Zach Supalla is founder and CEO of Spark, a hardware startup making products for the connected home, starting with connected lights. Zach has a background in product design and development, and he formerly worked at Groupon and McKinsey & Company.
On November 13, 2012, my company launched on Kickstarter. Thirty days later, on December 13, 2013, our Kickstarter campaign closed, with $125,588 raised from 1,601 backers. Because we had a funding threshold of $250,000, that means that the campaign was unsuccessful; credit cards will not be charged, and in a way, it's as if the campaign never happened.
However, in our first three hours of re-launching with our own pre-order site, we had $20,000 in pre-orders. In our first two days, we sold half as many units as we sold in our entire 30-day campaign on Kickstarter. And our startup is most definitely not the same company it was before the campaign. We've been featured on tech and gadget websites, we've been accepted into a hardware-focused incubator called HAXLR8R and we"re speaking with a number of interested investors and business partners. It"s pretty great.
In many ways, our Kickstarter campaign, despite not hitting our goal, was exactly what we needed. We got enormously valuable feedback directly from consumers and early adopters; we got great visibility; and perhaps most importantly, we learned a ton. Today I'm here to tell you what went well, where we struggled, and what we learned.
What went well, and why?
General reception to product. Before the campaign launched, I wrote in a blog post that the biggest question I wanted to answer was: When push comes to shove, will people take out their wallets, their hard-earned money, and actually buy our product? I am happy to say that the answer is a resounding yes. People like the product, they're excited about this space (the connected home), and they want more. We know our initial efforts weren't perfect (see below), but we now know that we should move forward with this product because people want it.
Visibility. We were featured pretty much everywhere you could ask to be featured with a product like this. Lots and lots of people learned about us through articles in a variety of online publications, and we've got more lined up, including some long lead-time publicity-like magazines (I know; apparently some people still consume content on paper). Mostly, this happened through good old-fashioned hard work; we sent out a lot of emails (apologies to any journalist who saw me as one more email to deal with in their inbox. I love you all). Some of the publicity we got came from warm connections through investors and advisors; it's always good to have a warm lead. But mostly we got press because the journalists we spoke to said "This looks cool," which proved to us that our product is cool enough to generate buzz on its own.
Investors. We created a $10,000 partner level on the campaign that said, "Hey, big spender. Let's talk." While we did not take any equity investments during the campaign, just having this on our Kickstarter site was enormously valuable, because it helped us start conversations with a dozen different angel investors, most of whom we are continuing conversations with today. Signaling that we were interested in and open to investment was big.
Branding. We want our product to represent simplicity — a new, powerful technology that's incredibly easy to use. I think we did a good job expressing this in our Kickstarter video and campaign, and when we got comments about why people prefer our product to competitors' offerings, it was often this simplicity that mattered most. We've also got some press coming up that highlights this, where our product is being featured as a "tech product for non-geek.". As a geek myself I hope that it's also great for geeks, but when we want to see our product on the shelves at Target, the Apple store and Best Buy, it's important that we are perceived as an elegant and accessible technology.
Where we struggled, and why:
We couldn't sell multiple units. A few weeks before we our campaign went live, Kickstarter published that “Kickstarter Is Not A Store†post and tightened the rules and restrictions on hardware products. Most of these changes didn't affect us, but the one that hit us hard was disallowing orders of multiple units. No matter how enthusiastic our backers were, they couldn't order multiple products. Right now on our pre-order site, the average order is for 2.3 units; if the average Kickstarter backer had ordered 2.3 units, we would have blown past our goal. I respect the changes that Kickstarter made and their reasons for doing so, but it's frustrating that we can so clearly point to this rule as being the make-or-break factor for our campaign.
Our funding threshold was too high. Going on Kickstarter without funding in hand is incredibly risky. Too many products fail because they realize that the funding they asked for was not enough to cover their project expenses. We worked with Dragon Innovation to come up with a realistic budget, and there was no way to get the goal down below $250,000. Why so high? Well, we were conservative with some of our assumptions, because we didn't want to take risks with customers' money. We also excluded low volume manufacturing from the get-go because our product has an integrated, custom power supply, and that is not something you want us making in our garage. In the end, we decided that the risk of not being able to deliver to backers was more important than the risk of not hitting our goal. I'm glad that we made this decision, because if we had taken a risk and set a lower goal, although we would have looked more successful, we would now be scrambling to figure out how to deliver.
Our price point was too expensive. One of the challenges of being a small hardware startup is managing your Bill of Material cost; it's hard to be cost-competitive with big companies when you're manufacturing in low volumes, as every component is more expensive, and you may not have access to some low-cost technologies that require very high volumes (in our case, Wi-Fi chips). There are two strategies for managing this; either charge a higher price, knowing that you'll reduce the price point over time, or subsidize the product until you can get the costs down enough to make it profitable. As a mostly-bootstrapped startup, we couldn't subsidize our product, so we were only able to charge a higher price than we would have liked. However, during our Kickstarter campaign, we made some cost reductions to our product that made it possible for us to sell the product at a lower price of $49.
Launching our product weeks after two similar products (LIFX and Philips Hue) were announced wasn't the best timing. We've got a number of advantages over both LIFX and Hue (lower cost; the ability to use any type of light bulb; better software, and a stronger app-development environment that will lead to more and better apps; no need for a "hub" and a new wireless technology to manage in the home). But launching directly after both of them was unfortunate bad timing. In the world of hardware launches, products are often considered on tech specs alone, and, at face value, some folks would say that because LIFX and Hue each include an LED bulb, they're better products. In the real world, user experience, distribution and reviews and references from trusted sources matter a lot more than tech specs. We're confident that we'll be able to deliver a better experience than either Hue or LIFX, but we'll have to wait until the product is delivered to prove that to our customers. And in the meantime, the feedback we've gotten helps us understand how best to communicate our differences and our advantages.
In the end, I am ecstatic about the potential of our product, and I don't think I would have done anything differently with the Kickstarter campaign. We didn't do everything perfectly, but we did a lot of things right, and we're learning from our mistakes and making changes to improve our product. Although other crowdfunding platforms (most notably Indiegogo and Lockitron's fabulous Selfstarter) offer a lot more flexibility, the visibility we got on Kickstarter was unmatched, and it's that visibility and traction that is exactly the rocket fuel we needed to take our company to the next step.
So what is our next step? Moving to China for four months with HAXLR8R to set up manufacturing operations; raising a private investment round; growing our company and our team. We've got big plans and we're excited about where things are going, and we wouldn't have been able to do it without Kickstarter.
Image courtesy of Flickr, AMagill, Zach Supalla
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