Nikolaj Hviid, founder of Bragi, raised $3.4 million for the company’s Dash wireless headphones on Kickstarter and is now building a $100 million business. But it wasn’t easy, even though he had a lengthy product design background as manager of Designit Munich and head of design at Harman, the well-known audio company. “On Kickstarter, you are really dropping your pants to everyone,” Hviid says. “They will see every mistake you make, and every success you have – they will see everything.”
That transparency is not a bad thing, but it does mean that entrepreneurs who turn to Kickstarter or another crowdfunding site need to be prepared, and not just for fundraising, but for what comes after. After all, once you’ve raised the funds you’ll have to fulfill the promises you’ve made to your backers, who generally get “rewards” for funding you. And people who’ve given cash and been promised a product tend to get angry when it doesn’t arrive as expected, as Coolest Cooler, which raised $13 million for its party-in-a-box, discovered.
“We’re all kind of trying to fake it till we make it,” says James Won, cofounder of Made, which recently raised $37,000 for its men’s custom shoes created with a 3D scanner app.
For those who chose to launch on Kickstarter, these are three crucial things to do:
Give yourself a cushion on both time and price. It’s likely to take longer than you think to design and produce the product, especially if it involves any type of technology. So if you’ve promised your backers that they’ll get your product early and at a discount as a “reward,” be careful how you set the deadline for shipping it. Similarly, be realistic about pricing. Are you offering the product for pre-order as a reward at an amount that covers the cost? Will the funds still cover the cost if something goes wrong (as it inevitably will)? And can you still produce a consistent, quality product on time if the campaign is successful beyond your wildest dreams, and you have to make five times the amount you expected?
Sort through the operational issues in advance. Before you start the campaign, do the logistical legwork: Create a prototype, figure out where you’ll get it manufactured, and come up with a plan (and a budget) for shipping. File for patents and copyrights before you start the campaign – if it’s successful, someone else is likely to horn in. And decide whether you’re going to hire outside help, for marketing or distribution, and how that might affect the amount you need to raise. “There are companies coming into this with a lot more ammo than a few years ago, but what they are shooting for is trying to get exposure on Kickstarter,” says Made’s Won. Exposure is great, but be sure you can finance and deliver the product.
Know when to say no, and communicate clearly with your backers. During the glitz of the campaign, it can be easy to get caught up in the excitement and want to do everything. Be wary. Shamil Hargovan, cofounder of Wiivv Wearables, which recently raised $235,000 for its 3D printed custom insoles, says that some 60% of the comments the campaign received were from overseas – and he had to think clearly about whether he could accommodate international buyers. “We probably lost a good chunk of business because we weren’t ready to do that. We just weren’t in a position,” he says. The campaign eventually allowed rewards specifically for backers in the U.K., Australia and New Zealand with a later ship date. A related point: If you’re not prepared to produce an unlimited quantity, set a cap on the rewards you’ll offer, or raise the price for later backers over earlier ones to help cover the cost.