Creating a Product through Crowdfunding: A Risky but Rewarding Venture

To be really honest with you, I don't even remember how I found it, all the signs were like, "this should be a product that will pan out," but that really quickly changed. We treated Kickstarter as a tool to see if we wanted to get an energized group of backers who really wanted to see this new concept come to life. Even so, the campaign ended at the end of 2014, and it was mid-2018 that we finally started fulfilling the Kickstarter and pre-orders.

Hardware is notoriously hard, and fulfillment there is particularly challenging, right? There's just way more complexity to the manufacturing of a complex gadget and shipping it then there is to publishing a book or producing a board game. Creating a gadget cost a lot of money, so creators often turn to crowdfunding to raise cash. But even if they raise all the money they could have ever wanted, if they aren't fully ready to make their product, it could end up being delayed for months, years, or worst of all, it might not ship at all.

Crowdfunding companies like Kickstarter and Indiegogo are aware of this possibility and are changing their business so that supporters don't end up empty handed. But the ultimate question is who's responsible when a product doesn't ship? The founders who pitched their dream or the crowdfunding platforms that gave them the money-making tools. This is In the Making.

We were grad students together at the University of Illinois in electrical engineering, and we wanted to do a robot. I have four cats, Dave had a cat, and we were really interested in doing a product where you could launch it right now. Mouser is an anonymous cat toy that bounces back when cats knock it over; the team successfully funded the product on Kickstarter in 2014.

The terminology we kind of use is Kickstarter classic. So back when we launched the whole idea was, "Hey, here's this thing that's never gonna exist unless a bunch of people get behind it." And you set this limit that we've gotta get to this much money or we can't even build it. Okay, so let's pause for a second and run through how crowdfunding works.

There are a ton of platforms, but for the sake of this video, we're just gonna talk about the two most-known in the U.S., Kickstarter and Indiegogo. Kickstarter requires campaigns to be completely new and never seen before; creators only get to keep their cash if they reach their goal. Indiegogo, however, lets creators come over from other crowdfunding platforms, and sometimes they can keep their money even if they haven't reached their goal.

I think we originally said 18 months and this was actually I need to check, but this was the strategy, high goal, long timeline. We had really supportive backers, and it's kind of amazing, and I think there are two reasons for that. One was our communication style which we tried to be very open and we didn't give really constant updates; just seemed false because we were looking at big milestones and giving this false sense of positivity when there are unknowns.

I think the saddest part for us was the total span of our project development was 20, 25% of cat's lifespans; so when you have a thousand backers, it's gonna happen where cats pass away that were hoping to play with this. Mousr took four years to ship their product which is a really long time, but that's the risk with crowdfunding and actually, these backers are lucky they received their product at all.

Sometimes campaigns raise their cash and then disappear like iBackPack. The very first complaint that people had was "he retroactively decided to make an iBackPack 2.0" and "and at that point I was like is the 1.0 even done, like what's even going on." How do we even know that the first product was even done? Are we all getting upgraded? What's going on? So it was just a lot of uncertainty and he would go back and forth with his stories a lot.

He also added some upgrades for new backers that he wasn't going to allow for people that had already backed it, was so there was an uproar about that and it seemed like every single time there as a story that changed. People would call Doug out on it, Doug of course is the founder, and he would respond with extremely derogatory and rude comments, this is like his quote.

Doug's Experience with Crowdfunding

Doug's experience with crowdfunding highlights the challenges that creators face when trying to bring their products to life through these platforms. As a founder of iBackPack, Doug was one of the first to experience the pitfalls of crowdfunding. Despite raising a significant amount of money, he struggled to fulfill his promise and deliver a working product.

When asked about his experience, Doug seemed evasive and unsure of himself. He would often change his story or add new features without warning, which led to frustration among backers who had already paid for their products. The lack of transparency and communication from Doug only added to the problem, making it difficult for him to regain the trust of his customers.

