Pebble Technology, the startup behind Pebble Watch, couldn't find venture capitalists to back it. But within 28 hours of putting the project on Kickstarter, it had raised more than $1 million.
Pebble isn't the only hardware startup to run into fundraising roadblocks before finding success on Kickstarter.
As Robert Fabricant, a vice president at product design firm Frog, put it in a recent Fast Company article: "It is still damn hard to get a VC to go along with any startup involving hardware, unless you have already locked in distribution with Best Buy or Walmart."
Kickstarter, meanwhile, favors cool gadgets that can be easily demonstrated in videos over the apps and cloud-based software that have become VC darlings. The top six most popular tech projects on Kickstarter this week are all hardware projects.
But it's more than just funding opportunities that Kickstarter affords for hardware startups. By exposing new products to an engaged audience early on in their development, it also allows them to develop products more like software companies — proving market demand and incorporating feedback as they go.
Gauging Interest
"Too many startups begin with an idea for a product that they think people want," writes Eric Ries in the Lean Startup. "They then spend months, sometimes years, perfecting that product without ever showing the product, even in a very rudimentary form, to the prospective customer."
Reis's bestselling book suggests startups release early, incomplete versions of new products and iterate frequently in order to avoid making a large investment in something that nobody wants.
But it's a lot easier for software companies to distribute a minimum viable product than hardware companies. Proving that a new hardware concept will take off usually requires the time, materials and manufacturing costs to actually produce it.
Kickstarter, however, introduces hardware products well before they're ready to be shipped. It reduces risk because funding literally depends on how appealing a product is to consumers.
The process can make a company just as easily as it can dissuade one from pushing ahead with a product.
When Dan Provost and Tom Gerhadt put up a campaign for an iPod tripod mount called Glif in 2010, for instance, they didn't intend to start a company. When Kickstarter users responded by pledging $137,417 for a $10,000 goal, however, they created Studio Neat, which has since released two additional products and one more Kickstarter campaign.
"The outcome of the first project definitely blew us away — we did not expect to raise that much money," Provost tells Mashable. "We kind of fell into having a business."
Pre-User Feedback
Instead of inserting a string of babble into your prose, which is what usually happens when you rest your fingers on the iPadâ??s keyboard, Steven Isaac's TouchFire — a keyboard overlay for the iPad — doesnâ??t set off a single key when you rest you fingertips on the product. Its defined keys make typing while looking away from the screen possible, and its silicon body is an improbably thin and flexible solution to a problem usually solved with clunky plastic add-ons. It is, in other words, pretty handy.
Kickstarter users who viewed the gadget's demo video had just one complaint: The clips that attached Touchfire to an iPad cover for storage outside of the case looked clunky.
With this feedback, Isaac was able to redesign the clips before starting the manufacturing process.
"Whenever you develop a new product, you usually have to do it in this cold and lonely design studio where youâ??re making your best guesses on what it should be," Isaac says. "When we were developing TouchFire, we got user testing. You can usually only do that with a handful of people, whereas with Kickstarter, you now have thousands of people engaged in your product…It's a whole different way of doing product development."
A New Startup Route for Consumer Products
Kickstarter gives hardware companies some advantages when they are developing new products. But it's not a perfect system.
For one, companies can underestimate how much money they'll need to actually manufacture a product. Even if a startup does the math correctly, it may set a goal lower than necessary in order to avoid missing it and gaining no funding at all.
Pebble Founder Eric Migicovsky said he set his $100,000 goal high enough to make about 1,000 watches. Isaac says that his $10,000 goal for producing TouchFire would not have been enough (though the $200,000 he ended up raising "has been just fine").
Scott Wilson didn't have a cash problem after raising $942,578 for two wrist straps called TikTok and LunaTik, which transform the iPod nano into a watch; nonetheless, he thinks it's easy to underestimate costs. "People see the total [money] raised on Kickstarter and don't always consider that amount against the significant investment that we made with TikTok+LunaTik in order to get more than 20,000 units into production, packaged and starting shipping to our Kickstarter backers in less than 2 months — a turnaround time that was incredibly fast and nearly unheard of for a consumer product."
Kickstarter requires the creators of successful funding campaigns to refund any backer whose reward they cannot fulfill.
Even with these risks, however, the fundraising platform is creating new opportunities for hardware companies that extend beyond capital.
"I think we are at the start of a very interesting revolution in the way that consumer products are getting started up," says Isaac. "This reminds me of what it was like with software in the early '90s. You can now build things, real things, and do it with a small team."
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