Is Crowdfunding a MUST for hardware startups?

Hardware and crowdfunding

Hardware startups and classic crowdfunding have been strongly linked over the last few years. The reasons are varied. On the one hand, the biggest crowdfunding campaigns are often achieved by hardware products. On the other hand, startups get an instant sense of whether there is a certain market demand. I write ‘certain’, because crowdfunding communities are not necessarily representative of a global or local market. We even see previously successful startups, real companies now, first launching their new products exclusively on crowdfunding platforms. It gives them a targeted reach and an already convinced and exclusive fan base.

So why do so many hardware startups consider a crowdfunding campaign as a must? Why do some accelerators consider the campaign as a deliverable, rather than a classic demo day?

We @ Usine IO regularly see startups at their prototyping phase preparing for their crowdfunding campaign. We even see more and more teams arriving after their successful crowdfunding campaign. When I say successful I usually mean a campaign that far outreached their initial goal. However, the goals of the teams launching campaigns often go way beyond the financial results and also cover testing market demand, getting feedback from backers or building visibility for more classical financial fundraising in the future.

Crowdfunding and other financing tools

The financial alternative of crowdfunding campaigns are well known: VCs, banks, Business Angels or more exotic products.

The differences we see are the following. When a bank or a VC asks them to “show me something concrete and we’ll speak“, hardware startups will often see themselves a bit ‘under prepared’. We can see the parallel with VCs asking software startups for some traction in the digital world. However, whilst VCs remain shy around hardware startups, things are changing for the better.

Yes, financing for hardware startups does not share the same dynamics as financing for software startups. Prototyping can be costly, iterations are possible but less flexible. Getting scalable is always challenging.

However, this last statement actually doesn’t have to be true. Hardware startups can be scalable, they can be financed at early stage and they can be highly profitable. The challenge is usually getting their future vision clear from day one.

Tech and Crowdfunding —Usine IO’s Crowdfunding Warchest

Hardware products are challenging. They require the combined skills of various people: designers, engineers, product managers and others. A successful campaign online is the result of a good concept, a strong community and convincing communication. However, it needs to be matched by the manufacture of a quality product, with effective logistics processes and distribution channels. It is a promise that still has to be delivered.

We won’t go here into the list of common post-campaign failures. We will say one thing though: crowdfunding campaigns are in some cases a good option and will always be a step among others. However, the technical challenges must be tackled in parallel and any hardware teams should take that into account. A successful hardware startup must be equally strong business-wise and on the technical side. From day one.

This is why, because of strong demand, we’re launching the @ Usine IO Crowdfunding Warchest. A program dedicated to teams looking to launch a campaign in the next 3 to 4 months. We’ll be providing experienced support for the business and communication side, whilst at the same time we’ll be working on the prototyping phase and/or the design for manufacturing. This way, we’re convinced we’ll be able to maximise the efficiency of any campaign and moreover the effectiveness post-campaign, to make sure they are here for the long run.

Come and meet us at our dedicated morning event next tuesday, the 17th!