Is crowdfunding a good way to get funding and start your business?

Goro Kosaka / September, 2018

Description

Vufine was founded by Goro Kosaka in 2015. Goro is well versed in both the wearable market and myriad challenges facing a Silicon Valley hardware start­up, and in this video he is sharing his experience running two crowdfunding campaigns for Vufine.

Video Transcript:

Is crowdfunding a good way to get funding and start your business?

Crowdfunding nowadays it’s not the best way to get funded, because it costs. It is a good tool to promote your product and to do a proof-of-concept. To see how many people actually want to pay the price to get your product.

When it started it was more for the people that had a great idea, get some money to start their business. But now the expectations for the crowdfunding products are much higher. People expect products to be delivered and many fail as we know. Also to have a nice clean video. It ends up you’re paying a lot to do a crowdfunding. You need funding to do a crowdfunding.

The good part of doing crowdfunding is that you can prove and show your investors that this product has a potential market and that people like this. As a business and funding wise, specifically for a hardware product, because hardware products need a development and then also the cost of manufacturing. So if you’re offering a discount for a product you don’t even have, you’re not making money. You are kind of losing money for selling the product and you still don’t have the money to develop the products.

It’s not a good way to start funding your business. You must have some kind of basic funding, product pretty much ready to go and then go to crowdfunding so that you will get attention and exposure, that part is very good. Especially in the US, it’s not like you become famous when you get one interview and everybody else will know about you. You have to talk to different media. You have so many ways to reach out to a wide market. Crowdfunding is a good way for you to start to talk to all the early adopters who are looking for something new.

To get your product known, and to get a good exposure and attention it is good, but to get funding maybe not a good idea.

This is from our experience three years ago, I am not sure if it still valid today. We spent like at least three months to make a base of your funds waiting for the crowdfunding to start so you can’t expect everybody to find you when you start crowdfunding. Instead, you already have a mailing list of the people who are waiting for the crowd campaign to start. That took us around three months to go to different shows and to do promotions. That’s how much it took us timewise.

For the cost, the first one we did a video in-house so it was much less than most other nice looking crowdfunding videos who cost like $30,000 maybe $50,000. During the campaign you need as many people as possible to find you in the Kickstarter so you do ad campaigns on Facebook, Google and that will also cost you money. If your products are super good and you don’t have to do any of these, you may still be successful but it’s becoming harder and harder, I think.

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