Most investors said we were crazy when we pitched our idea for a video doorbell that sends live video from a user's front door to a smartphone. "A doorbell? No one cares about the doorbell," most people replied.
We refused to let a lack of seed funding stop us. We took an alternative path to funding that also turned out to be an effective way to hack the launch of a business. The solution to our problem was a crowdfunding campaign on Indiegogo.
While my co-founder worked on the product development, I created and executed a campaign that raised $600,000 in 30 days in 2013. The campaign was so successful that Fast Company called us an "Indiegogo sensation."
The most difficult things involved with launching a business are solved nearly instantly with crowdfunding. There's nothing like it. This article highlights the power of crowdfunding and why it's the perfect way to launch your business. You'll quickly realize that crowdfunding is more than just money. It is much, much more.
The difficult dynamic when starting up
When you launch a startup, there are a number of important things that you lack that hurt your ability to raise money and launch your business in a big way. Not surprisingly, VC's and investors will use the lack of these items against you.
Here's a list of the biggest hurdles you face or the things you lack when starting up:
- No funding (startup capital)
- No market validation for your idea
- No PR or brand recognition
- No customers
- No customer feedback (on the product or idea)
- No go-to-market strategy
Traditionally, you either need to raise money under those circumstances, or bootstrap your business. If you raise money at this stage, you risk massive dilution as investors use the absence of funding, customers, validation, press and consumer feedback to lower your valuation. If you bootstrap, you must pick only a few of the above limitations to address, and hope for the best.
The result is either significant dilution or falling victim to opportunity costs.
There's also another dilemma. The absence of funding, customers, sales, press and validation also makes it difficult to decide on a go-to-market strategy. It's difficult to earn that initial traction and identify which channel provides the right product/market fit.
Crowdfunding solves all those problems
I'll admit, I didn't realize the power of crowdfunding until we completed our campaign. What started as a quick and effective way to hack the funding process quickly turned into a gift greater than we could have asked for.
The true power of Indiegogo and Kickstarter is the ability to satisfy each of the items on that list - all at the same time. Never before has this been possible until crowdfunding, and it's why it's the perfect way to launch your business.
This is exactly what happened with SkyBell, and it changed the trajectory of our company. We are now one of the most valuable crowdfunded startups of all time.
Let's look at each one.
- No startup funding - In just 30 days, we raised just under $600,000 on Indiegogo - quickly solving our capital needs for developing and shipping the first version of the SkyBell video doorbell.
- No validation of your idea - When you can raise almost $600,000 in 30 days for a product that does not yet exist, you can cross this item off the list. It was clear that consumers wanted a video doorbell. Voting with one's money is the strongest validation there is.
- No PR or brand recognition - In just the first week of our campaign, we were covered by Engagdet, TechCrunch, Fast Company and more. We quickly built a brand that we developed into a leader in the Internet of Things space.
- No customers - In total, 4,250 customers ordered a SkyBell from over 50 countries. Cross that off the list.
- No customer feedback - This is the hidden gem of crowdfunding. Over our 30 day campaign, we received over one thousand comments and questions via Indiegogo from customers or potential customers. Whether by email, Facebook or via Indiegogo comments, these people provided feedback in droves. This helped us add the things customers wanted and remove the things they did not. We were able to get the product right the first time. This is invaluable.
- No go-to-market strategy - I believe that Indiegogo and Kickstarter are a perfect go-to-market strategy for product companies for all the reasons listed above. Yet in addition to the customers, PR and feedback we received, our successful campaign also prompted representatives from Best Buy and Amazon to reach out to us after our campaign ended - opening up retail as a second go-to-market strategy.
The value of starting your business via crowdfunding far exceeds the funding you receive from the campaign. As you can clearly see, a successful crowdfunding campaign helps you address the hardest parts of starting a business.