What follows is an excerpt from my new book, Get Funded !: The startup entrepreneur’s guide to seriously successful fundraising, A book I wrote while working with hundreds of startups around the world. In this excerpt, my co-author and I, Eric Villines, talk about how to build a hardware startup using crowdfunding.
When it comes to building and selling products – be it hardware, software, or artistic products – your options are limited. Sure, you can pull up next to a mall and sell hardware out of your trunk – not recommended – or you can try crowdfunding.
Product crowdfunding is one of the most popular ways to get a creative product, be it a piece of hardware or a book, to market.
Crowdfunding works by providing benefits for your audience to pre-order or otherwise support your work.
There are a number of crowdfunding sites dedicated to specific industries. Bandcamp grew to fund albums developed in bedrooms and studios alike. Entrepreneurial endeavors can be found on websites such as Crowdfunder, Indiegogo or AngelList.
The best products for crowdfunding are finite items like comics, music CDs, or devices. With a crowdfunding campaign, you can raise enough money to produce and ship a limited number of these products. In a Kickstarter or Indiegogo campaign, crowdfunding usually targets a specific amount of funding for a specific number of products.
This book focuses on corporate finance. So how can you use a crowdfunding campaign to achieve this? Interestingly, thanks to new techniques, it just keeps getting easier.
If you just want to produce a single product – a bicycle light, for example – and then sell it online, a standard crowdfunding campaign is more than enough.
Crowdfunding is de facto the way to fund a lot of high profile and exciting projects, but there is a certain trick to figuring out how to raise money while building a business at the same time.
When it comes to crowdfunding, there are a few basic laws that you need to remember. If you break any of them you are at risk:
1. Build the prototype. Build what you promised. Maybe it’s a smartwatch or a comic. Do most of the work before crowdfunding. You can fake videos and pictures of your product, but funders are getting smarter and smarter.
A campaign without a finished, working product is sunk.
2. Own the page. Create an awesome crowdfunding site with an awesome video. Spend some money on a designer if you are not comfortable creating it yourself. Your crowdfunding page is the first and last place your funders interact with you. It must be amazing.
3. Appreciate (and disrupt) your early supporters. Early supporters are wonderful. Reward them with praise and thanks. . . and then ask them to spread the word and possibly give more.
4. Contact, collect, repeat. Create a mailing list and contact all participants three times a week until your campaign is over. It’s the best way to avoid virality or, besides, create trouble.
5. Update constantly. Add updates to your crowdfunding page almost daily. Do your suppliers help you with the setup? Take a picture and post it. Are you suffering from a setback? Write about it. The crowdfunding process enables ordinary people to experience the thrill of creation. Do not hold back.
6. Ship on time. When you promise to ship something, ship it out. You don’t always have to ship on time, but there’s nothing worse than not shipping at all.
Hardware makes software sticky. So when you are able to sell a product, work on hooking up a software product that leads customers to updates and improvements. By keeping your customers happy (and upgrading) you can turn a crowdfunding project into a business.
excerpt from Get Funded !: The startup entrepreneur’s guide to seriously successful fundraising by John Biggs and Eric Villines (McGraw Hill, Sep 8, 2020).