Planning, Startups, Stories


Tim Berry on business planning, starting and growing your business, and having a life in the meantime.

What Kickstarter Means to You — Maybe 5

I’ve had several visits to Kickstarter.com in the last week. First because some friends of mine are looking to launch a project there. Second, because I’m getting so interested in crowdfunding. Third, because of the Three Years of Kickstarter Projects infographic on NYTimes.com.

At kickstarter, I saw the Pebble project that’s raised more than $8 million for an epaper watch. It was at $6.6 million when I first saw it last week. This morning it’s at $8.3 million.

While I was at Kickstarter, I preordered my Phonesoap unit there for $39. I saw Phonesoap at the Rice Business Plan Competition two weeks ago. It didn’t win that contest, but it has now won $63K of the best kind of financing, without question, which is sales.

Every entrepreneur has to go look at what’s happened with that project. Take a step back, exhale, and think of this as the best possible kind of financing: prepaid sales. The people who’ve contributed to Kickstarter don’t get a share of ownership. They get future product, not yet built. And they have to fit into one of the standard kickstarter.com categories. You can get that with the NYTimes infographic.

Need I say more? Go look at it.

So what’s going on at Kickstarter? The best possible financing, sales as pre-sales or pre-order sales. It’s not technically crowdfunding, but it’s better than that, because it doesn’t dilute ownership.

By the way, speaking of crowdfunding, Myventurepad.com this week released a free ebook called The Revolution in Venture Funding, which covers the topic pretty well . Disclosure: I’m one of the authors.

  • Balfour donaldson

    Very nice to hear of company’s helping others to achieved there goals well done.

  • http://www.ugrokit.com Carrie Requist

    Both the kickstarter projects that you mention are hardware devices, which is what I am interested in becuase my startup has a consumer hardware device as part of its solution. The question comes…is Kickstarter really seed funding or is it pre-sales when you are close to manufacturing? we have working prototypes, but need funding to get to a manufactured, shipping product. We are holding off on Kickstarter becuase we can’t in good faith pre-sell when we know we would need to pre-sell close to 6,000 units in order to have the funding to get any units made (as you know there are startup costs in hardware that get amortized into the product but that you need all up front to get started like tooling). Pebble is a 4 year old company that has already received funding and already put out a similar hardware product. Becuase of that, they were able to go to Kickstarter knowing that if they raised the $100k that way their goal, then they could actually deliver. My concern is doing a kickstarter campaign and either having the set the goal to be one of the most successful campaigns ever (in the millions of dollars) or setting an achievable goal that doesn’t actually get you enough money to product product and fulfill the pre-orders. Seems that the damage from the later could easily kill a company.
    So, as a hardware startup, my take on Kickstarter is that it is an awesome way to do your pre-sales when are close to shipping or a great way to do your initial sales once you have started shipping, but that it is not a viable seed funding vehicle when you aren’t just about ready to go into manufacturing.
    Your thoughts?

    • http://timberry.com Tim Berry

      @Carrie, thanks, you have an interesting comment and an interesting question. First, disclaimer: I’m no kickstarter expert, just an interested observer and a buyer aometimes too.

      One note that might help is that when I agree to buy something on Kickstarter, the transaction goes to my account at amazon.com to make it easy, and the follow-up assures me that my credit card will not be charged until the product ships. So there is no taking people’s money and not delivering.

      Also, the normal format sets a minimum amount. If you manage that minimum, then it’s understood that unless you get enough, nothing will happen.

      The third point is that kickstarter.com is a special case. It is not normal investment funding, because the “donors” do not get stock or any ownership in your company.

      I gather that kickstarter.com isn’t for every business. If it works, that’s great.

      Tim

      • http://www.ugrokit.com Carrie Requist

        Tim -
        Thanks for your reply. We do intent to have a kickstarter campaign as a pre-sale, but not for seed funding. What I am encountering is investors and even VCs asking if I have thought about Kickstarter for seed funding.
        One thing I need clarification on in your answer…I know you won’t be charged unless the project meets it minimum, but I believe in Kickstarter, you are committing the money before the ship the product. Otherwise it is not pre-sale, it is just sales. I occasionally fund kickstarter campaigns and I am always charged when the campaign closes and then wait for a while to get my goods. So can you clarify this for me?

        thanks,
        -Carrie

        • http://timberry.com Tim Berry

          Carrie, clarification: last week I ordered my phonesoap product on Kickstarter.com. As part of the transaction they told me that my credit card will not be billed until the product ships. The campaign had already closed, however, maybe that’s a detail that matters. Tim