Kick-starting the new year
Using crowdfunding to expose a product to the market
When meeting with clients, we often explain to them that securing intellectual property rights of inventions or products is an important step of the process, but it is just the start and sometimes is the easiest part of bringing a product to market or starting a new business venture. Millions of great ideas are conceived every day; however, just because something is a great idea does not guarantee success.
Business owners face major obstacles, including the practical realities of bringing the product to market and generating sufficient consumer awareness to sustain the business. Previously, this could be a monumental task that dooms many business ventures. However, the advent of crowdfunding sources may make the process of exposing a product to the market and making that initial purchase of inventory easier.
Crowdfunding websites such as www.kickstarter.com have existed for a few years, but I never seriously considered participating in a Kickstarter project. In the early days many of the projects revolved around funding the arts – projects included independent films, musicians seeking to fund albums, and projects to launch or revive TV shows. In exchange, benefactors generally would receive tickets to the premier, copies of the film or CD or other associated swag.
At the time I saw Kickstarter as an interesting and effective way for the artist community to fund projects. As time has gone on, Kickstarter has shown to be wildly successful for these sorts of projects. Most notably for Colorado is the successful funding of the documentary Touch The Wall, which documents Missy Franklin and Kara Lynn Joyce in the years leading up to and during the 2012 London games. When looking at the number of projects successfully funded through Kickstarter in 2014, these sorts of projects still dominate.
It wasn’t until last fall that I was able to see the potential benefit of a website like Kickstarter for entrepreneurs and small businesses. When browsing Facebook, I saw an ad for a pole to be used with a GoPro that contained a battery inside the handle that could power a camera for eight-plus hours.
As an avid skier and GoPro enthusiast, the ability to have enough battery power to last a whole day of skiing was interesting. I clicked the link and, to my surprise, was taken to a Kickstarter page. I watched the video and checked out the company’s website. What struck me was that this was not a call to fund a concept or some “pie in the sky” idea. It was an actual product that the company had spent time developing – they had already acquired production-ready molding, tooling and packaging. They just lacked the operating capital to purchase the first large order of product.
I felt I would actually get the product, so backed the product. The pole arrived, it works great, and the overall experience was great. I even bought a few PolarPro filters.
It then occurred to me that Kickstarter could be a way for clients to obtain the capital needed for a product launch, as well as gain exposure and marketing for their product.
A look at Kickstarter’s 2014 data indicates that artistic endeavors dominate the number of 2014 funded projects, but technology and designs dominate the amount of money raised. Funding, however, is not automatic. Here are tips to enhance crowdfunding success:
1) Project professionalism. Kickstarter’s terms and conditions state that accountability lies solely with the creator of the project. Backers are encouraged to do their own research. The more established and reliable of a company you are, the better chance to get funded.
2) Crowdfunding can catapult you over the last hill. Funders want product, not concept. Products put through the R&D process and tooling are ready to manufacture. Funders are not eager to fund design and development. With Touch the Wall, all of the footage had already been shot. The money raised by the Kickstarter campaign went to editing, post production, distribution, etc.
3) Be able to show a production-ready prototype. This ties in to No. 2, but consumers want to see the product and to see people using it. They want to see that it is real and that it works. SolidWorks drawings and computer animated images do not instill confidence that the project is at a point that invites participation.
4) Lower price points make it easier for backers to take that leap of faith. More people will take a calculated risk to back campaigns at amounts of $100 or less versus something that costs several hundred dollars or more. I was willing to risk $100 on the power pole and if nothing ever materialized, I may have been annoyed but it wouldn’t have been catastrophic. If it had cost much more than that, I don’t know that I would have participated. The takeaway here is that your ultra-cool GPS-enabled widget may be a really neat product, but you may not find many backers if your starting price is $1,500.00.
5) A history is a plus. If you have a worth highlighting. And say upfront why you need the money. If it is because your first production run will cost $50,000 and you simply don’t have that sort of cash lying around, say so.
If you are a business owner and you haven’t thought about using crowdfunding as an arrow in your to get the capital and marketing exposure your company needs when launching a new product.
Who knows – it might just be the kick start your business needs in 2015.