Editor’s note: As part of our ongoing series for hardware startups in partnership with ANSYS Startup Program, today we’re covering crowdfunding campaigns. Read on to find out how you can make yours uber-successful…
If you’re running a hardware startup, chances are you’ve thought of crowdfunding. And why not? Crowdfunding helps you answer a few important questions about your startup. If your campaign is successful, it indicates a demand exists for your product in the market and that you know how to market your product to your target customers. After all, there’s no better validation than money spent on your product. But wait, there’s more. Successful crowdfunding campaigns can lead to even bigger investments, as our research shows.
In this article, we cover the state of crowdfunding for hardware startups, and steps you should take before, during and after the campaign to ensure a successful crowdfunding campaign.
Before You Opt for Crowdfunding….
There’s an important rule we’d like to mention before you jump on the crowdfunding band wagon: make sure what you’re making will have real-world applications and that you know how to make it in the first place.
More often than not, startups hit crowdfunding sites with no more than a concept that may or may not work in real life. And even if it does, the team has no idea how to build the product. Make sure you’re not one of those. People are afraid to invest in a product when they have no idea whether or not it will work. What’s worse, if people think your idea has potential and fund you, you could be left with the dilemma of not having a product to ship.
In order to make sure that your product becomes a reality, test it with simulation tools and make a working prototype. Once you have a working prototype, you can determine how you can produce it on a large scale, and only then should you opt for a crowdfunding campaign. While engineering simulation software can be expensive for a startup, ANSYS offers a special, discounted simulation program for startups that you can check out. Be sure to see if you’re eligible to apply for it.
Once you’ve cleared this step, read on to find out what crowdfunding can do for you…
The Hoopla Around Crowdfunding for Hardware Startups
Take a look at some of the statistics for crowdfunded hardware startups, as per CB Insights:
- Venture capitalists have invested about $321 million in crowdfunded hardware startups
- 9.5% of crowdfunded hardware startups have gone on to raise money from VCs
- Pebble and Oculus are two of the most funded hardware startups, raising $20,338,986; and $2,437,429 respectively.
Oculus later sold to Facebook, and while this displeased fans of the product, it shows that crowdfunding does provide some measure of credibility when pitching to VCs.
When it comes to choosing a platform for crowdfunding, Kickstarter is said to be more effective, as more dollars have been raised on the platform and more successful projects have gone on to raise VC money, when compared to Indiegogo.
So what makes a successful crowdfunding campaign? We sifted through dozens of crowdfunding campaigns and analyzed each one to bring you the perfect recipe of well-funded campaigns. Read on to find out more…
Pre-Launch: What to do before you publish your project
When planning for a crowdfunding campaign, what you do before launch is most important. Why? Because this is the phase where you analyze your idea, test it, and build momentum for your campaign.
Let’s cover each of these in detail:
- Be sure your product is innovative and not just an add-on.
Two of the most successful people who’ve raised money crowdfunding, Brad Leong and Sam Gordon, advise that the key to success on Kickstarter is to innovate and not just provide an improvement to an existing product. Leong tells Wired, “The thing that’s bad on Kickstarter is these companies using it just to promote. That’s completely against the idea of what Kickstarter is.”
You should only use these platforms if you’re genuinely bringing out a new product in the market. If so, proceed to the next step.
- Test the technological feasibility with simulation.
As discussed earlier, this step is critical to making both your campaign and your startup a success. Once you’ve decided on what you want to build, you need to test the technical feasibility of the product. Will it work in real life? What will the costs be? What materials will be required?
You can check all of these elements with simulation software. We have covered this topic in detail in a previous article.
- Decide how you will produce it.
It’s easy for startups to think of building one prototype of their product, but what about mass production? This factor needs to be fully thought out in advance if you want to make headway on crowdfunding campaigns. Remember, once the campaign is over, you will have to ship your finished product.
Consider KREYOS, a startup that lost the $1.5 million it raised on Indiegogo to an OEM (Original Equipment Manufacturer) partner, because it could not ship the product on time. Before you take on a campaign of mighty proportions, be sure to decide beforehand how you will produce and ship your product.
- Build some buzz around it.
Here’s the thing: If you expect people to be interested in your project right after you hit publish on your campaign, that’s not going to happen. You need to promote your product and develop a vibrant community around it. There are many ways to do this. You can utilize social media tools such and Facebook and Twitter. You can also start building a mailing list of potential customers with relevant blog posts.
Consider investing in a bit of online advertising, go to as many meetups as possible, and build momentum around your project. Then, when it’s time to publish, notify this community so they can help you amplify your campaign.
- Have a press plan.
You can’t magically expect the press to find out about your project. Once the campaign starts, you need to contact journalists in your niche directly. It also helps if you already have press clips to showcase your project.
How to Structure Your Crowdfunding Campaign To Get the Most Backers
After you’ve taken the steps above to ensure your campaign doesn’t crash and burn without anyone noticing, it’s time to work on the campaign itself. You need to structure your campaign in such a way that users are immediately excited by it and know that they can trust you with their money.
Here’s how to do that:
- Mention specifications.
What materials are you using to build your product? What functionalities can users expect it to have? Does it need a battery? How long does it work? All of these are questions that backers will need answers to if you expect them to buy your product.
For a crowdfunding campaign, especially for a hardware product, it’s important to mention exact specifications so customers know precisely what they’re getting. This also informs them that you know exactly what you’re doing, and you’re not just dreaming up an idea you cannot execute.
