In our previous article, we discussed 5 unlikely product successes. One of them was a potato salad that raised $55,000 through the crowdfunding platform Kickstarter. Lots of people have been asking for more information on this type of crowdfunding so we created this as a follow-up article, get in touch if you have any questions!
The basics
Crowdfunding is a way to raise small amounts of money from lots of people to develop ideas. There are two main types -
Equity crowdfunding
Raise money in exchange for a percentage of your business.
Rewards-based crowdfunding
Receive funding in exchange for rewards such as early versions of your product. In this article, we're looking at rewards-based crowdfunding. The main company in this space is Kickstarter and the format is simple -
- Build your campaign page on Kickstarter
- Explain your product and offer rewards such as early versions of the product at a price you can provide them for
- Set a minimum amount of funding you need to receive to ensure you can pay any setup costs
- Attract people to your page and encourage them to back your project
- If you raise the funds you asked for, congrats - Kickstarter will send you the money so you can start production
- If you didn't raise the money, Kickstarter returns it to your backers, no hard feelings
Help your product successfully reach production
Getting a product manufacture ready can be challenging but making it into production only to find no-one wants your product is even harder. Luckily rewards based crowdfunding can help on both counts.
Attract loyal customers
Seasoned Kickstarter backers can be the best of customers. When they back a project they are taking a risk that the project might fall through or be significantly delayed. They do this for the thrill of being one of the first to own a product they really want. If you deliver a product that makes them happy they can be the strongest of allies and may follow you on your journey to new products and sales channels.
Grow revenue before production
The cost to take a product to production varies depending on the type of product. Some products require mould tools to produce parts consistently or high minimum order costs. Others might require certification or many variations to be stocked. You will receive the funding your campaign generated as soon as it has successfully finished so you can use that money to help pay to setup your first production order. On the flip side, if no-one wants your product you won’t recieve any money. Not what you wanted but it’s much better to find out now rather than when you have 1,000 boxes of product in your garage!
Receive feedback to improve your product
Another great quality of Kickstarter backers is that they know how to get what they want. If they have an idea to improve your product, they will probably tell you during the campaign. If you hear the same suggestions cropping up, you may wish to incorporate those suggestions into your production product. By the time the product is delivered it might be even more popular than your original design.
Show traction to win future business
These days when it comes to creating a successful business from your product, traction is king. There are so many products out there vying for our attention and money that retailers and investors struggle to know which ones to back. Traction is about showing your product is gaining momentum and worthy of a shot. A successful crowdfunding campaign which delivered its promise to a collection of happy customers is a great way to show traction and help you scale your business.
Below are the simple steps you can take to prepare your own crowdfunding campaign.
Step 1. Design your product
Create a design of your product which you can use to develop features and gain early feedback.
Step 2. Make a prototype
Make a prototype to verify your design functions the way your customers appreciate.
Step 3. Find out manufacturing costs
Create a Request for Quotation (RFQ) pack and ask the manufacturer to quote on it, then build a cost model so you can see how much your product will cost.
Step 4. Build your crowd
Build it and they will come is not a good marketing strategy, even on Kickstarter. Start promoting your campaign to friends, family, and other potential backers on social media months before the campaign launches. Motivate as many people as possible to back your project on day one. It’s a bit like a new shop opening with a queue around the corner and can win you even more backers.
Step 5. Build your campaign
Create an engaging campaign page to help sell your product to potential backers. Include a 2-minute video to demonstrate the product's unique value and explain the stage of development you have reached. With your campaign built you are now ready to launch your campaign.
Don't forget to consider patent protection
Once you put your invention in the public domain you can no longer patent it. If you are considering patent protection for your idea, you should review this with us before you launch your campaign. A patent can help you legally prevent others from stealing your invention which could be helpful if any copycats pop up.
