After working in sales for a long time at existing companies, I decided to use my expertise to pursue my dream of starting my own company.
I used crowdfunding to check the public interest in my product, and have since helped people who were looking for crowdfunding advice.
Here are some things I’ve learned.
There are two types of crowdfunding— equity-based and product-based. I used product-based crowdfunding, specifically Kickstarter.
Product-based crowdfunding involves putting a product concept out on the Kickstarter website, describing the product and its potential uses, and stating what you would need in order to make the product a reality.
People who saw my product and liked it made a monetary contribution with the expectation that if I met my goal, they would receive a shipment of the product in the future.
Essentially, I pre-sold the Seally Cap to people who believed in me and liked my product.
My most common “reward” was an actual Seally Cap for a $25 contribution from interested consumers. They knew they wouldn’t get it for a few months even if I was successful, but they saw enough value in the product that it was worthwhile for them.
Gauging consumer interest before production
By crowdfunding the Seally Cap, I was able to determine if there was enough consumer interest for it to be successful — before I invested time and money on production.
If people aren’t interested in an item on crowdfunding websites, that’s generally a good sign that the product itself wouldn’t sell well and the innovator should focus their energies somewhere else.
How much of your money do they take?
Kickstarter takes about 5-6% of the money generated by user contributions, and there is a payment processing fee that is another 3-4% of the money received.
To be safe, I plan to lose about 10% of what I receive, and recommend taking that into account when creating a goal for a crowdfunding project, so you aren’t surprised by it.
Thankfully, I easily beat my crowdfunding goal of $9,000 in 48 hours, and finished our 30-day campaign with $27,000 of contributions to help us launch our product and our company.
Crowdfunding is a great consideration for start-up companies. Could it be a good fit for your next big idea?