The Impact of Crowdfunding on Creators

Doug's experience is not an isolated incident. Many creators have faced similar challenges when trying to bring their products to life through crowdfunding. The pressure to deliver a product quickly and cheaply can lead to mistakes and miscommunication, which can damage the reputation of both the creator and the platform.

Despite these challenges, many creators continue to turn to crowdfunding as a way to raise money for their projects. However, it's essential that creators understand the risks involved and take steps to mitigate them. This includes setting realistic goals, communicating clearly with backers, and being transparent about any challenges or setbacks that may arise.

The Future of Crowdfunding

As crowdfunding continues to evolve, it's likely that we'll see more platforms emerge that prioritize transparency, communication, and quality over quantity. Creators will need to adapt to these changes and find new ways to connect with their audiences and deliver high-quality products that meet their promises.

In conclusion, crowdfunding is a complex and nuanced process that requires careful planning, execution, and communication. While it can be an effective way for creators to raise money for their projects, it's essential that they understand the risks involved and take steps to mitigate them. By doing so, we can create a more sustainable and successful ecosystem for crowdfunding that benefits both creators and backers alike.

Mouser's Experience with Crowdfunding

We were grad students together at the University of Illinois in electrical engineering, and we wanted to do a robot. We had four cats, Dave had one cat, and we were really interested in doing a product where you could launch it right now. Mouser is an anonymous cat toy that bounces back when cats knock it over; our team successfully funded the product on Kickstarter in 2014.

We used Kickstarter to raise money for our project because it seemed like a great way to get feedback from potential customers and validate our idea. We set a realistic goal of raising $10,000, which we felt was achievable based on our marketing efforts and social media following.

However, after the campaign ended, we realized that we had underestimated the complexity of bringing our product to life. We had promised to deliver a working prototype within six months, but it took us four years to get everything right. The delay was frustrating for our backers, who were eagerly waiting for their products.

Despite the challenges, we're grateful for the support of our backers and the experience we gained through crowdfunding. We learned that it's essential to be realistic about timelines and costs, as well as to communicate clearly with our audience throughout the process.

