In April 2012, Eric Strasser raised $60,000 to support production of the tiltpod— the first pocket-sized iPhone stand to take perfectly framed photographs anytime/anywhere. Later that year, Sylvia Marino and Cheryl Kellond, Co-founders of Bia Watch, raised more than $400,000 to help get their startup off the ground. Eric and Sylvia recently shared their experiences and suggestions with CareerFuel.
Tiltpod—Founder Eric Strasser characterizes this fundraising stage of development as “validation.” His company, Gomite.com, set out to use crowdfunding as a way to underwrite the costs of initial production while simultaneously creating happy customers. The Kickstarter tiltpod campaign, which included a superb video, was indeed successful—with a goal of $10,000, he raised almost $63,745 in one month from 2,463 contributors. Eric estimates that the marketing value alone was worth $100,000 in distributor contacts, sales and direct mail list creation.
“Key to a campaign’s success are managing the expectations and objectives,” says Eric. Pre-revenue startups must have a product to offer, should see the goal as getting started (not fully funding a startup), should be able to deliver the product on time and at the estimated price and, lastly, should have a plan that goes beyond the one product. Donor expectations also have to be managed, according to Eric. People who donate are customers, not investors, therefore expectations must be managed and promises kept or the fallout will be public and ugly.
Tiltpod is not the “golden egg” for Gomite says Eric, recognizing that being a one-product wonder is a dead-end unless the product meets a very big market need. His success with Tiltpod will increase their odds of attracting investment capital for expansion and to support other new product ideas.
Bia Watch—Co-founders Sylvia Marino and Cheryl Kellond are well connected to the investment community in Silicon Valley due to professional experience at firms such as Yahoo, eTrade and Edmunds.com. Based on this experience they initially turned to venture capitalists, Golden Seeds and Angel investors in an attempt to raise $1.5 million for their Bia multi-sport GPS watch. All of the investors whom they approached said no. Borrowing from their experience as mothers who “know how to get things done with less,” they decided to crowdfund for the amount needed to build the watch and “prove concept.” Sylvia and Cheryl met their goal of $400,000 in just five weeks with the help of 2,118 funders. Successfully achieving their initial crowdfunding goal, they are now closing a round of angel investment to complete their fundraising needs. A venture capitalist who had introduced them to an angel investor before their crowdfunding success assisted Cheryl and Sylvia in connecting to their new investors.
Sylvia’s advice to others considering this approach is to plan carefully, paying careful attention to costs and production timetables. She highlights the importance of being transparent when people ask questions on the platform (of which there can be hundreds), and recognizing that the process will not be easy.
She and Cheryl had rarely asked for anything from their existing social network but had paid a lot forward. When they launched their campaign on Kickstarter they aggressively courted their network and did indeed receive support from most who knew them.
Bottom line, both parties needed a large social network to achieve their fundraising goals and they had to shamelessly and intelligently ask for the sale. In addition, these entrepreneurs did a lot of prep work so they could realistically project manufacturing schedules in order to manage donor expectations. They also had a plan for success that went beyond the single crowdfunding campaign.
Crowdfunding is a highly public way to succeed or fail. One of the greatest benefits of this fundraising option is that unlike the private, networking nature of angel and venture capital fundraising, crowdfunding is an open book. Anyone can go to Kickstarter.com and read about a project, post questions and learn. That visibility gives those considering crowdfunding a unique opportunity for market research. Don’t miss out on it!
AnnMarie McIlwain is a savvy businesswoman with a visionary feel for market timing and opportunities. For the past fifteen years, AnnMarie has run her own consulting firm specializing in new business development for Fortune 500 companies such as J & J, Schering-Plough, Novartis, and Mellon Bank. A recipient of numerous civic and leadership awards, AnnMarie has a long-standing commitment to social enterprise and community engagement. In 2009, her husband was laid off from his marketing job. His job search, and the plight of over 23 million other Americans like him, inspired AnnMarie to create and invest her savings in CareerFuel.
Image credit: CC by Felipe Menezes