For years, crowdfunding has been a great option for entrepreneurs and innovators looking to bring their product ideas to life. Some have succeeded with their product crowdfunding, while others have failed. We have heard many stories of customers who have tried crowdfunding and other methods for funding their projects, we even carried out a successful crowdfunding campaign with our open source macropad.
This is why we wrote this simple guide to product crowdfunding, which will clarify for you the different aspects to consider when you are looking for potential backers of your product.
What is product crowdfunding?
In simple terms, product crowdfunding refers to the process of raising money from hundreds or thousands of people to finance its development, manufacturing, and distribution. Let’s say you have a product idea you want to build, but you only got to the prototyping stage (see IoT prototyping). The market won’t buy a product that isn’t finished, so you need to invest money for its development and further mass production.
Is product crowdfunding for you?
This is a common question we ask many of our customers. Some of them have a big budget for going mass production, while others just have an idea and want to test it to see its feasibility (see PoC examples).
If you are a startup and it is your first IoT device or prototype, you need to consider first carrying out some tests before advancing to another phase of the product development plan.
If you have already gotten the results from your tests and they proved to comply with the basic features you want to offer, you could continue with the crowdfunding process.
On the other hand, let’s say you only have an idea, that is, you don’t have a physical prototype which you can show people. Though you could start a crowdfunding campaign, you need to understand that the money you raise will be only for building the first prototype, and you need to deliver some results to your backers.
A first prototype may or may not be feasible, so there is a high risk the first version doesn’t work out as you planned. In this situation, you need to demonstrate to your backers you are really committed to your project (investing more money and time on its development), otherwise, they won’t support you again, or even, they won’t believe in your idea from the beginning.
To sum up, we think it is better to have at least a prototype people can see, and from that point, show them how it works or what it can do. Another strategy is to use rapid prototyping, and this can be a different way to get the attention of potential investors in the different crowdfunding platforms. Refer to the following articles for more information:
How to raise money for a prototype
There are several crowdfunding platforms entrepreneurs, inventors and startups can use to raise funds and validate their concept. As a recommendation, we suggest you check the platforms that best suit your product idea, and that have a good background in funding other projects similar to yours.
1. Choose the right platform for crowdfunding your prototype
Taking the previously into account, you could start by checking platforms like Kickstarter, Indiegogo, and GoFundMe. This is just a starting point, there are several places that offer crowdfunding services.
Check their policies, limitations, and conditions, since they will dictate if your crowdfunding campaign is successful or not according to the amount of money you set as a goal.
Each platform has its unique features, so research and pick the one that aligns best with your project’s goals.
2. Set clear goals
Many projects fail in the first stages because the entrepreneurs aren’t sure about how much money they need to develop their prototype (see what is product development strategy). The recommendation here is to define your funding goal accurately. What aspects should you consider?
- Production or development costs
- Product updates that are necessary
- Embedded software development service
- Software development
- Manufacturing of hundreds of units
- Marketing
- Shipping costs
- Unexpected expenses.
Your backers will appreciate it if you show them in detail how you are going to invest their contributions.
By analyzing these aspects, you will be able to calculate the amount of money you need to take your product to a new level. If during the planning process you discover you need 15,000 dollars, you will be certain of what crowdfunding platforms can be a good ally in the process, and what happens with the collected money if you don’t reach the 100% of your goal.
In other words, would you be able to continue with the development of the product if you get less money? Would you get funding in other spaces?
For instance, this was the campaign we made for our macropad. We initially set a goal of 5,000 dollars to start producing this device, however, our campaign was so successful that we surpassed the goal and got over 300% in funding (16,400 dollars).
By applying almost all the steps of the present guide, we could get great results in our product crowdfunding campaign.
3. Define the core message of your product crowdfunding campaign
Your crowdfunding idea is the foundation of your campaign. It should be unique, innovative, and solve a problem that resonates with your target audience. Take the time to validate your idea and gather feedback before launching.
Another strategy is to start a pre-campaign or pre-launch, you can generate expectation by reaching out to a close circle of friends or potential investors that might be interested in your product. You can make a compelling presentation about your goals with the project, and offer them the opportunity to be the first backers of your project.
Also, consider reaching key groups for potential backers through social media, email newsletters, and teaser videos.
Once the crowdfunding campaign is operating, you will already have backers ready to fund your project. The idea here is to motivate the first backers of your crowdfunding idea with special rewards, or more shares of your company, if you plan to do so.
4. Show a good product for crowdfunding your inventions
Before you launch your campaign, having a “functional” prototype is essential. It demonstrates that your concept is not just an idea but a tangible product in development.
If you need to develop a good prototype, consider reaching out to manufacturers or get hardware development services to bring your idea to life.
5. Create a detailed business plan
A well-structured business plan not only helps you stay organized but also instills confidence in potential backers. Include a clear timeline, budget breakdown, and IoT marketing strategy in your plan.
6. Work on social proof
Building credibility is crucial for product crowdfunding success. Share any awards, endorsements, or media coverage your project has received.
Testimonials from satisfied customers, early adopters of technology that have tried your product, or industry experts can also boost your campaign’s credibility.
7. Engage with your backers (crucial for crowdfunding products)
Communication is key during your campaign. Regularly update your backers on your progress, respond to questions promptly, and express gratitude for their support.
Engaging with your backers can turn them into loyal advocates of your business idea or prototype.
8. Offer attractive rewards (special tip on how to crowdfund)
Crowdfunding a prototype requires you have something in return for your potential backers. We mentioned above about the possibility of providing exclusive rewards, like early-bird discounts, limited-edition versions, or exclusive merchandise related to your product.
Another option is to share a participation of your company with the backers that contribute the highest amount of money. This is optional, since you need to be careful on who can be a partner of the company.
As an important reminder, make sure the rewards you give to your backers match different budget levels. This encourages people to contribute more, since they have different options for the product crowdfunding.
9. Post-campaign marketing after crowdfunding prototype
Don’t think your crowdfunding campaign ends when you collect the money you needed for your prototype, the journey is far from over.
The idea is to continue marketing your product to a wider audience, and consider expanding to retail or other distribution channels. A successful crowdfunding campaign can be a launchpad for long-term success.
10. Be prepared for delays
Production and shipping can often encounter delays. It’s crucial to communicate any setbacks transparently with your backers and manage their expectations.
Delivering on your promises is paramount to maintaining trust. Even if you have delays in the deadlines, if you show them what happened and that you are working on solving the problem, they will surely understand.
11. Seek professional guidance
Crowdfunding can be challenging, especially for first-time creators. The recommendation here is to look for experts that have succeeded in product crowdfunding campaigns.
Maybe look for companies or entrepreneurs that can provide you with good insights for your project, crowdfunding platforms, deadlines, and estimated budgets.
As you can see, success in crowdfunding products is a combination of having a brilliant idea, effective marketing, and a well-executed campaign. Don’t rush the process, rather, plan the steps you need to achieve your goals, and we are sure you will be pleased with the final results.
We hope you liked this simple guide to product crowdfunding. As we previously mentioned, this guide can be a great way to know how to raise money for a prototype that is ready to advance to a new stage. However, if you feel you are not yet ready for the crowdfunding process, and you are wondering where to get a prototype made or you need IoT product design and development consultants, DeepSea Developments is here to help you out.
Just click on the link below and book a free consultation regarding your product idea. We will gladly listen to your questions and try to guide you throughout the prototyping process.