"WEBVTTKind: captionsLanguage: en- To be really honest withyou, I don't even rememberhow I found it, all thesigns were like,this should be a productthat will pan out,but that really quickly changed.- We treated Kickstarter as a tool to seehey, we wanna get anenergized group of backerswho really wanna see thisnew concept come to life.Even so, the campaignended at the end of 2014and it was mid-2018 that we finallystarted fulfilling theKickstarter and the pre-orders.- Hardware is notoriously hardand fulfillment there isparticularly challenging, right.There's just way morecomplexity to the manufacturingof a complex gadget and thenshipping it then there isto publishing a book orproducing a board game.- Creating a gadget cost a lot of moneyso creators often turn tocrowdfunding to raise cash.But even if they raise all the moneythey could've ever wanted,if they aren't fully readyto make their product itcould end up being delayedfor months, years, or worst of all,it might not ship at all.Crowdfunding companies likeKickstarter and Indiegogoare aware of thispossibility and are changingtheir business so that supportersdon't end up empty handed.But the ultimate questionis who's responsiblewhen a product doesn't ship, the founderswho pitched their dream orthe crowdfunding platformsthat gave them the money-making tools.This is In the Making. (upbeat music)- We were grad students togetherat the University of Illinoisin electrical engineeringand we wanted to do arobot and I have four cats,Dave had a cat and wewere really interestedin doing a product where youcould launch it right now.- Mouser is an anonymouscat toy that bounces backwhen cats knock it over,the team successfully fundedthe product on Kickstarter in 2014.- The terminology we kind ofuse is Kickstarter classic.So back when we launched the whole ideawas hey, here's this thingthat's never gonna existunless a bunch of people get behind it.And you set this limitthat we've gotta getto this much money orwe can't even build it.- Okay, so let's pause fora second and run throughhow crowdfunding works,there are a ton of platformsbut for the sake of thisvideo we're just gonna talkabout the two most-known in the U.S.,Kickstarter and Indiegogo.Kickstarter requirescampaigns to be completely newand never seen before, creatorsonly get to keep their cashif they reach theirgoal, Indiegogo however,lets creators come over fromother crowdfunding platformsand sometimes they can keep their moneyeven if they haven't reached their goal.- I think we originally said 18 monthsand this was, actually I need to check,but this was the strategy,high goal, long timeline.- We had really supportivebackers and it's kind of amazingand I think there's two reasons for that.One was our communicationstyle which we triedto be very open and we didn'tgive really constant updates.That just seemed falsebecause we were lookingat big milestones andgiving this false senseof positivity when there are unknowns.- I think the saddest partfor us was the total spanof our project developmentwas 20, 25% of cat's lifespanso when you have a thousandbackers, it's gonna happenwhere cats pass away thatwere hoping to play with this.- Mousr took four yearsto ship their productwhich is a really longtime, but that's the riskwith Crowdfunding andactually, these backersare lucky they receivedtheir product at all.Sometimes campaigns raise their cashand then disappear, like iBackPack.- The very first complaint that people hadwas he retroactively decidedto make a iBackPack 2.0and and at that point I waslike is the 1.0 even done,like what's even going on.How do we even know that thefirst product was even done,are we all gettingupgraded, what's going on.So it was just a lot of uncertaintyand he was going back andforth with his stories a lot.He also added someupgrades for new backersthat he wasn't going to allow for peoplethat had already backed it,was so there was an uproarabout that and it seemedlike every single timethere as a story that changed peoplewould call Doug out on it,Doug of course is the founder.And he would respondwith extremely derogatoryand rude comments, this is like his quote.\"What is wrong with some ofyou, have you not read the post,there are 160 of them, wekept everybody up to dateat every second of the way,\"which he didn't by the way.\"We are making the iBackPacksensational in every way,regardless of what the whinerssay, you know full wellthat this project is a work in progress.Nobody bought a bag or any product here,you pledged to fundthis project regardlessof how long it takes, go ahead and readthe licensing agreement,if you want to whineand moan and groan, call me.\"So now it seems like oh,he's just hiding behindthe terms of service that Indiegogo has.- These backers created a Facebook groupto try to figure out whathappened to their moneyand to iBackPack, the founderoccasionally wrote themwith minimal and hostile updatesbut eventually went silentafter blaming batteryissues for the delays.The backers still don't have answersbut this past summer the FTCbegan investigating iBackPack.The government agencyonly once previously fineda crowdfunding campaign and at the timeit said it would onlyprosecute if there seemedto be outright frauds, so without the helpof a government agency, backershave nowhere else to turnbut the crowdfunding platforms themselves.And Hao thinks theyshould take responsibilityin situations like iBackPack.