How To Avoid a Failed Crowdfunding Campaign for Your New Product
Successful crowdfunding requires a well-thought-out plan and a lot of intentional upfront work.
This technique enables startups to get assistance and financial support from a large number of people, via an internet platform.
However, utilizing crowdfunding necessitates a well-thought-out plan and a lot of intentional work.
I launched my own hardware product with a crowdfunding campaign back around 2010.
But, I had no online audience back then, so I was unable to generate any momentum at all.
My assumption at the time was that people would just find my product on Kickstarter’s platform, immediately fall in love with it, and want to invest.
Oh, how wrong I was!
I ended up with mainly just my closest friends and family investing, and the campaign was a total failure.
Why? Because no one knew about me or my product, or more importantly had any level of trust in me.
This article will hopefully help you avoid the same newbie mistakes I made with my crowdfunding campaign.
The Smartshoe Example
A few years ago the Digitsole Smartshoe, the “world’s first intelligent sneaker,” was unveiled on Kickstarter with the intention of raising enough money for production costs.
The high-tech shoe was designed to incorporate a number of technologies, including Bluetooth and GPS, fitness tracking, step counting, a smart heater, auto-tightening, a 3D walk analyzer, and a charging port.
The campaign started with a financial target of $100,000, and they were asking for backers to pledge $390.
However, the startup failed to draw a sizable number of supporters and was only able to raise 50% of the target goal.
This was due, in part, to the Smartshoe’s relatively high price (retail $599), which many potential backers felt was excessive given the features it offered.
The Smartshoe’s design was also not particularly appealing, and many people believed that it would not be useful for daily use.
The Smartshoe did not have a significant presence online, and there was little marketing and promotion of the device.
The campaign simply had a hard time reaching a large audience and creating buzz.
They committed another common mistake by failing to conduct adequate market research and validation.
This prevented them from determining the true demand for their product or from knowing how much consumers were really willing to pay for it.
Although a lot of factors contributed to the Smartshoe campaign’s failure to reach its Kickstarter funding goal, they aren’t alone.
In fact, over 300,000 projects have failed to reach their fundraising goals on Kickstarter!
More campaigns fail than not, and the failure rate for fully funding a project on Kickstarter is 59.88%.
In this article we look at the important factors for conducting a successful crowdfunding campaign, with tips on avoiding the most common mistakes.
Educate Your Customers
The development of an engaging and educational campaign is one of the first steps in raising money via crowdfunding for a new consumer electronic product.
Detailed information on the product, including your product’s characteristics, its advantages, and any and all prospective applications, should be included in your campaign materials.
This is especially true if your product solves a problem in a new and novel way, since customers may not understand at first glance how it works.
Be clear and concise with how you describe your product and how it operates to potential backers of your campaign.
Be sure to describe your product precisely in both your text and visuals.
Campaign Photos and Video
Professional quality product photos and videos are essential to educating potential investors about your new product.
Your crowdfunding campaign must contain a video that offers a thorough examination of the product, its features, and its possible effects on the market.
To create a winning video, start with a concise and persuasive script that highlights the salient benefits and features of your product.
To ensure that the video is clear and visually appealing, choose (or hire someone with) high-quality video equipment, such as a DSLR camera or a smartphone with an excellent camera.
Include pictures of the product in use and close-ups of its most important features.
Displaying actual users interacting with the product will help potential funders relate to it and picture themselves using it.
Ideally, the video should be no longer than two to three minutes in duration.
To keep the audience interested, make sure the video is well-edited and has music, sound effects and/or narration.
To draw attention to important details and provide more information, use text overlays or captions.
To keep the attention of the viewer be sure to have frequent visual changes every few seconds.
Before starting your campaign, test the video with various audiences to collect feedback and make any necessary adjustments.
Finally, be sure to include subtitles and optimize your video for mobile viewing.
I highly recommend you look on Upwork or similar freelancing sites to contract out video editing and product photography.
It really is worth the money to hire someone to add stock video clips, text, special effects, etc.. to your video. Luckily, you can find experienced freelancer video editors for a reasonable price these days.
You can easily mail your product to a professional photographer to create stellar product photos or to shoot the product video.
If you have a decent set up yourself, maybe you can get by just contracting out someone to touch up or digitally alter your existing photos or video content.
Although, for a quality video you must have great lighting, and there is only so much improvement that can be made to a poor quality video.
In any case, make sure you put your best visual foot forward.
You want potential backers to trust you, and for your product to look legitimate and worthy of serious investments.
Explain Your Financial Plans
Potential campaign funders will want to know the answer to this important question – how will my money be used?
Your campaign needs to communicate a thorough plan for how the cash that is raised will be utilized.
You should also include clear and achievable financial goals.
When describing your financial plans to potential crowdfunding investors, it is important to be clear and transparent about how the funds raised will be used.
This includes providing a detailed breakdown of expenses, such as production costs, marketing expenses, and any potential risks or challenges that may arise.
If you want to go into more detail with estimating your costs, you might be interested in my articles on how to estimate your manufacturing costs.
It is also important to explain your revenue projections, including how you plan to generate revenue and how you plan to scale your business in the future.
