Crowdfunding: Dos and don’ts

Finding your customer is an integral part of building a business. Developing a process where your customer finds, and funds, you? Perfect. Or is it…

Kickstarter and Indiegogo are two of the largest crowdfunding platforms around. But, rather than crowdfunding equity capital, as discussed in an earlier piece on NDRC, these two deal with the far more common, and erratic, world of R&D and sales.

A base premise, should you need it, is that companies can build a webpage to inform the general public of its future product plans, allowing potential customers to ‘buy off the plans’, thus funding R&D and shipping ahead of manufacture.

In terms of risk mitigation, the attractions are obvious. In terms of potential failure, the opportunities are endless. A quick glance at the main, promotional pages on both Kickstarter and IndieGogo reveal a train track of success:

  • Pigzbe – Help Kids 6+ Develop Great Money Habits: 200 per cent funded.
  • Pivo – Get Insanely Creative GIFs, Photos & Videos: 2,274 per cent funded.
  • Wynd Halo + Home Purifier – Keep Your Home’s Air Healthy: 1,523 per cent funded.
  • SoundFlux – Dual Driver Truw Wireless Headphones: 2,998 per cent funded.
  • Pocket Monkii – A Gym In Your Pocket: 2,055 per cent funded.

However, look beneath the surface, and there’s a train wreck of failures (Actually, despite their abundance, the failures are harder to find. First, you navigate through ‘Trending’, ‘Popular’ and ‘Hot’ products before you find a never-ending stream):

  • Infinity 100 – Affordable 3D Printer: One per cent of the way there, with less than a week to go.
  • Redro – Efficient & Eco-Friendly Self-Ordering App: Two per cent of the way there, 14 minutes to go.
  • Baby Joe Coffee Roaster: Six per cent there, three hours to go.
  • DigiNow SuperCharger v2.5: 33 per cent there, campaign ended.
  • Comonsol – Cellular Power Grids: Six per cent there, campaign ended.

We should have left our jobs the moment we shipped our first product

- Paul Canavan

So what is the difference between a successful, and unsuccessful, Kickstarter and IndieGogo project? Paul Canavan has now completed three campaigns, across both platforms, building up a business with co-founder Chris Monks to deliver one of the leading, tangible VPNs around: InvizBox.

Both benefiting greatly and losing out massively from timing during his company’s first two successful campaigns, he’s in as good a position as any to cast his eye over the ecosystem. And timing, he claims, is more important than anything else.

InvizBox came from an idea Paul and Chris, both gainfully employed in software roles at the time, had: ‘What if we could make VPNs, but make them better.’

Indiegogo has a lower bar to entry than Kickstarter, requiring little input at first, so the duo gave it a whirl. They found off-the-shelf hardware, thought through the VPN software, made a short video, developed a few pictures, and InvizBox was released into the wild. By chance, Arstechnica spotted the campaign and liked the look of it. That aligned the stars for InvizBox and, a few days later, with the full €20,000 raised, it was time to get serious.

The product was shipped within a few months, on-time, before the duo took their InvizBox startup full-time. A rival company emerged, forcing the team to rush through their second campaign, but even at pace, they were improving their output.

“We should have left those jobs the minute we shipped our first product,” said Paul. “We had the idea for InvizBox Go, our second product, in the intervening four months between campaign end and product shipping. We should have followed our gut.”

Now moving to Kickstarter, the video improved, the photos, the prototype, the planning. But not enough.

“The second campaign, we raised €100,000, and it could have been more if we were three months earlier and armed with slicker campaign. We rushed it as we thought we were losing money hand over fist.”

By the time they looked at InvizBox 2, the third product in InvizBox’s catalogue, lessons had all be learned. Everything improved, from preparation to presentation, promotion to personal touches.

“The game has changed quite a bit over time. When we did it first, four years ago, you could make money even with a shitty campaign, if you had a good idea. Now, you are just obliterated by people with very slick campaigns. Polishing is absolutely, completely and utterly necessary.”

Paul’s tips for building a successful crowdfunding campaign are simple, but some come with a cost.

Expenses:

  • Video: You need a really good video, professionally made. Every successful campaign has a slick video, many unsuccessful ones don’t.
  • Sample devices: In InvizBox’s case, these had to be handcrafted. Kickstarter doesn’t allow off-the-shelf hardware, one of a fair few differences between it and Indiegogo.
  • Industrial design: This was InvizBox’s highest expense for its most recent, most successful campaign.
  • Web designer: This is not a huge expense, but you need to get one as you are competing with other campaigns who have.

“We were confident that our third campaign, InvizBox 2, was going to be a success and we knew we needed to pay for some things. If people see a beautiful product they are more likely to buy it. If the page is nice, they are more likely to buy it. If your video is slick, they are more likely to buy it.”

In 2018, the better-prepared team at InvizBox negotiated with both Kickstarter and Indiegogo for its latest campaign. Whichever could provide the team with the best chance of succeeding would get the campaign.

“They say they don’t negotiate. They definitely do.” Kickstarter won out.

There are less costly things to consider, too. These largely revolve around customer management and expectations.

For example, the company’s second stab at crowdfunding threw up its own challenges, with missed deadlines extending beyond a calendar year. Though what InvizBox learned then was that customers are largely supportive, if you keep them in the loop.

“Customers were surprisingly cool with it,” said Paul. “InvizBox Go was more expensive to produce, and therefore it cost more. But people were cool. We kept the customers informed. We walked away from our first manufacturer. We told people this would lead to a significant delay, but we explained that we felt this was the right thing to do. The customers were like: ‘Yep, this seems a good decision’.”

The right customer engagement was an important lesson, as the company’s third device got bogged down in its own raft of manufacturing issues. In both instances, dealing with manufacturers in China proved difficult.

For example, the first time around Paul and Chris headed over to meet their manufacturer and recieve, they thought, final samples. With that not playing out as planned they spent three weeks on the ground solving the problem – keeping everybody up to speed as they went along.

Fast forward a year to InvizBox 2, and the second time that the team has contracted manufacturers, the team can engage with Chinese operators with the right balance of scepticism and confidence – though delays still emerge.

Your first 48 hours are critical

- Paul Canavan

Prepping your customer base is integral, where possible, according to Paul. With no customers the first time around, friends and family were tapped up in advance. Buy, share, whatever can help promoting the device. By the time the second product came around, there was a small community to lean on. For the third campaign, Paul and Chris went into overdrive.

Mailing lists were developed, customers were notified ahead of the campaign, rewards were strategized and, by the time the button was pressed, success was almost in hand.

“Getting a surge in traffic is super important. Your first 48 hours are completely critical. We didn’t prep like that for the first two. Only this third one. We nailed it.”

Finally, the team dealt with “the store”, a shop window for their product, for when a successful campaign has ended. Here, free from targets, acute deadlines and a reward scheme, InvizBox products are posted, almost advertised, in front of an engaged and captive audience.

The end result was €100,000 in products sold, a third successful campaign, and a wealth of information on marketing a product directly to customers.

Would they do it all again for a fourth time?

“I don’t know,” said Paul. “It’s very stressful. If you need cash for R&D: Perfect. If you don’t: Questionable.”