October 23, 2013 2 Comments
It has been over 2 months since the Ubuntu Edge campaign concluded, and I haven’t really blogged about it. I must say, driving something like this was great fun but also a fully immersive 24-7 experience. For that reason, I wanted some time to pass before write some conclusions about it.
One of the things that made the Ubuntu Edge campaign to stand out from previous crowd funding projects was the target: $32 Million. Other successful projects (I will focus only on products) had much lower targets (~$100K). So, why was this the case?
If your company has already raised capital via “standard” funding routes or you are actively pursuing it, a successful crowd funding campaign will reduce the overall amount of equity you have to give away. It can also attract that elusive VC investment. In this situation, your objectives are:
- Proof the product viability
- Remove doubts from future investors minds
- ensure your campaign and your product are perceived as a successes
An early achievement of your campaign target will tick all these boxes. A “sold out” effect in the first week will increase the confidence of future pledgers and investors. In that case, a campaign target of $100K can be the magic number for you.
In the other hand, if crowd funding is your only or main avenue to finance your product, your objectives will be slightly different. These were ours:
- Proof the product viability
- Finance product design and factory tooling
- Finance a fix/minimum production run
- Market validation
An early achievement of your target is still desirable, but your main worry will be to raise enough money via the campaign to deliver on your promises to the pledgers.
Although we raised over $12 Million, we did not reach our intended target. The Ubuntu Edge was a unique proposition that was build on the premise of delivering the latest cutting edge technology. Unfortunately, this meant that we could not pursue what I think is a better approach for 100% crowd funded products: a multi-campaign project.
In a crowd funding campaign, people contribute for different reasons:
- The Angels: Angels are interested in supporting new innovation. They might not even necessarily want to own your product, but they appreciate the disruption you are trying to bring to the market. For these reason, they are willing to contributed from a little as $1 to thousands of dollars to see your project succeed.
- The Extended Team: These are passionate individuals that understand your product concept and they want one! Not only they are willing to part with some money to get one, but they are also willing to contribute their own time and energy to make your product successful. They are a great source of professional and amateur resources. The contributions we got for Ubuntu Edge ranged from advise on how to run the campaign by serious knowledge people, to PR (T-shirt designs, websites, ads) to product design.
- The Pragmatists: Your product might look good, but your project might just be too risky. Crowd funding projects are developing a bit of a reputation for shipping late or even worst, never happening. Pragmatist might be put off from contributing to your project is the perceived risk is too high. Some key questions they would like answer to are: Who are you? What is your proven record? Do you have a proto-type working? Do you have suppliers ready to go? but they all ultimately boil down to one: Can I trust you?
- The Shoppers: Although, it should be clear to everyone that crowd funding is not the same that shopping in Amazon, similar motivations may apply. Shoppers will compare backing your project with buying a similar product online. Things they will care about: Are you offering a good deal? How long will it take for me get the product? What warranties do you offer?.
Pragmatists and shoppers form the bulk of the backer community out in the wild. If you are just getting started with your product development, you might find that addressing the concerns of pragmatists and shoppers is just not possible. In that case, financing your product development via multiple crowd funding projects might be a better option.
Target your first project to attract angels and extended-team. Set a campaign target that will allow you to build a prototype and start seriously talking to suppliers. Build up your credibility by delivering the first project on time.
For your second project, you will have had reduced the risk and the time to product delivery substantially. You might now be able to raise the rest of the funding or your might need a couple more iterations. Here is how the people at +Pool are doing it: