If you have a goliath trust fund or friends featured on The Rich Kids of Instagram ready to write you a check, pass go, collect your $200 and skip the first section below. For the rest of you, let’s talk crowdfunding.
Step 1: Choosing a Crowdfunding Platform
If you meet the Kickstarter Guidelines, go with Kickstarter. Kickstarter is the market leader, has a better interface, and is a well-known brand. However, it can be hard to get past Kickstarter’s strict Guideline #1 against using the platform to fund a startup: “starting a business, for example, does not qualify as a project.” The company explicitly says that Kickstarter is “a place for products with strong aesthetics. Think something you would find in a design store, not ‘As-Seen-On-TV’ gizmos.”
Don’t worry if Kickstarter denies you — we’ve been there and can feel your pain.
My buddy and I are selling the PillowPocket, a pillow case with a pocket for your cell phone (high in function and utility but with really simple aesthetics). We had a compelling project story, developed a customer-ready prototype, and lined up manufacturers so that campaign contributions were directly linked to product rewards. Despite a valiant attempt, we were denied by Kickstarter, so we recently re-launched our project on Indiegogo. Fortunately, repurposing our Kickstarter campaign took about three hours and we went live immediately (Indiegogo has an automated approval system, whereas Kickstarter does approvals manually).
Note: If you aren’t from the US, you have to go with Indiegogo as Kickstarter only allows US projects at this point.
Step 2: Check You Have an Original Idea
You probably don’t have an original idea, but it might not matter. “Google-ing it” is a more effective market research strategy than most people give it credit for. By way of example, we queried “cell phone pocket pillow case” and the only direct competitor on the first page was someone selling a one-off product on Etsy (a hand-made arts and crafts marketplace). You may want to scroll a couple pages deep when performing your market check, but keep in mind that the average consumer won’t do this. If your product or business idea isn’t on the first page of Google, there is a market opportunity (perhaps you just have to beat your competitors in the search engine optimization game).
Two additional resources that are worth reviewing in your diligence are Quora and Yahoo Answers. Both have enormous Q&A databases. The key difference is that Quora helps users enlist “expert” talent. A keyword search will enable you to identify specific individuals with expertise in your market, as well as individuals that may have a need for your product. Further, you can pose your own questions and solicit responses (Quora has a gamified system that incentivizes domain experts to contribute).
Step 3: Make Sure You Have a Market
Are you solving someone’s problem? If so, as long as you can communicate your solution to the folks that have that problem, you should be able to sell a few. By searching the common social media sites, you can quickly establish whether or not there is a market for your product. As an example, there are several hundred thousand people who have joined Facebook groups indicating they sleep with their phones. Therefore, we felt comfortable there would be a market we could address. Given the propensity for folks to post or comment about every facet of their life on Facebook, you probably have a good chance of digging up a few niche audiences that are highly relevant for you product.
Step 4: Making a Prototype
Most likely, you won’t be the one making it. We wanted to make a pillow case with a phone pocket and had never sewn anything in our life. Therefore, we used TaskRabbit to connect with local talent that could sew pockets onto pillow cases. Outsourcing your prototype isn’t a bad thing, and you shouldn’t be worried about someone stealing your idea. There are many good ideas; it is the execution of a plan that determines success and failure. If you’re going to be making your own prototypes, consider outsourcing certain elements as a means of shortening the iteration cycle.
Step 5: Manufacturing A Bunch of Your Product
If you are going to have any reasonable margins, your materials probably won’t be coming from a first-world country. The simple recommendation is to go to Alibaba and trust your gut. It can be hard to develop a cross-border business relationship, so start with a small capital commitment and wait for the supplier to prove credibility by delivering the initial order (asking for additional product photos helped us get comfortable too). Also, leveraging Skype can help (after all, building buyer/seller trust was eBay’s strategic rationale for originally acquiring Skype).
Goods are easier to purchase overseas than services, it may be worth the extra cost to keep labor in the US initially. Oftentimes, communicating the vision of the final manufactured product is best done in person or on the phone with someone who speaks your language fluently. Proximity can be really important if you need to tweak your final product specifications.
Step 6: Making the Crowdfunding Video
You need a video if you expect to raise any money on a crowdfunding site. If you are committed to staying in your office chair, you can use your webcam or Xtranormal, a 3D avatar technology that converts text to on-screen audio and visual. After a few awkward webcam trials, we decided to go with Xtranormal. We went through ~15 re-writes in order to get our messaging correct, but each re-write was performed in under an hour.
Depending on your product story, you may elect to produce it professionally. Regardless, consider rehearsing the script using a webcam/Xtranormal so you iron out some of the potential wrinkles, which will save you both time and money.
Step 7: Avoid Stupid Mistakes
Don’t think you are too cool for legal stuff.
You may be able to purchase materials through Alibaba as an independent, non-incorporated entrepreneur, but at some point you will need to form a legal entity, get a tax id number, and obtain a seller’s id (you don’t want to end up paying sales tax on the goods from your manufacturer). We used RocketLawyer, an all-you-can-eat subscription online legal service provider, to make our business legit. But it took several weeks for the state government (California) to process our paperwork (we elected not to pay $480 to expedite it). Our naivety led us to believe that we could test out the market demand before figuring out the legal issues. Not the case, so start figuring it out early in the process.
Despite our use of outsourcing technologies, it still took us about two months before we launched the PillowPocket crowdfunding campaign (legal issues slowed us down). However, we were able to do everything without leaving our office. The high-level take-away is that there are tools and platforms online that enable entrepreneurs to “quick-start” a business. Many of the tasks are consistent project-to-project, so we hope you’ll benefit from our experience. If you have any additional questions, please feel free to leave a comment and we will gladly respond (especially if you buy a PillowPocket!).
[Top image credit: oksana2010/Shutterstock]
VB’s research team is studying mobile user acquisition: Chime in here, and we’ll share the results.