to form key partnerships. Do you know any industry influencers? If so, connect with them and work on forming a partnership in which they will be willing to help share your campaign with their connections. Remember, crowdfunding is all about tapping into ‘the crowd’, so the more people that see your campaign the better your chances are for success.
Content Creation
Let your creativity run wild! This includes all videos, photos and text; make your content unique and memorable. Also don’t forget to include the “ask” in your pitch. This piece is often overlooked so the message gets lost. A clear and concise “ask”, coupled with a creative campaign means that you are on your way to crowdfunding success.
Setting up your crowdfunding campaign will take planning and hard work, but remember that it is also supposed to be fun. Show potential backers the fun side of your product and your team.
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3D Innovations is a Product Development Company – from the 3D Design to a fully functional 3D Prototype & Product.
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The Upside & Downside of Crowdfunding for Hardware Startups
With the exponential growth of crowdfunding, hardware startups are finding it easier to raise funds and launch their product into the marketplace. For instance, on Kickstarter in 2015, the amount of money going to funded projects increased by 35%, or $160 Million more than in 2014. There were 54,831 projects funded on Kickstarter in 2015, which is an increase of over 10,000 from the previous year. In addition, the Design and Technology categories were among the fastest growing segments.* Crowdfunding continues to grow in popularity and has transformed into a viable funding option for hardware entrepreneurs. However, like any type of business funding, crowdfunding has its upside and downside, and before you setup your campaign there are a few things to consider.
Upside of Crowdfunding
Crowdfunding is often viewed as a way to raise funds and validate your product idea (both of which are true and terrific for startups). However, there is one aspect that many hardware entrepreneurs fail to consider, it is the community support of your early-adopters. The influence that these backers have on the success of your crowdfunding campaign should not be taken lightly.
Through your early-adopters you also gain exposure that you would not have been able to receive if you went solely with the traditional Venture Capital (“VC”) funding route. The more exposure your campaign receives and the more public interest it garnishes, will undoubtedly affect your product’s funding. Recently, VCs have started paying close attention to successful campaigns as a way to evaluate a startup before investing their own funds. Hardware investors understand that crowdfunding campaigns give an advantage to startups because they speed up the market feedback process—which in turn, helps minimize a VCs potential investment risk.
Downside of Crowdfunding
Failed campaigns, wasted time and underestimated product development costs are crowdfunding downsides experienced by startups. When you are an early-stage startup there is nothing worse than failure and wasted time. To prepare for these potential missteps it is crucial that you plan ahead.
While a failed campaign can be attributed to a number of things, the most common factor is the lack of an engaging story. Early-adopters need to be motivated to invest in your product, and one way to do this is through an interesting campaign with a backstory that grabs their attention. Your “story delivery” also demonstrates to early-adopters that you have a strong marketing strategy that will translate well from your crowdfunding campaign and into the marketplace.
Another pitfall to avoid is asking for the wrong amount of funding. Estimating your total development costs can be tricky, but this risk can be minimized with the input from experienced team members and outside consultants. Manufacturing and packaging is one area that is particularly challenging for hardware entrepreneurs, and getting a firm “estimate” can be even harder. (Our advice, research potential manufacturers and meet with a variety of them before settling on one.) If your dollar estimate is off, it can sink even the best crowdfunding campaign.
Without and engaging story or correct project cost estimates you risk crowdfunding failure. The time you spend crowdfunding will be wasted, which can be detrimental for early-stage hardware startups.
*ICO Partners Kickstarter in 2015—Review in numbers
Have additional questions regarding crowdfunding for your hardware startup? Send them our way, info@3d-innovations.com
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3D Innovations is a Product Development Company – from the 3D Design to a fully functional 3D Prototype & Product.
Startup Connector is a Manufacturing Accelerator helping companies commercialize—turning ideas into products.
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The Menehune Mount Is Now On Kickstarter
This past November our President and Chief 3D Officer, Collin Kobayashi, had the honor of participating as mentor for the Menehune Hat Clip team at Startup Weekend Honolulu. The Menehune Hat Clip is a simple mount that attaches right to your hat and allows you to connect your GoPro to capture that ‘perfect shot’. This team of young entrepreneurs went on to capture First Place at Startup Weekend Honolulu and then tied for First Runner Up in the Global Startup Battle Champions track! While they were quite possibly the youngest team participating in Startup Weekend, their determination and drive helped propel them to the top.
After Startup Weekend, the team knew that they wanted to continue to fine tune their idea and eventually get it into the hands of consumers. Instead of focusing on a mount solely for GoPro, the design was altered and became a universal mount for any recording device. The prototypes have been designed and tested, manufacturing partners have been procured—however, first funds need to be raised. Their Kickstarter page, Menehune Mount, is now live!
If you are into vlogging or taking event action shots, you are going to want to check out the Menehune Mount. The mount has been designed to easily hold your GoPro or iPhone and can attach to many surfaces (tent fabric, poles, magnetic surfaces). The compact design makes it lightweight to carry around or mount on the bill of your hat. Learn more about the Menehune Mount and all of the testing that went into perfecting its design on Kickstarter or the Menehunes website.
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3D Innovations is a Product Development Company – from the 3D Design to a fully functional 3D Prototype & Product.