- I do feel like in a perfect worldthey should be responsible and they shouldprotect their backers andprotect the users of the productbecause they're takingmoney for it, right.That's basically the servicethat they're providing.They're saying okay, we'reallowing future merchantsto promote their product andwe're advertising it to peopleon our website but for them to say,okay, well if the product doesn't pan out,it's not our problem, Idon't think that's right.- Kickstarter and Indiegogohave traditionally saidthat investments come with risks,but that pressure frombackers hasn't gone unnoticedand it's even forced a fundamental changein Indiegogo's business model.- So what we're now doingis for a subset of campaignson Indiegogo, we're actually guaranteeingthat that product willultimately be delivered.Actually you were thefirst person we talked toabout guaranteed shipping,we're now calling thatguaranteed delivery, and so the backersthat back those projectscan back those projectswith the confidence that thatproduct will be deliveredor they will get their money back.I think realisticallyit's next to impossiblefor a platform to be ableto fully protect the backerson the platform, in largepart because it wouldbe impossible for any platformto be able to fully evaluatethat entrepreneur's abilityto ship that product.We've had entrepreneur's that have raisedover $10 million and we've had questionson whether they canactually ship $10 millionworth of product like the FlowHiveis good example of a productwe had a few years agowhich was a beehive and it wasvery inexperienced entrepreneursfrankly, from Australiaand sure enough they shippedevery FlowHive to every backer.It's almost impossible or us to be ableto really know whether anentrepreneur's gonna ship or not.- Where to do you thinkKickstarter's responsibility liesto backers, becausewhat I've seen a lot ofis the backers get angry at the platform,they're angry at thecreator, they're just angry.So how do you thinkabout Kickstarter's roleand responsibility in this?- Yeah, Kickstarter's obligationis we're gonna be stewardsI think of this system and wecan have the most influencehonestly at the outset of the campaign.Before the transactiontakes place is much betterthan winding up in a situationthan after the campaign.So we put a lot of emphasison putting mechanisms in placeto make sure that the creator'sare being transparent.We've verified their identitythat they are publicly visibleas individuals, not being ableto hide behind a pseudonymor a corporate name or anything like that.And having rules in placeand mechanisms in placeso that backers can reallyvet the campaigns right.We assist them where it'sreally the backer's decision,discretion to evaluate these campaignsand understand the risks involved.And our responsibilitythere is to make surethat backers, creating a fairsystem that is transparent,where backers do understand the risks.- Both Kickstarter and Indiegogo have alsostarted partnering withthird parties like Avnet,Dragon Innovation and Aero Electronicsto make sure creators have the supportthey need to get throughthe manufacturing process.- What an entrepreneurcan really do to helpwith manufacturing isreally think through exactlywhat's needed in the bill ofmaterials for that product.And to think through both how that productis gonna be manufactured andshipped before the entrepreneursets the price for thatproduct in their campaign.- Manufacturing is justhard, even if you dosome of that upfront homework,factories go out of businessor they change, quoteschange, and so you can beon top of a shiftinglandscape, often you're gettingcomponents that aren't upto quality specifications.And so you have to goback and do it again.Entrepreneurs tend to be optimistic people'cause you have to be a little bit crazyto be an entrepreneur anddelusionally optimistic.And so it requires really thinking throughhow each of those components,each of those stepscould go wrong a littlebit to really understandthe challenges of thespace, but there's a lotthat can go wrong or there's challengesthat you'll have to overcomethat you can't foreseeat the beginning with hardware.- After four years ofdelays Mousr has shippedto all its backers and is even workingon new products, they'reon Amazon and evensome physical retail storeslike Best Buy, overall,they're a crowdfunding success story.- You can't even fathomhow much energy and thoughtand time and passion goesinto every detail, right.The mouse itself, the software, the app,everything, and then to havesomebody condense it down,just be like, software sucks. (laughs)I think you just have todevelop a way to handle that'cause they're takingyears of your hard workand condensing it to a reallyshort, really negative,not well thought out commentary,but if you can laughat that you'll be fine.- We just really wanted to put somethingthat was ours, we weren'ta part of a big companyand we did this littlething where every detail,how it looked, itspersonality, how it sounded,the video we shot to promote it.Everything was ours and for usit was like a rock and roll album.It was a piece of artthat we put together.Not matter what happensin the future we did that,and if you kind of have thatattitude it helps sustain you.- Crowdfunding really doesgive independent creatorsthe power to launch their own companies.And oftentimes, it wasn't their intentionnot to ship, the crowdfunding platformsare on the right track to takesome of that responsibilitybut ultimately it's onthe creators to ensurethat their products endup in backers hands.So before pitching your dreams to backers,make sure it's grounded in reality.So who do you think is responsiblefor products that don't ship?Let us know in the commentsbelow and of course,stay tuned for more episodesof In The Making, bye.\n"