Raising capital is always a challenge, but thanks to crowdfunding sites such as Kickstarter, there are more ways than ever to fund new business ventures. When the platform works, it can help foster truly innovative ideas.
“Kickstarter is for everyone who has a creative idea they want to bring to life,” Nick Yulman, Kickstarter’s senior curator for design and tech, said to CNET @ Work.
By allowing individuals or businesses to simultaneously raise money and conduct market research, it provides a strong platform for “anybody who’s doing something genuinely new and using Kickstarter as validation,” Yulman explained. “Is this thing that I’m trying to do, which hasn’t been done before, does it have the interest? Is there enough support for me to move forward with it?”
Crowdfunding, however, isn’t easy: Only around 36 percent of all Kickstarter campaigns are successful. Some categories perform better than others. For instance, only around one in five projects in the technology category meets its stated fundraising goals. Yet in both the theater and dance categories, around 60 percent of projects are successful. Projects in those categories often benefit from the strong support of local communities, given that they’re often launched to stage live performances in a certain region.
There are several steps an entrepreneur or business should take to put its Kickstarter campaign on the right track. To begin with, it’s worth asking whether crowdfunding is the right way to raise money for your project. We spoke with Kickstarter and others familiar with the platform about how to get started:
Is Kickstarter right for you?
- Do you have a specific project to fund?
- Could you benefit from primary market research?
- Do you have a compelling story to tell?
The first step to launching a Kickstarter campaign is ensuring you have a distinct project to fund.
“Everything on Kickstarter must be a project,” the site’s FAQ page explains. “A project has a clear goal, like making an album, a book, a gadget or a work of art. A project will eventually be completed, and something will be produced by it.”
Platforms like Kickstarter offer a compelling opportunity for businesses looking for funding, as well as product validation. The makers of Quinn Popcorn wanted to test the public’s interest in their product, as well as the public’s support for the company’s overall mission of producing healthier snacks. They knew the Kickstarter audience would be more receptive than the greater market.
“People think they can [use Kickstarter to] raise money to make their thing real, and that’s true to a degree,” said Coulter Lewis, who co-founded the Colorado-based company Quinn Snacks with his wife Kristy Lewis. “When you’re out in the wild and you have a product to sell, it’s harder. On Kickstarter, you have this audience that’s really intent on learning about you and your brand and supporting you. You’ve got people who want to be engaged, which is gold.”
Of Kickstarter’s 15 categories, the technology category has delivered some of its most high-profile success stories: Pebble ran multiple blockbuster Kickstarter campaigns and, before heavyweights Apple and Google stole the show, effectively paving the way for the smartwatch market. The Oculus Rift used Kickstarter to demonstrate how virtual reality could be accessible to a mass market.
Crowdfunding could be a strong option for tech entrepreneurs whose capital requirements fall within a certain “sweet spot,” said Mike Jude, a program manager at Stratecast/Frost + Sullivan.
“If you have a tech product that effectively represents a new intellectual property and your ultimate aim is to get it market, demonstrate a need for it, and ultimately spin it and sell the intellectual property to another company that can better capitalize it, sometimes that makes a lot of sense because you typically don’t need a lot of capital to do something like that,” he said.
Andrew Jiang was pitching a project called the Superbook: a laptop that’s powered by a USB-attached Android phone. Jiang and his co-founder Gordon Zheng launched their Kickstarter campaign for the Superbook with a modest goal of $50,000. They blew past that on the first day and ultimately raised nearly $3 million from more than 16,000 supporters, making the Superbook one of the most-funded computer hardware projects on Kickstarter ever.
Critical step: Building buzz before launch
- Find websites and social networks that appeal to your likely audience and build an authentic connection.
- Encourage your potential backers to sign up for an email list.
- Repeatedly remind them to visit your Kickstarter page the day your campaign launches, offer early rewards.
The Superbook not only far surpassed its fundraising goal, but it did so quickly: The campaign raised $50,000 within about 10 minutes.
“The secret to Kickstarter is it’s all about the first day,” Jiang said.
To prepare for the Superbook campaign, Jiang’s team started cultivating an audience about four months in advance. They promoted their plans on sites with strong Android developer communities, like XDA, and encouraged interested readers to sign up on their website for email updates. By the time the campaign launched, around 20,000 people had signed up for the Superbook email list. The team emailed out teasers, insights into their work and calendar invites for the Kickstarter launch. They also offered “early bird specials” for the first 100 backers.
Even if you don’t hit your goal immediately, Jiang said, a strong first day can create a virtuous cycle: Your campaign could land on Kickstarter’s list of trending projects, which would give you a strong second and third day. Several days as a top project can lead to interest from the press and thus more interest from backers.
Kickstarter also recommends preparing a communication plan and producing a promotional video ahead of your launch.
What are you promising backers?
- Know what your audience wants.
- Offer tiered rewards, even for backers who can only make small contributions.
- Include rewards that keep your audience engaged with your brand.
Before launching, Kickstarter creators also have to consider what rewards to offer. The most obvious reward is the product itself.
ZTE’s Axon 7 Mini.
