Now that spring is upon us, it’s time for us to look ahead at the new season of Kickstarter successes, coming this summer. Alex Peet, CRL’s Product Development Lead, has written his top three crowdfunding mistakes to avoid this year –
From the outside looking in crowdfunding can seem like a bit of a breeze. Film a quirky video and play some ukulele behind it. The next thing you see is a clip of the team cheering “we raised $2M!”, unfortunately, it’s just not that simple. To give yourself the best shot of success, let’s go through the three crowdfunding mistakes to avoid.
“Where is everybody?”
Crowdfunding Mistake One: Launching before you have an engaged community
Clicking go on your campaign will always be nerve-wracking. If you’ve been able to build a list of people that have said they’d back the project once you’ve launched, you’ll feel more confident. Crowdfunding success rates are 35% for design and 20% for technology. Campaigns that raise 20% of their goal are 80% likely to be successful. Build a community that is interested in the product and are engaging with the information you put out, that way you’re much more likely to get off to a good start.
By the way, this community people keep talking about, it doesn’t need to be a bunch of people that are only interested in buying your product. It can be about engaging with a group of people that share the same values as your business. Say you’re designing a product that reduces food waste at home, then you could engage with environmental conservationists who are passionate about the same causes as your company. This can also be a great way to pitch the product right from the start, so you can get real feedback from the get-go.
“It’s ready!! Oh wait…”
Crowdfunding Mistake Two: Launching your product too early
Now, in the world of product development, ‘ready’ is a fairly loose term and it’s a difficult thing to get right. On the one hand, launching early can save your company money from further development time and validate the concept, before paying for expensive upfront manufacturing costs. This essentially de-risks the project. On the other hand, developing a product can be a tricky and time-consuming process. The last thing you want to do is hit your campaign targets and find you come across a fundamental problem with your product’s technology. Putting the project back six months or even indefinitely! The other risk is that as you’re usually going to be selling the product at a discount and margins may be tight. If you’re planning on using the profits to pay for tooling costs, then you don’t want to eat away at that money in paying for further product development, it’s a big distraction having to raise investment just to fulfil your orders.
Peter Derring, the founder of Peak Design, explains how he had committed to manufacturing 1000 units before launching his first campaign. The advantage of taking this risk was that he could fulfil his orders quickly. This made his customers happy and kept them engaged for his next projects. How was he so confident? He asked a bunch of people in a park! Watch the interview here.
I’ve always found spending money is a lot easier than earning it
Crowdfunding Mistake Three: Underestimating Costs
Product costs are one of the most important things to get right. Manufacturing a product is expensive. After considering all the costs associated with manufacturing, shipping and tax. In order to accurately predict all of the costs associated with manufacturing, the minimum amount of preparation required is to contact suppliers and get quotes for your initial production run. That way you’ll know how much the upfront costs will be and how to price the product. You should also get feedback from your potential customers and gauge how much they’d be willing to pay for the product before gambling on a random figure.
So many campaigns underestimate the manufacturing costs and sell the products cheaply in the hope of making more sales. The problem with this approach is that you back yourself into a corner, and may even have to raise more funds just to fulfil orders. This isn’t the most convincing pitch to an investor, who will be looking to fund growth, not just settle your order book.