- Have lots of graphics, images, and videos.
Visuals are the only way you can show your customers what to expect from your product, so make them as enticing as possible. Use lot of videos and images to give users a sneak-peek of your product.
Don’t give them low-quality visuals; make sure everything is professionally produced. Professional visuals indicate that you‘re serious and won’t skimp on quality. For inspiration, check out successful campaigns like Pebble.
- Have reviews from beta testers.
Reviews from beta testers validate your product, which is crucial to a crowdfunding campaign. Remember, users cannot touch, feel, or try your product before purchasing, so all forms of validation move you toward winning their trust.
- Have pictures of rewards as well.
If you’re offering rewards such as product merchandise and other add-ons, be sure to add images of those as well. Onewheel nails this by putting up pictures of rewards, such as a Onewheel hat, hoodie, t-shirt, and the product itself in various colors.
- Show media proof.
If you’ve already garnered some PR for your product before the campaign launches, be sure to include those reviews as well in your campaign copy. This is an even better form of validation, as it indicates that a professional journalist and/or company is vouching for your product. You can also cultivate these relationships once the campaign starts by emailing journalists about its progress.
- Mention your team’s experience with product development.
Just like you’d have to include your team’s experience if you were pitching a group of high-profile investors, so should you mention it on your campaign page. At the end of the day, crowdfunding is very similar to raising money from VCs, it just happens on a smaller scale. Nevertheless, you need to convince potential backers that you know what you’re talking about and that you can deliver.
- Show your production schedule.
Simply putting up fancy images and videos is not enough; you need to have a plan in place to show users that you can actually deliver on your promises. You don’t want to end up like Zano, a company that raised a lot of money but never shipped any products.
It’s important to clearly mention your production schedule, taking into account all the potential delays and snags along the way. You should mention that you’ve already contacted manufacturers and set tentative dates that users can expect your project to arrive.
- Mention safety and legal regulations, if any.
If your product has any safety requirements users must note before use, or if it is governed by specific regulations, be sure to mention those on the campaign page as well. This lets customers know that you’ve done the necessary research and are concerned about customer safety.
- Partner with organizations/causes.
This one helps you get cross-promotion as well as giving customers another reason to back you.
For instance, the Superbook, that went on to raise $2,952,508 in their campaign, partnered with the Freedom2Learn campaign, whereby they distributed their product to communities in need. See if your campaign aligns with any existing organization or cause and partner with them to get more support.
- Create a sense of urgency and give rewards for early backers.
An important rule of business is the idea of creating a sense of urgency in customers that prompts them to buy. How do you apply this to a crowdfunding campaign?
There are two ways to do this. 1) You can state on your project page that once the campaign ends the price of your product will go up dramatically. This will make sure that campaigners don’t just look past your page and wait to buy your product until the campaign ends. 2) You can offer rewards to early backers, such as limited editions of your product or other exclusive accessories. This will ensure that you have a surge of traffic the moment the campaign goes live, which allows you to show that people are interested in your product.
- Offer different levels of rewards.
This point is crucial and should be well thought out if you want to get substantial backers. Remember, rewards are the most appealing part of your campaign, so offer a lot of them and at different levels.
Offer rewards at $10 and $20 so a lot of people can contribute to the campaign, but give equal thought to rewards worth $1000 and above. These are the rewards that will help you not just hit your target, but surpass it. While you can offer a single product as a reward, you can also have bigger rewards for contributors who want to distribute your product. Start seeking out large distributors before your campaign starts; you only need 5-6 big parties interested in order to reach your goal faster.
- Have an attainable goal.
This means that your goal should be a lot less than the amount you actually plan to raise. Why? Because once you hit your small, attainable goal, more and more people, including the press, will sit up and take notice of your campaign. They will further boost your campaign, and take you to the actual amount you want to raise.
Let’s say you want to raise $500K. Don’t set that gigantic number as your goal. Put a much smaller, achievable number such as $50K and then see what happens once you hit your goal. People will suddenly want to invest in your product because you’ve already proven its success.
- Remarket to bring customers back.
Retargeting campaigns are effective in bringing back customers who have already visited your campaign page. There are various online services to help you achieve this. Setup retargeting pixels before the campaign starts so you can bring back customers who may have left your campaign page without making a contribution.
- Release exciting stretch goals.
Stretch goals are meant to be fulfilled once you hit your target, and usually consist of adding new features to your product. You can also release stretch goals offering free products to existing backers which will help you amplify buzz around your product and get even more backers.
Post-Launch: What to do after a successful crowdfunding campaign
With the strategies mentioned above, you will hit your goal in no time. But what happens once you hit your goal? You have to ship out products to all of your backers.
It is important that you nail down your distribution strategy before the campaign starts so you’re able to ship out product to all your backers. Be sure to speak to manufacturers and make the necessary arrangements. You can also build product prototypes and make design changes using simulation software, accelerating this process.
Whatever you do, remember, a successful campaign is just the beginning. You have a long way to go in your startup journey from here on!
On that note, if you’re looking for an economical engineering simulation software provider, we’d urge you to check out the ANSYS Startup Program, and see if you qualify for it. They work with startups in various industries such as health care, energy, defense, high-tech, aerospace, automotive, and more.
About the author
Farheen Gani is a freelance writer and content manager at StartupBlink. She writes about startups, tech and productivity.