It seems to happen over and over again: A budding entrepreneur creates a Kickstarter campaign to create a new product. Consumers get excited and fund said product. Then, for countless reasons--poor pricing, manufacturing issues, design flaws, or just plain inexperience--the entrepreneur fails to deliver.
Enter Dragon Innovation, a crowdfunding platform for product makers. Dragon, which exited beta testing on September 5, claims to offer fundraising with a bit more handholding. “Many entrepreneurs come to us without any hardware experience,” says CEO Scott Miller, who cut his teeth developing life-size robotic dinosaurs for Disney Imagineering, robotic baby dolls for Hasbro, and the Roomba for iRobot. “We can help them get there faster.”
Dragon is pricier than Kickstarter or Indiegogo: it charges $5,000 to list a project. Similar to Kickstarter, Dragon takes a 5 percent cut of the amount raised for every funded project. (Payment processors take another 3 to 4 percent.) For the extra money, entrepreneurs get consulting from Dragon on manufacturing and scaling. The company also promises introductions to larger electronics companies such as GE, Freescale Semiconductor, and Qualcomm.
I recently spoke with Miller about how Dragon works and why so many new entrepreneurs run into trouble on crowdfunding sites.
Start-ups like OUYA and Pebble received their share of bad press for not making good on their promises to backers. Do Kickstarter and Indiegogo have a hardware problem or does the issue rest more with entrepreneurs?
We're huge fans of both Indiegogo and Kickstarter, but they're just not set up for hardware. One reason is you've got to be able to do the math upfront to know what it will cost so you can raise enough money to actually deliver on what you need. The trick is, how do you convince the backers that they're going to get what they offer? I think almost 75 percent of start-ups either deliver late, or never at all. We’ve also seen that for platforms like Kickstarter, their mission is just fundamentally different from what we do. What we want is to build meaningful companies, so we're more interested in volumes of at least 1,000. If the projects are funded, we have confidence that they're going to deliver because they've raised enough money. Also, our listed projects can sell in quantities and to my knowledge, Kickstarter can't--those projects can only sell one or two units. We're so confident that the start-ups who work with us are going to deliver that backers can just type in however many units they want so we'll make sure that they're sent.
You’ve also said these platforms aren’t built for hardware start-ups in general. Why not?
Entrepreneurs have a perception that being on Kickstarter will drive more views to their page. But first, we have fewer projects that are only in the hardware sector, and second, we've got the whole team pulling for them to succeed, from our network of hardware investors to our media connections. We're much more of a mammal model: We want all of our offspring to survive and thrive. The others have more of an insect model, where it's up to the entrepreneur. There's really not a lot of support from the platform itself.
What makes Dragon’s guidance valuable to entrepreneurs making products?
Hardware is hard. The costs are much higher. You need some specialized knowledge that you just can't find on Google. Sure, you might find some stuff if you search for information on manufacturing in China, but it just won't be practical. A lot of this is experience and relationship-based, and you have to learn quickly what works and what doesn't. If you don't set yourself up for success, you can really hurt yourself downstream.
How does Dragon prepare its clients for a campaign?
We have our senior engineer do a thorough deep-dive and make sure they haven't forgotten anything. We make sure it's all out there, which means labor factory costs, the estimated cost of tooling, the design for manufacture and assembly review--that is, making sure what they’ve designed can be built. If that’s not the case, then we’ll get them to a point where they can start manufacturing. From there, we put together a cohesive manufacturing strategy. We start with a lower volume to build in the U.S., then if they want to stay in the U.S. or move to China, we'll help them with a strategy for that, so when they're funded, they'll know what to do. If they want to do it on their own, that's awesome, as long as they have a plan to deliver. If a start-up is funded, it will deliver above all else.
What advice would you give to entrepreneurs just setting out to build a product?
Get to the prototype stage and have confidence that what you’re building actually works. Be serious. If you’re funded, expect to spend the next year of your life working hard on this because that's what will be expected of you. Build up your social network. Let everyone know what you’re working on so you can drive traffic to the site.