Lessons learnt delivering a $1.6M Kickstarter campaign
Traditional investment is becoming more difficult to secure, yet the demand for early-stage capital remains. As a result, crowdfunding has become the go-to alternative source for startups looking to secure funds for early prototypes and new products, and to trial sales. In April 2016, Primo Toys followed this very path. We closed a $1.6M campaign on Kickstarter that fast propelled our wooden coding robot Cubetto to the most funded educational invention in the crowdfunding platform’s history.
It was an unexpected achievement that personally struck me with a great sense of anticipation and humility. Without Kickstarter, Cubetto in its current form would not exist – it is fair to say that Cubetto was very much born from the crowd. In this post I want to give a snapshot of what I learnt from the journey, as well as my thoughts on where I think crowdfunding, and Kickstarter more specifically, is heading in the future.
Before getting into the details of Cubetto, I often get asked the question:
“How did you do it?”
For me, there were three key factors which, when put together, enabled the campaign to succeed:
1. Existing community
The $1.6M campaign was in fact the second coming of Cubetto after Co-founders Filippo Yacob and Matteo Loglio had launched an earlier iteration in 2013. Meaning, when we went live with the campaign we already had a loyal group of advocates who were ready to back again and spread the love. These advocates were the innovators and early adopters of Cubetto, and a huge key to the campaign’s success.
2. Bang on trend
Even today, STEM and programming education are hot trends in the toy industry. Back in 2016 when the campaign launched, the national IT curriculum had started changing to introduce the teaching of computational thinking skills in schools. Coupled with the fact that there were fewer coding robots back then, many parents and teachers keen on tackling these developments looked to non-threatening, non-screen solutions which could help mediate this change.
3. Invested dollars
Earlier in 2016, we ran a CrowdCube campaign. The platform’s premise is similar to Kickstarter’s, but instead of providing a product as a return on our backers’ investment, CrowdCube allowed us to give away equity. Around that time things were rocky financially and it was an all or nothing situation. For obvious reasons, it is good practice to keep as much ownership of your startup as possible, especially in the early stages. However, in this case, the gamble paid off. We were able to raise $300k+ from CrowdCube and we invested that straight into the Kickstarter campaign.
Delivering the product
With the campaign backed, we now had to deliver! For me, developing Cubetto was my baptism of fire into hardware. We were fortunate in that we had a working relationship with hardware startup kings PCH International in helping us set up the supply chain.
Prior to Cubetto, I had experience of working with traditional materials such as wood, plastics, and fabrics. You can read about the ups and downs of bringing my own product PL-UG to market here, but this was a completely new ball game. Here are three takeaways I picked up when it comes to hardware manufacture 🛠:
Traditionally, when I was working with plastics I was used to short(ish) development cycles of around 6 months. I would kick off tooling, go through a few iterations to sort tolerancing, action the odd colour tweak and agree to finalise the job. That was it: done and dusted! However, when it comes to electronics, that timeline stretches to 10-12 months at a minimum. This is down to the risks involved, with the principle of hardware development being to ramp up production, incrementally from 50 pieces, to 300, to 1,000 and finally 5,000+, validating as you go. With the costs of bulk ordering so high, this approach totally makes sense. But it also shows the probability of unforeseen issues arising, and highlights why you see so many hardware product delays.
2. Long lead components
I call long leads a silent killer of hardware, because you often don’t see the lead times coming with component shortages. Some components can take over 6 months to order. Finding this out once you are ready to manufacture can be tough as it can negatively affect you in two ways. First, you have committed to delivery dates and now you find yourself having to delay. Late deliveries never bode well on a brand’s relationship with customers, nor on its reputation. Then, second, when it comes to reordering, you need to place Purchase Orders (POs) earlier than you would like, wreaking havoc on cash flow. One solution is to spot buy components on reduced lead times but this will only drive up your costs and is not sustainable. The best way to counter this is to consider lead times early when making component decisions. Look for China alternatives and when qualifying suppliers, ask what channels they use to procure components.
3. High setup costs
In traditional manufacturing, the major costs are associated with tooling. In hardware’s case, High Minimum Order Quantities (MOQs) make it inherently expensive to manufacture. And when you add on non-sellable validation sample units, your Printed Circuit Board Assembly (PCBA) test fixture, certification and (if required) Bluetooth licensing, the costs can add up. Then factor in the long lead times mentioned above and you will need to be placing POs and paying deposits at rather unfortunate times. There is no magic solution to these costs, so the best you can do is to plan ahead. I cover the keys of preparation in a previous blog post on the challenges of scaling toy hardware.
The evolution of crowdfunding
Kickstarter and other crowdfunding platforms are, in general, fantastic for helping you to establish a community of loyal, passionate backers as well as getting cash in the door early. However, I have seen an evolution in the way these platforms are being used. For example, we were using Kickstarter as a launchpad to generate sales as opposed to what Kickstarter was traditionally built for: raising funds for R&D.
A really interesting article in the Harvard Business Review titled Finding Your Company’s Second Act talks about a change to the adoption curve and transitioning to more of a shark-fin curve. To quote:
“The spread of information through social media and other digital channels has dramatically lowered transaction costs for consumers evaluating potential. Buyers are thoroughly informed about your product at launch (and sometimes even before). Everyone who wants the product will adopt it immediately.”
This got me thinking… Instead of Kickstarting an idea and scaling a business post-campaign, is crowdfunding now evolving into more of a sales platform aimed at a targeted audience of ‘trial users’?