Crowdfunding and hardware startups II

This is a follow-up to last week’s post It’s an important topic, so there’s a lot of information.

I think many people love crowdfunding, and they are happy with not only for being a customer, but also for supporting new ideas. But it’s quite obvious, also for customers, that crowdfunding is based on promised, so confidence is one of the keys of the model. As mentioned, delays affect it but that’s not all.

Credibility of crowdfunding is very relevant for hardware startups. What happens if the campaign isn’t successful is clear, and platforms explained it well. But to be sure you’ll get the product you’re expecting is another point. In Spain, when I teach about it, the first question I have is: What happens if these people take the money and run away? Well, I prefer to think this kind of thing usually doesn’t happen, but I’m not sure if there’s a simple and real protection for the customer in these very unusual cases.

Here in hardware the leap of faith is big, because many project teams promise something that doesn’t exist as technology today. Many of them are developing disruptive innovations, but others are only dreaming. A couple of projects I know have gotten a lot of attention even though they didn’t show everything they needed to.

Anonabox: a router for private connections with many unclear points and probably based on a third party commercial product that was banned from kickstarter, and Skarp: a laser razor whose technology was not really ready and had the same fate.

Also many startups are using crowdfunding campaigns as a strategy for launching products, in order to create hype and attract media attention. That’s probably against “the spirit” but doesn’t affect credibility for the users.

The big problem with these bad practices is that they not only affect the projects involved, but also the platforms and the whole industry. To educate media and customers is probably impossible. It would be nice if specialized journalists could act as a filter, but that rarely happens. Therefore, the agents most interested in stopping the scams are the crowdfunding platforms. They will probably improve the standards to publish projects, maybe making it a little more difficult, but they will ultimately show more realistic projects and avoid these scams.

Creating a community is something you’ll need. Effort from marketing and PR was mentioned, as well as having an initial support in the very beginning of the crowdfunding campaign, and that means creating a community from the start of your project.

You’re probably involved in the projectspace in some way, so you have your initial friends or contacts in the area to start creating the first group of supporters. And these people love news and content. You can start describing what you’re creating, document it via blog posts and videos, and also ask for feedback.

Participating in events could also be a good idea. Think about the best moment to do it. Getting attention is nice, but when you’re talking about something for a year and you don’t have a solution, it starts to not be nice.

Try to start with hardware community events. Approach startup events when you can talk about market and business. Go to public events or demos when you’re so near to launching the campaign, and get visibility in media, fairs or mass events just when you launch your campaign.

About 80-90% of tips and best practices for crowdfunding projects, regardless of type (music, hardware, software, books, films…), applies here. But other tips are quite different or even more important than usual:

You should have something really disruptive or impressive. It’s best if you’re the first one in a category, or at least the first one getting attention.

Design is so important. Crowdfunding customers are buying a promise, and I think it’s an impulsive buy. So you should create something that people love, and design is so important for creating this feeling.

Show the product: really do it! In video, renders, pictures, plans… A hardware project has a unique way of differentiating from others because it’s tangible, you’re doing something real that people can touch. Founders and customers talking in a video are necessary but that’s with every single crowdfunding video. People fall in love with your product, not with you.

Selecting the platform is also a critical decision that is affected by both the market you’re approaching first, and the most successful platforms in each country. Nevertheless I think a one-country strategy is an unnecessary limitation. Many platforms give you the opportunity to be international from the beginning and there are not many reasons to reject this opportunity. Although I’m not an expert I’ve heard many times that kickstarter gives the best results.

I also know some projects that have taken advantage of being the first projects when kickstarter launched in a country. That’s a really nice moment but it happens only once, so this situation is difficult to replicate.

You can also think about not using a platform. Pre-sales of the product or bookings are similar in many ways to these crowdfunding campaigns. You can always give the money back if everything fails. Here, you should write good terms and conditions because all the legal responsibility is on your side, and the line between an experiment and a scam is so thin.

If everything is going right in your campaign and you have high objectives for the amount of money to get, it is probable that you’ll have a new problem. Maybe you have 500k€ or millions in your pocket and also thousands of demanding customers looking forward to get your product. That’s high pressure and high responsibility.

If the campaign surpasses your expectations and you’re getting 4x, 5x or 10x your minimum, you could think about limiting it. But when you have success and traction, the temptation of keeping it is so high and you never know if you will have it again. So probably the best idea is to get as much as possible and then face the new problems.

Anyway, having big problems but with millions in your pocket is a nice situation. It’s probably very stressful, but the dream of many entrepreneurs.