Startup Connector is a Manufacturing Accelerator helping companies commercialize—turning ideas into products.
Subscribe to the 3D Innovations newsletter on our Facebook page!
Connect with us on Twitter, Facebook & LinkedIn today
Crowdfunding Moves Mainstream
There is no question that crowdfunding is revolutionizing the way business is conducted. Crowdfunding has moved—relatively quickly—from an ‘alternative’ financing method to mainstream. These statistics breakdown and help quantify the popularity of crowdfunding…
*Statistics are from Crowd101 (link below)
The crowdfunding industry is experiencing huge overall growth. Entrepreneurs are using crowdfunding for proof of concept, early idea validation and customer pre-orders. This is shifting the business funding and financial ecosystem, and really putting the power of fundraising in the hands of individuals.
However, before you head out to launch a crowdfunding campaign, there are a few basics that should be worked out first.
Step 1: Develop your message. Before explaining the benefits of your product, demonstrate the problem(s) it solves. This helps potential investors recognize the problem in their own life and acknowledge that a solution is necessary. Once your message is developed, work on honing it until it is short, concise and perfect.
Step 2: Clarify how much funding you need. This involves research, and lots of it. Pulling a nice round number from the sky is exactly what you shouldn’t do. Prove to investors that you have what it takes by researching each stage in the product development process, and provide realistic estimates for each phase and how you came to these amounts. Meet with product designers, manufacturers and other key players to firm up costs and timeframes for yourself and investors.
Depending on the size of your project, it is a good idea to focus your crowdfunding requests on specific parts of your business or certain phases of development. This way you won’t be asking for too much money, and left disappointed if your goal is not obtained.
Step 3: Avoid a cold start. There is an innate psychological avoidance to being “first”. People tend to hesitate if they see that no one else has backed the campaign yet. Increase your chances of gaining investors by starting out with initial investment capital. This money can be raised with your starter crowd.
A “starter crowd” are those in your inner circle and community that want to see your campaign succeed. These are the people you reach out to before your campaign has even gone live. That way, once your campaign is up and going you already have a certain percentage of funding accounted for and avoid a cold start.
Keep in mind that raising funds is really the first step. If you didn’t reach your goal, find out why. Analyze the feedback and then adjust your goals accordingly. For example, you may find that your message wasn’t getting across clearly and investors weren’t sure what value your product served in the marketplace. Now is the time to address this. Listen closely to what people are saying and adjust your campaign, message or product accordingly.
If you had a successful round of funding, maintain a relationship with your investors and show your gratitude. Work hard at fulfilling the promises made during your campaign because regardless of how much someone invested, they may be willing to invest more during a second round of funding.
Here are a few more powerful statistics to highlight from Crowd101:
Like infographics? (We do!) Crowd 101 has a great “Crowdfunding Success Statistics & How You Should Raise Money Online” infographic here.
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3D Innovations is a Product Development Company – from the 3D Design to a fully functional 3D Prototype & Product.
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Product Design Collaboration Leads to Crowdfunding Success
From our experience, having a Product Design firm involved with the design process earlier in the campaign, or if possible, prior to launching will help crowdfunding companies establish themselves and their products. Entrepreneurs do not want to find themselves in the position of raising the necessary capital through crowdfunding, but then having no idea where to actually begin. A Product Design firm can negate this and make sure you are adequately prepared for what lies ahead.
What to expect… An engineering partner will properly test and validate the design, evaluate the sustainability of the design and make sure the product can be successfully manufactured. Also, they will be able to assist with not only developing the idea, but developing an entire project plan, from design to prototyping and manufacturing. From there, the Product Design firm can assist with additional design factors that make assembly and packaging more efficient — resulting in cost savings. It all boils down to showing the crowdfunding community that you are prepared and committed to the successful launch of your product.
Below are three additional reasons to choose an engineering partner for your next crowdfunding campaign…
Proper Product Development Procedures
There needs to be a synergistic approach to the product development process, allowing the entrepreneur to provide feedback while the engineering partner ensures that the design meets manufacturing requirements. Engineers will be able to develop and update the product design models and provide prototypes reflecting design changes for testing and validation purposes.
Managing Supply Chains
Managing supply chains is a critical factor. A lot of crowdfunding companies who have raised capital and need to move into the manufacturing process are not aware of the many pitfalls that can arise, and experience delays in fulfilling their orders because they lack the knowledge and experience in working with manufacturers — who are often overseas. Many entrepreneurs often rely on the first (and only) manufacturer that they meet, and fail to fully evaluate other manufacturing companies. A Product Design firm has the knowledge and experience to connect you with reputable supply chain partners.
Increased Focus on Core Activities
With an engineering team focusing on the design and development of the product, more focus can be given to other areas of the business. The current team can concentrate on marketing, business development and all other areas necessary to build a successful business brand.
Collaboration with a Product Design firm can help you successfully develop and commercialize your next great product idea.
Have additional questions about product development or would like to know more about partnering with us on a project? Please e-mail your questions to us at info@3d-innovations.com
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3D Innovations is a full service 3D Engineering/Design company – from the 3D Design to a fully functional 3D Prototype & Product.
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