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-writer and I, Eric Villines, talk about how to build a hardware startup through crowdfunding.
When it comes to building and selling products - be they 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 to crowdfund.
Product crowdfunding is one of the most popular ways to get a creative product, be it a piece of hardware or a book, off the ground.
Crowdfunding works by giving your audience perks for preordering or otherwise supporting your work.
There are a number of crowdfunding sites dedicated to particular industries. Bandcamp has grown to fund albums developed in bedrooms and studios alike. Entrepreneurial efforts can find crowd support on websites like Crowdfunder, Indiegogo, or AngelList.
The best products to crowdfund are finite items like comics, musical CDs, or devices. A crowdfunding campaign allows you to raise enough money to produce a limited run of these products and ship them. In the case of a Kickstarter or Indiegogo campaign, crowdfunding usually aims for a specific amount of funding for a set number of products.
This book is focused on funding businesses, so how can you use a crowdfunding campaign to get this done? Interestingly, it’s become more and more simple thanks to new techniques.
First, if you just want to produce a single product — a bike light, for instance — and then sell it online, then a standard crowdfunding campaign is more than enough.
Crowdfunding has become the de facto way to fund many high- profile and exciting projects, but there is a definite trick to figuring out how to raise money and build a business at the same time.
There are a few basic laws to crowdfunding that you must remember. Breaking any of them puts you at risk:
1. Create the prototype. Build the thing you promised to build. Maybe it’s a smartwatch or a comic book. Do most of the work before you crowdfund. You can fake videos and images of your product, but funders are getting savvier and savvier.
A campaign without a finished, working product to show is sunk.
2. Obsess over the page. Create an amazing crowdfunding page with an amazing video. Spend some money on a designer if you don’t feel comfortable creating it yourself. Your crowdfunding page is the first and last place your funders will interact with you. It has to be amazing.
3. Cherish (and bother) your early backers. Early backers are wonderful. Reward them with praise and thanks . . . and then ask them to spread the word and possibly donate more.
4. Contact, collect, repeat. Create a mailing list, and contact everyone on it three times a week until your campaign is over. It is the best way to create virality or, barring that, exasperation.
5. Update constantly. Add updates to your crowdfunding page almost every day. Are your suppliers helping you build? Take a picture and post it. Are you suffering a setback? Write about it. The crowdfunding process allows regular people to experience the thrill of creation. Don’t hold back.
6.Ship on time. When you promise to ship something, ship it. You don’t always have to ship exactly on time, but there is nothing worse than not shipping at all.
Hardware makes software sticky, so once you’re able to sell a product, work to connect a software product that will carry customers forward to updates and improvements. By keeping your customers happy (and upgrading) you can actually build a business out of a crowdfunded project.
Excerpt from Get Funded!: The Startup Entrepreneur’s Guide to Seriously Successful Fundraising by John Biggs and Eric Villines (McGraw Hill, September 8, 2020).