For decades, entrepreneurs had to subject themselves to venture capitalists to get their businesses off the ground. Not only would they have to reveal their entire business to them, they would have to give up 20, 30, even 50% of their company’s equity in exchange for money. Recently, a variety of startups such as Kickstarter and Quirky have come along that helps entrepreneurs skip the traditional VC model and go directly to the masses. By connecting entrepreneurs directly to consumers, these platforms helped companies like Pebble and Ouya raise over $8M to develop and launch their products. On paper, it sounds like a win-win situation: startups get great exposure and marketing and consumers get an early piece of the action.
However, all is not well in the land of crowdfunding. Many entrepreneurs don’t have product development experience and often underestimate the wherewithal required to bring a product to life. Issues like regulatory, legal and intellectual property can plague a product launch and even mundane things like sourcing components becomes complicated when you need to buy them at scale and in a reliable manner.
I would love to see companies like Kickstarter focus a bit less on the sexy side of marketing products and expand to provide some additional services to every product that lands on their platform, like advisory services to ensure realistic product delivery dates and even helping match startups with component suppliers before funding gets approved. When startups succeed because they have the right know-how, the stronger the platform it becomes.
Originally published at www.jasonchan.com on September 17, 2012.