Kickstarter seemed like a natural platform for one of the final legs of Project Crowd Source X (CSX), ZTE’s ambitious initiative to build a phone that features ideas and designs from its customers. However, the company’s plan to put Project CSX features on a midrange phone was not what the Kickstarter audience wanted. ZTE is now planning to put those features on a flagship phone. Had it planned to do so from the beginning, the Kickstarter project would’ve resonated with early adopters, said Jeff Yee, VP of technology planning and partnerships for ZTE.
Beyond the product itself, Yulman of Kickstarter suggested offering tiers of rewards that keep supporters engaged with the product — or even let them enhance it. Oculus, for instance, offered an SDK that allowed developers to integrate the Rift with their new or existing games. The biggest backers of the Rift were rewarded with an invitation to the Oculus lab.
Lewis of Quinn Snacks believes that building support may be easier in the technology category, simply because there are fewer media outlets and online communities focused on Kickstarter campaigns in other categories. For the food category, he said, “there wasn’t any kind of amplifying factor.”
For that reason, Quinn Snacks found it all the more important to convey to its backers that they weren’t just receiving popcorn in exchange for their donations — they were joining a cause.
“We told a story about a thing we were trying to accomplish,” Lewis said. “You have a product you’re making that hopefully people want, but this was also a story about changing food, and we were two people who believe in that. The people on the platform believed in that, they’re generous people, and they want to see people succeed and see things work.”
Be prepared to communicate
- Your audience will expect prompt answers to their questions.
- Find different platforms for communication, such as your Kickstarter page or a Reddit AMA.
- Provide basic information on your Kickstarter page.
Keeping your audience engaged and up to speed is critical before, during and after your Kickstarter campaign.
“One thing we noticed immediately is how vocal everyone is within that community,” ZTE’s Yee said. “We were constantly getting feedback, on forums but also in a lot of private messages we were responding to every day.”
ZTE posted updates on Project CSX about once a week, but its followers were expecting more, he said. “There’s a lot of demand for real-time information, that’s a key takeaway for anyone doing Kickstarter. People want quick answers to questions. Unfortunately, in our case, as a big organization, it just takes time to get answers.”
Kickstarter lists the basic information that each project should share: Your goal, how you will do it, your qualifications to complete the project, the members of your team and how far along the project is. Additionally, the Prototype Gallery allows creators to share documentation through different stages of a project’s prototypes.
What if you don’t reach your goal?
- Don’t worry about refunds.
- Keep your original dashboard and supporter list handy on Kickstarter.
- Learn from your mistakes and try again.
Kickstarter backers aren’t charged until a project reaches its goal, so refunds are not an issue. Creators are invited to relaunch their project once they feel ready. You can maintain access to your dashboard and send messages to your backers.
While the Superbook was a hit on Kickstarter, Jiang and his team actually launched a similar campaign about a year earlier that failed “miserably,” he said. They failed to realize, he said, that “there is a tremendous amount of preparation in order to make sure you have a successful first day.”
What if you’re too successful?
- Be prepared to ramp up manufacturing.
- Devote time and resources to communicating with your backers.
- Don’t let your product narrative get away from you.
The Superbook was so popular on Kickstarter that Jiang had to hire additional Android engineers. Even so, they had to push back the shipment of the Superbook by about six months.
“When you’re manufacturing 20,000 instead of 200 units, there is very little room for iteration or failure,” the team explained on its Kickstarter page. “Each mistake could cost hundreds of thousands of dollars or more — and in the end, delay the process even more than necessary.”
While the product was delayed, the technical challenges were minor compared to the challenge of communicating with a “vocal minority” of Superbook supporters, Jiang told CNET @ Work.
“There’s a huge difference between having 1,000 backers and 20,000 backers,” he said. “In any community, 1 percent [are] going to be a pain in the ass. In a group of 1,000, that’s 10 people, and that’s totally manageable. Two hundred people — that’s really hard.”
To improve its communications with the most engaged members of their community, the Superbook team opened a Slack group. “If not for that, we would have to spend a tremendous amount of time answering support emails,” Jiang said.
Can you launch multiple Kickstarter campaigns?
- Don’t rely on crowdfunding as a crutch to compensate for business shortcomings.
- You can use Kickstarter repeatedly to keep your customers engaged.
- Do use crowdfunding as a way to validate innovative ideas.
The platform’s very name suggests it’s a launchpad for new ideas, rather than a regular source of funding. However, there are numerous examples of entrepreneurs and organizations who have launched multiple, successful Kickstarter campaigns.
Not every story ends well: Pebble, for instance, launched with two of the highest-grossing Kickstarter campaigns ever. The company returned to Kickstarter last year to launch three more products, which garnered significant interest. However, facing stiff competition from the Apple Watch, the company was acquired by Fitbit and forced to cease all hardware operations before it shipped those products.
Jude, of Frost + Sullivan, said the Pebble watch is superior in many respects to the Apple Watch, but the Cupertino giant simply “sucked all the oxygen out of the room.” In hindsight, Pebble’s return to Kickstarter should’ve been a red flag, he said.
“If you’ve got an established company that’s been around for a couple years” relying on crowdfunding, he said, “that’s maybe a sign something’s kind of squirrelly.”
Still, there are several companies going strong after multiple Kickstarters: The Seattle-based mobile photography company Moment is currently running its third campaign. Makeblock, meanwhile, first turned to Kickstarter in 2012 and has launched multiple campaigns to support its open-source construction platform.