3 key crowdfunding lessons
Crowdfunding platform Kickstarter can be a strange place. On the one hand, a guy can raise $55,000 for potato salad in one month.
On the other hand, there are worthy products that don’t meet their funding targets. In fact, Kickstarter has a failure rate of more than 64 percent.
But despite Kickstarter and other crowdfunding platforms’ reputation for funding frivolous projects, more and more startups are turning to them for early-stage funding.
One such company was Audeara, co-founded by Dr James Fielding, which recently raised more than $460,000 from a $100,000 target – after initially hitting its target within a day.
Audeara turned to Kickstarter to turn its idea for seriously high-tech headphones into reality after realising that Kickstarter wasn’t just about raising cash, but about market validation.
“Most of the product legwork was done, so we turned to Kickstarter to demonstrate that there was appetite in the market for it,” Dr Fielding said.
“After all, the ultimate proof point is a person paying for the product.”
So how do you maximise your shot at successfully raising on a crowdfunding platform?
1. Get your pre-game right
Gone are the days where you can simply whack something up on a crowdfunding page and hope to get it funded.
Audeara even hired a marketer to make sure it had the best shot at drawing attention to its raise.
“When we did launch we wanted it to be super-slick, so we got to work on an email and social campaign as well as filming a few advocacy videos,” Dr Fielding said.
Part of this is simply creating buzz, but Dr Fielding said this also goes a long way to reassuring backers that they would end up with their product.
Crowdfunding has received a bit of a bad rap recently, with backers pissed off when a Kickstarter campaign doesn’t deliver what’s been promised.
There are even entire blogs dedicated to crowdfunding fails.
The more professional a campaign looks, the less likely it is to create the impression that it will fall over.
But Dr Fielding said the main benefit of running a strong pre-launch campaign was that there were buyers ready on day one.
“We started promoting the product pretty heavily on social media, so when we did launch we already had a following,” he said.
2. Be prepared to pivot – even if it alters your cost structure
One of the great things about opening a project up on a crowdfunding platform is that you’ll get a lot of early feedback.
In the case of Audeara, it received one bit of feedback that prompted it to alter the product – people wanted wired headphones.
“Our big play was that whatever the market does, we’ll do and then you have the added Audeara experience on top. So we thought Bluetooth, noise cancelling, great battery life…we’re good to go,” said Dr Fielding.
“Then people said ‘no, I don’t like Bluetooth, I want to plug it in’.”
To create wired functionality fundamentally changed Audeara’s gameplan.
“The costs for us over the course of the process essentially doubled, because we went to wired,” said Dr Fielding.
It led to a stretch goal for Audeara during the campaign – which wasn’t part of the original plan.
“Coming into the platform we said ‘we’re ready to go – we had it all lined up’,” said Dr Fielding.
“But it became apparent that people wanted changes, so we gave the people what they wanted.”
The change in cost structure for the project also led Audeara to rethink the way it viewed the campaign.
3. Crowdfunding is part of the journey, not the destination
One of the key things Audeara took away from the Kickstarter experience was that a crowdfunding campaign should be used as part of a bigger journey – it wasn’t the journey.
He said despite costs going up during the campaign, the fact the campaign enabled to company to conduct its first manufacturing run was worth the reduced margin.
“Ultimately when we come out at retail at $500…that’s when I think we’re more justified in making those material changes,” Dr Fielding said.
“We see the Kickstarter as enabling us to go retail – it pays for the first run, but it’s going to be the next or third wave of manufacturing where we’re going to see actual margin.”
He said the campaign had also created the first wave of brand advocates, a strategy often employed by startups to gain early traction in the market.
“When we send out these 2500 units, hopefully our first customers become our biggest backers,” said Dr Fielding.