One common mistake made by new product developers is to spend a lot of money before they know there will be a demand for the product. Yet how do you demonstrate demand before spending money on things like design, tooling, patents, trademarks, and the myriad other costs associated with getting a product ready to sell? The answer for many may lie in the relatively new “crowdfunding” websites such as Kickstarter.com, Peerbackers.com, and IndieGoGo.com, where an inventor may post an idea and a financial goal before spending a dime. If enough supporters back the idea in advance by pledging small amounts, such as $25-$50, then the goal is reached and the credit card of each backer is charged. The crowdfunding website takes a cut, such as 5-10%, and the inventor gets the rest. If the goal amount is not met in time, none of the backers are charged and the project fails.
So late last year I ran a campaign on Kickstarter, mostly to see if I should recommend this approach to my patent clients as a source of initial funding. The project was an art book featuring some of the best patent artwork. (Kickstarter tends to be geared more toward artistic projects, and I thought this project would have the best chance of success.) I aimed high with a goal of $10,000, which would be enough to fund the graphic design for the book’s cover, the initial print run of books and a test mailing to patent attorneys (a good target market for a book about patent art). You can see the resulting Kickstarter campaign for The Art of the Patent book at http://kck.st/oRyLP8. It ran for 30 days (which I could have extended to 60 days) and raised $10,528: just over the goal. As a result I was able to finalize the book and get it printed, as well as finish the website at www.ArtofthePatent.com. I’m happy to report that the book is now available on Amazon and other on-line retailers.
So here’s what I learned about Kickstarter specifically, and crowdfunding in general, after running a campaign (please remember that this is just one data point, so your results may vary):
1) The crowd-sourcing platform must accept your project first
Each crowdfunding website has its own flavor, so hunt around for the one that looks to be the best fit for your particular project. Also, be sure to review other campaigns on the site, and study any tutorials or help sites (such as http://www.kickstarter.com/help/school) before launching a project. With this in mind, you might want to avoid spending money on the project until it’s approved.
2) Every campaign needs a video and suitable rewards
Your campaign video is the most important element for a successful campaign. You might be able to get away with a self-shot home video, but it is surprisingly affordable to get higher quality these days. I just looked on Craigslist for wedding videographers, thinking that they might give me a cheap price if they could work during the week (between weekend weddings). The result was a nicely-done video for $400, which included about a three-hour shoot, all of the editing, effects and royalty-free music.
For an example of a very nicely-done video, see the campaign for “the Oona,” a versatile smart-phone mount (http://kck.st/laiW7L, and also at www.theoona.com) that raised over $130,000 with a goal of just $10,000. On the simpler side, “Revolights” (http://kck.st/pfYXcN) is a basic video. Both of these campaigns were successful. Additional video tips can be found at http://www.kickstarter.com/help/school/making_your_video.
So what motivates someone to back a project? Simple…the “project rewards.” For my project, I promised anyone pledging $25 or more a signed paperback copy of the book. For $45 they got a signed hardcover copy, and so on. It’s important to choose rewards that are motivating and have obvious value. To get a baseline for rewards that would be appropriate, I simply reviewed other successfully funded book campaigns in the “art book” category to see what others had offered. The main campaign I modeled my rewards after can be seen at http://kck.st/uBaeF7 (an art book of automobile sketches that raised $55,857 with a goal of $10,000).
Just remember that you don’t want to go broke producing the product and delivering the rewards. The idea is to make enough profit after you’ve shipped the rewards so that you can actually accomplish your other goals. If you don’t set your goal high enough to cover these costs, or if your rewards cost too much to produce and ship, you could even lose money. So count the cost, including potential rewards you might have to ship to overseas backers (nearly 10% of my backers were foreign).
3) Your goal amount should be the minimum required to launch
Setting your goal correctly is at least as important as setting your rewards. The FAQs on all of these sites say to set your goal to the minimum that you need to launch the product, and I completely agree. I still could have produced my book with a goal of $5,000, and that would have been a much more reachable goal. I was lucky and just barely made my stated goal of $10,000. Instead of risking the backing I had received by setting a goal too high, it would have been smarter for me to set a lower goal.
4) Don’t rely on the native audience
Upon launching your campaign, do not expect the Kickstarter native audience to get you to your goal. It’s easy to believe that if you launch the campaign, the backers will find you. Yet I estimate that about 60% of the funding on my project came from people I know, or as a direct result of efforts I made. So don’t just sit back and think your project will fund itself…you have to market it as much as possible.
I like crowd-funding, and I’m planning to launch another campaign for a non-disposable coffee cup sleeve idea. I’ve received initial tooling quotes at about $2,500, which will include a run of 1,000 units. So a $5,000 campaign this time should do the trick after adding reward delivery and video production. Worst case, it fails and I only have to pay for the video and my effort at setting up the campaign. What’s more likely is that it will just barely fund, and the tooling will be paid for. Best case, it raises $100,000 and everyone loves it (and Starbucks calls me instead of me trying to get in touch with them!).
Kevin Prince is an engineer out of UC Berkeley, author of The Art of the Patent (www.artofthepatent.com), a US Registered Patent Agent, and president of QuickPatents, Inc. (www.QuickPatents.com). The holder of three patents himself, Kevin has had multiple successes in business, most notably selling a portable computer accessories business to a public company in 2000. He is also the past president of GridArt, which manufactures a unique line of art supplies that can “turn anyone into an artist.” GridArt products have been featured on QVC, and have been sold in at Michael’s, Hobby Lobby, and various catalogs.