TO CROWD, OR NOT TO CROWD?
It’s beginning to be a crowded arena for startups looking for funding (although, perhaps not quite as much yet in the hardware sector when compared to the further developed software).
Bringing Funding Variety
Indeed, crowdfunding is booming and it is an important supporting factor in the developing hardware, physical product focused, startup ecosystem. Alongside the more traditional fundraising channels such as Bank Loans, Venture Capital (VC) or Angel Investment, crowdfunding models and streams introduce a welcome addition, particularly as others may be getting harder to get or decreasing. From lending to equity, and pre-sales to rewards, crowdfunding platforms ensure their ubiquity in the investment and funding landscape.
Building a Community
Darren Mulvihill, from one of our partners Crowdcube(equity-based crowdfunding platform), has shared with our teams the importance for hardware companies that focus on consumer products, to consider the impact of a good investment strategy that should include or be based on firstly a strong marketing campaign. This is exactly what a successful crowdfunding campaign does by building a community around a company and a product along with raising money.
Hardware startups are increasingly invading the crowdfunding scene!
According to Kelly Angood from our other partner, Indiegogo(a reward based crowdfunding platform), with the flourishing development of Internet Of Things (IOT), connected devices, smart grids and the further recognition of the integration between hardware / software, opportunities for hardware product based startups are very bright.
The advantage of a reward-based campaign for hardware companies is of course that it allows pre-sales, product validation, and user feedback alongside being a powerful communications and PR tool.
Moreover, Indiegogo sees more and more VCs investing in successful campaigners on their platform, proving the seriousness of the opportunities for higher level investors.
Don’t Underestimate the Commitment
On the flip side, there is an art to crowdfunding your business and many pitfalls (there have been a number of examples of projects that have found themselves in difficulty).
Crowdfunding is anything but easy, and as you’re exposing your business to promote it, better to act strategically.
A campaign doesn’t kick off the day you launch it, you have to prepare a long time before, choose the right time, shape your product, and raise interest in advance. At the other end of the pipe, after a successful campaign, you have to produce your units and deliver it, which has to be well planned to keep your customers happy.
In a nutshell, crowdfunding can be an amazing way to both promote and fund a business, but as always, and like is often said about hardware …. it’s hard and crowdfunding it is no different!
Here at the CRL with our partners and support network ( also including Innovate UK ‘s Nigel Walker and the Greater London Enterprise, GLE ) and through our programme, we aim to help our startups through the difficult decisions and questions around choosing and implementing the right funding models for success!
30/11/2015 written by PIERRE BAISLE