This can help investors understand the potential return on their investment.
Another important aspect to highlight to potential funders is the team behind the project.
In fact, in many cases the team behind the product is more important than the product itself. This is especially true for larger investors.
Talk about the founder’s experience in fields that relate to the product, and list any advisors or partners that are, or will be involved.
This can help backers feel more confident in the project’s success.
It’s also important to be honest about any potential financial risks or challenges that may arise during the project, and have a plan in place to mitigate those risks.
This can help backers make an informed decision about whether to invest in the project or not.
It’s crucial to be transparent, clear and honest about your financial plan and projections, the team behind the project, revenue generation, and any potential risks.
From my experience, most founders tend to overestimate financials especially when it comes to revenue growth.
Unrealistic financials are a big red flag to investors, so be sure to have an experienced advisor review your growth forecasts before sharing them.
Build an Audience and Community
You need to begin building an audience of people interested in your product or product category as soon as possible, ideally simultaneously while you develop your product.
Creating a vibrant and active community around your product is even better!
Social networking, email marketing, and other internet marketing strategies can be used to accomplish this, but I always recommend that you prioritize your own website and content.
Generating valuable content related to your consumer product is one of the best ways to build an audience of interested buyers.
Organic traffic to your website takes time, and paying for visitors is only a short term strategy.
Building an engaged audience allows you as the founder to generate excitement and buzz about your product, which can help you to gain additional supporters and boost your chances of success.
A strong PR and media plan is also crucial because media attention can significantly raise your campaign’s visibility and credibility.
Offering Something of Value to Investors
Typically, crowdfunding campaigns on Kickstarter and Indiegogo provide benefits to investors in exchange for their support.
This is not to be confused with equity crowdfunding where you give away a portion of your company, which is not the subject of this article.
To encourage individuals to donate to a given campaign, you need to think about how best to offer benefits or awards to backers.
For the Smartshoe Kickstarter campaign, in exchange for a pledge of $229, the company offered 1 pair of Digitsole Smartshoes at 60% off their retail price of $599.
Discounts from the retail price is a common reward for investment in the campaign, so consider offering a steep discount to backers of your campaign.
Some other examples include offering early access to your product to funders, so they can use your product before the broader public is allowed to.
Consider if you can offer a limited-run or special edition version of your product to investors.
Some campaign creators will offer a meet-up or a video call with investors as a thank you to any backers.
Your specific product, and the amount pledged by backers to your campaign, will determine the best benefit or benefits you should offer, with higher-level investments leading to more valuable or unique goodies.
Early access to the product at a discounted price, future purchase discounts, or even exclusive goods are all benefits you should consider.
Market Now and Build an Email List
Don’t expect success from merely posting your product on a crowdfunding website like Indiegogo or Kickstarter.
It is absolutely critical that you have ways to drive potential customers to your crowdfunding campaign.
You can’t leave it up to organic traffic, and random visitors to these sites.
Possessing an effective network of contacts is crucial for crowdfunding.
This is why I always talk about the importance of marketing your product to potential customers before development is completed.
If you haven’t done so already, start gathering the email addresses of potential customers.
While social media can get the word out, you are still dependent on a third party platform to communicate with your customers, so have your own website as well.
You can easily spend years building up followers on different platforms like Twitter or Instagram.
But what happens if you get booted off the platform, for legitimate or illegitimate reasons?
If you don’t have an alternative way to contact followers, you will have wasted all that marketing work and effort.
So make sure to always get the email address of any and all potential customers.
Prioritize your own website and building your own contact list. Use social sites to funnel traffic to your own website and email list.
Also, don’t neglect people in real life, or as my 10 year old son would say “IRL”.
You should try to establish connections with influential people, subject matter experts, local media, and possible backers who can help the campaign become more visible and draw in more support.
Be Honest with Backers
It’s critical to be open and truthful with your supporters and to keep them informed of the campaign’s development.
By doing so, you might be able to win over potential backers and boost your chances of success.
If your delivery time for first production units is slowed down for some reason, be honest and upfront with your backers.
Be sure to give updates on changes, and never overpromise.
It’s difficult for first time product entrepreneurs to not overpromise, especially when they are optimistically natured and have high hopes for their product.
Just about every aspect of developing and manufacturing a new product takes longer than expected.
This is true for experienced entrepreneurs, and it is especially true for anyone doing this for the first time.
This is why you need someone on your team, such as an advisor, who can help you avoid overpromising to your backers.
Communication is key, since many crowdfunding campaign backers enjoy being a part of your product’s development journey.
If you keep backers in the loop with honest communication, delivery delays probably won’t be a major problem.
Most people will understand that production delays are common for a new product coming from a new startup. But they will only be accepting for so long.
Other content you may like:
- Lesson 3: The Strategic Way to Develop and Sell Your New Electronic Hardware Product
- The Importance of Early Marketing, Selling, and Networking for Hardware Startups
- 8 Tips to Ensure Your Hardware Startup Will Succeed
- The Right Way to Bring a New Product to Market
- Episode 32 : How to Build an Audience for Your Product with Craig Rettew