Crowdfunding: Your Friend's Guide [What is Your Product, What is Your Goal?]
Understand what your product is, who is your customer, and what do you want to get out of this?
Crowdfunding might evoke thoughts of the Pebble Watch, raising millions of dollars in a campaign… and then being forced to build a business from scratch when you don’t quite know what you’re doing. BUT IT DOESN’T HAVE TO BE THAT WAY!
Nobody is forcing you to put out a crowdfunding campaign. If you do decide to put out a product via crowdfunding, it’s your campaign, what do YOU want to get out of it? Here I’ll present what I see as the three main options that you can set as your crowdfunding goals: Hit the big time (a thriving new business), the medium time (make some money in the campaign and see what happens), the small time (fund your small project).
The BIG TIME: precursor to riches and a full-time job/business (i.e. Pebble)
So you have a big idea and want to quit your job to pursue it. How do you get the startup capital to… start up, and the market research to ensure that other people are actually interested in your idea? Crowdfunding solves both problems, allowing people to literally vote with their checkbooks for an idea, while providing you with a cash cushion to get started.1
One might call this the crowdfunding dream, and it is possible. At the same time, it comes with some risk, since in order to ramp up to millions of dollars in funding, you’ll most likely need a slick campaign and advertising, both of which cost money and time. Of course, the more effort you put into these efforts, the more money you will potentially bring in, in theory making it a very good investment. However, you might argue that crowdfunding is supposed to take care of this risk for you. Maybe you could have a crowdfunding campaign for your crowdfunding campaign…
I haven’t had the sort of enormous success that would require my full-time attention post-campaign. While it’s interesting to consider that sort of income, it’s also terrifying, thinking if I’ve already pre-sold 1000s of items, if I made a mistake in my math, of if there’s some change in the supply chain, I could loose money on each unit sold. This scenario or may not be for you, but double, triple, quadruple-check your math and assumptions here to sure you get your pricing right!
In preparation to write this course, and for my second crowdfunding campaign, I read the book Crowdfunded: The Proven Path To Bring Your Product Idea To Life. I thought it was a good book with some great information. However, it came at things mostly from a marketing perspective, and with the idea that you were in the crowdfunding game to make a ton of money and build a successful business.2
THE MEDIUM TIME: Make some money from campaign, see what happens
Perhaps you like your day job, or maybe you’re just uncomfortable committing to manufacture one million widgets yourself and/or hire people to do so. You’d rather try to hit the medium time, make some money, and go about your life.
This is the sweet spot that I seem to have hit with my JC Pro Macro 2. I sold a few hundred of these, made a nice profit3, and learned a lot in the process. I also was able to make something that I really, really like myself, and that I use every day. If you made something for yourself that you really like, and that you think a limited number of other people would enjoy, this might be a good time to try to hit the medium time.
At the same time, I think I could have made this into a much more profitable, longer-term endeavor. While the hardware is very good, there were some improvements that I could have made between then and now, and ease-of-customization for the software is lacking. I am working on this, and maybe I’ll do another crowdfunding campaign on this at some point.
Perhaps I should have gone close to all in on this pursuit and really thrown myself into the JC Pro Macro 2 as a business, not just as a mostly one-time moneymaking opportunity. There’s nothing wrong with hitting the medium time, but do have a plan for after-crowdfunding if you want to keep the success going.
THE SMALL TIME: validate & pay for your minor project
Let’s say you already successfully sell products on a site like Etsy, Tindie, eBay, Reverb, or anywhere else. In order to get these products going you usually need to invest a bit of capital, and there’s no easy way to validate whether or not anyone will buy them.
Such was the situation with my latest project, the creatively named Transistor Coaster PCB. While I can get 10 samples of the standard green PCB for around $40 including shipping, if I want to get 10 in matte black with gold ENIG and the product number removed, the price goes up just over $90 (I quoted this from PCBWay without any discounts).
Sure, $100 isn’t a huge risk, but considering I would want to buy many more than 10 for a production run, and that I have to get four design variations (NPN, PNP, in green and black/gold) my ideal minimum order is looking more like the $515 that I’ve raised so far!
Note that with Kickstarter (and others, I assume) you can set an upper limit on pledges, so you won’t be swamped with more orders that you can handle. In this case, I can produce just about any amount that is needed (i.e. order more from my supplier), but you might consider this option if you’re concerned about selling too many of your product X.
Conclusion: crowdfunding can be a big leap (but it doesn’t have to be)
I suppose the main point that I want to get across in this post is that starting a crowdfunding campaign can be the start of something life changing. However, it doesn’t have to be. Before you decide to pursue a massive new business, why not try out a small or medium-time crowdfunding goal first to get your feet wet?
For that matter, if you’ve never sold anything online, why not try doing so on Etsy, Tindie, eBay, etc? This will not only give you the confidence to pursue something larger (and in a batch a la Kickstarter), but it will help you work out some kinks in your process/warehousing/shipping/pricing game!
Next Lesson TBA
When the general public thinks of crowdfunding, I suspect the general consensus is of someone with a rather quirky idea, who is able to portray it well, gets a lot of money, they struggles to make good on his promises (whether that’s because of ignorance of the challenges involved, the idea’s impracticality, or dishonesty). And that does happen, but I think the vast majority of people go into crowdfunding wanting to put out their really cool idea.
Note that this book promotes the Launch Boom service pretty heavily. This actually sounds like it could be a good service for many people, but just realize that there’s an angle to how things are presented.
I did make a profit, however, I did not keep track of how much time I actually spent designing and selling the device. My hourly rate was actually probably quite low. At the same time, I learned a huge amount while doing this, so compared to the cost of (more) higher education, one could still see it as an excellent value.