When a startup is trying to launch a new product, thorough research and choosing the right business model are musts. But sometimes, even after meticulous planning, product launches still can go awry or — even worse — not even get off the ground.
Why? Many times, the problem involves funding, or lack thereof. Typically, money comes from investors who want equity in exchange for financial backing. But during the last decade, an alternative form of funding projects has emerged, and it doesn’t involve stuffy formal boardroom meetings or gut-wrenching presentations.
Welcome to the world of crowdfunding.
Born primarily online, this alternative is a way to raise money for a project by soliciting donations from myriad “backers.” Here’s how the process works: An inventor or startup company typically posts its product on a crowdfunding website — IndieGoGo.com, GoFundMe.com and Kickstarter.com are most popular — and sets a target monetary goal. When it’s reached, the onus is on the company to manufacture the product.
What motivates backers to fund a project? Many people rally around friends’ projects. Others may be motivated by its rewards: a related custom experience, or a copy or limited edition of what’s being produced, according to crowdfunding website Kickstarter. In fact, the latter is a great way for a company to get its first orders filled with the promise of more to come.
Crowdfunding campaign goals and deadlines are set by their creators. If a project succeeds and the goal is met, backers must pay the amount they pledged. If the monetary goal is not reached, no transaction occurs.
The tailgate market may be ideal for the crowdfunding model because it’s laden with startup entrepreneurs with smaller marketing budgets looking for ways to bring the next great idea to consumers. Examples of successful tailgate crowdfunding campaigns include the GoBQ portable grill, Beer Tie, Cooler Belt and Instagate tailgate in a box.
Fill a Void First
The common factor in the aforementioned successful crowdfunding campaigns was a unique idea that filled a void in the marketplace. Put simply, the products solved a problem or inconvenience.
“My partner Eric Goeken, who’s the inventor, thought of the idea back in college,” says Todd Zaroban, CEO of GoBQ. “He liked to tailgate but he didn’t have a car. He wanted to hop on his bike and take his grill with him, but a clunky metal grill is very cumbersome. What’s unique and exciting about [GoBQ] is not that it’s a portable grill — because obviously there are dozens of those out there already — but that it’s made from a flexible, fireproof fabric. It’s the only grill on the market made from fireproof fabric, which makes it ultra portable.”
GoBQ’s viability was subsequently confirmed when the company raised 300% of its initial IndieGoGo monetary goal.
Similarly, Bryan Kendrick’s inspiration for the Cooler Belt and Matt MacLean’s idea for the Instagate both stemmed from a lack of similar products on the market. For example, the Cooler Belt is a way to conveniently carry dry goods on a cooler without having to worry about balancing them on top or placing them inside — a problem experienced by many tailgaters and outdoor enthusiasts.
“We do a lot of camping and going out to the lake and I’m always carrying the cooler and extra bags on top of it or going back to the car and grabbing all the dry goods,” Kendrick says. “I got sick of it and my wife said, ‘Why don’t you create something to eliminate that problem?’ So I thought, ‘I’ll create a bag that goes around the cooler like a belt.’”
Instagate is everything a first-time tailgater needs, packaged in a box — a cost-effective alternative to purchasing a cooler and expensive grill.
“Instagate started out when I wanted to go tailgating before a [New York] Giants game with a few friends but didn’t have a grill, cooler, etc.,” MacLean says. “I thought about how great a turnkey tailgating solution for fans like myself could be — one that reduced the effort required to prep and clean up, but didn’t break the bank.”
Successful product ideas that are attractive to crowdfunding backers don’t always originate as solutions to problems. They also can be fun ideas that hit the jackpot.
“The Beer Tie was created by me and my wife here in the mountains of North Carolina while we were camping,” says inventor Reuben Hollifield. “We envisioned it as a fun outdoors product that you can use during parties, potlucks, tailgates, concerts, kayaking — pretty much anything that you need [to have your] hands free while drinking a beer. We kind of invented it as a funny thing, but after time we realized that it was super functional. It sells for both reasons.”
Don’t Fail to Prepare
Launching a crowdfunding project takes much more time and effort than simply thinking of a product. Thorough effort must be directed at creating functional prototypes and videos of the product’s effectiveness, as well as planning each additional detail of the ensuing campaign. Most importantly, a realistic financial goal must be set.
“If you fail to prepare, you prepare to fail,” MacLean says. “The months leading up to the crowdfunding launch are crucial. Do your research, check out successful projects and plan the timing of your launch carefully.”
The Cooler Belt was funded at $10,570, but Kendrick, whose background includes self-marketing, says its success was due to diligence in that arena before his crowdfunding campaign was launched online.
“A month or two months before I put [the Cooler Belt] on Kickstarter, I was telling people about it and I talked specifically with friends, friends of friends and businesses,” he says. “And I basically committed people by talking to them two or three or four times before it actually launched. So when it actually launched, all I had to do was send these people a follow-up message and they would jump on it.”
Pre-campaign marketing should include a well-crafted social media plan, Kendrick says, which can help raise awareness and even gain backers. “Kind of make a rough timeline of when you might post some things — short clips, videos and pictures that people may find cool,” he says.
Diligent preparation also includes ensuring you can make good on promises to backers, accounting for unexpected expenses and verifying that manufacturing partners are legitimate, Zaroban says.
Seek Brand Exposure
Crowdfunding website options abound, with each having various areas of focus and experience levels raising funds for startups. Even after starting a campaign, success hinges on continued visibility and brand exposure via social media and the internet, MacLean says.
“The nature of the internet makes it easier than ever for startups to spread their message,” he says. “We had over 10,000 views within the first 24 hours and got covered on over 20 blogs in the weeks following the launch. The immediate and positive press coverage was truly invaluable.”
Because of that type of exposure and commitment, Instagate received $28,291 from 180 backers during its Kickstarter campaign.
“It’s amazing the reach these crowdfunding campaigns have,” Zaroban says. “It helps small businesses and entrepreneurs such as ourselves to reach a wide audience without hundreds of thousands of dollars in marketing budget.”
In addition to social media, in-store and conventional promotions also can boost a crowdfunding campaign.
Live Up to Promises
Delivering on the initial promise to backers may be the most difficult part of a crowdfunding campaign, but it’s also the most important. Kendrick says failure to do so can leave backers jaded, with the perception of a failed project.
“Filling those [initial promised] orders is a huge deal and a lot of people out there think bad about it.” Kendrick says. “Or, there’s a bad rap about crowdfunding where you won’t ever get the product or see it a lot of the time. But the heart of any aspect is following all the way through and getting it to customers on time.”
However, experienced crowdfunded startups warn that nailing down an accurate production timetable to ensure prompt delivery can be a major challenge.
“One thing we learned is when factories and manufacturers give you an estimate, you should probably double that,” Zaroban says.