How crowd-backed companies secure distributors
Which role will crowdfunding play for small businesses? The mantra (or “slogan”) has long been that platforms like Kickstarter and Indiegogo will revolutionize SME financing, and that their counterparts in the investment space will have unprecedented positive impacts on the economy at large.
While we all wait for hard data to confirm or dismiss these claims, there is anecdotal evidence that SMEs are starting to see long-term impacts of using crowdfunding. Especially, when we look at repeated campaigners (i.e. companies that use crowdfunding for several products), we find that the motivation for campaigning moves from product validation; over leveraging the value of an already engaged customer base; to signaling market interest to potential post-campaign distribution channels and investors.
The Miggo storyBased near Jerusalem in Israel, the startup Miggo is the exception that confirms the rule. In the course of three campaigns (to date), their benefits from implementing crowdfunding as a development pillar span product- and market validation, customer engagement, and business development. What is interesting, however, is the fact that the progression from R&D to business development has been reversed in their case.
Co-founder and CMO, Guy Sprukt, has kindly shared Miggo’s experiences with three successful campaigns in the interview here below.
From market validation to business development
In January 2014 the company launched “Miggo – camera’s best amigo” campaign. Close to 24 hours after launch, the campaign reached its $20,000 goal, and during one month, 1551 backers pushed the funding level up to $80,863. “Our first product was launched on Kickstarter to test the market and to generate some initial buzz around our company,” Guy shares, “The result was a very nice jumpstart for our company, but the most important outcome of this campaign was actually that a lot of distributors started reaching out and wanted to work with us.”
Finding high quality distribution channels is one of the most significant pain points for companies in the camera accessories vertical. The camera sales have plunged over the last couple of years as the quality of camera phones has risen to a level that meets the needs of average consumers. Naturally, this development puts pressure on accessories as well, and the competition for shelf space is fierce. Miggo overcame this pressure with their first campaign. As Guy puts it, “This campaign completely kickstarted our business development, and for a young company like ours it was amazing that we all of a sudden could pick and choose between several really powerful distribution channels.”
With a funding-to-goal ratio above 400%, Miggo’s first campaign leap-frogged the sticky second peak that Professor Ethan Mollick explored in The Dynamics of Crowdfunding.
The second campaign “The AGUA” was launched in May 2015 with an initial goal of $20,000; this goal was reached in less than an hour. “We got better at campaigning! We had lots of coverage from the media and we had a much bigger crowd at launch. We put it out there, and people were answering.” About this experience with crowd-engagement Guy explains, “We got tons of feedback, we got the money we wanted, and the product was delivered on time. People were happy. We now have 3500 happy backers, which is a lot of people. If you think about it, this is the biggest focus group on Earth!”
The AGUA reached a 910% funding-to-goal ratio, which is indicative for campaigns where there already is an engaged crowd in place. For a company like Miggo with 20 products in the catalogue (not all crowdfunded), the challenge is to choose ideas that speak to the audience and open up a conversation with the customers as early as possible.
The key is to “reach out, collect feedback, and open up a discussion with the crowd before going into production. If people feel that you listen, there is enough time to make tweaks afterwards. That was the purpose of the second campaign… Raise the money, talk to your people, get ideas, make it better, and then take it out to the shops,” Guy continues, “We pick very carefully the flagship products that we want to build crowdfunding campaigns around, and we will try to launch at least one campaign per year following the same recipe.“
Product validation: The R&D trigger
With a couple of thousand engaged customers, Miggo has with their third campaign, the “PICTAR” taken their crowdfunding efforts to a new level. The product itself is a camera-grip that flips your iPhone into a fully functioning camera with shutter release, zoom ring, exposure compensation wheel, ergonomic grip… and (of course) a selfie button. “The future of photography is in your pocket, and while cameras sales are declining, photography is accelerating and has never been as popular as it is today,” notes Guy.
With close to $300,000 in funding this is their biggest campaign to date. The goal was $100,000, which is five times higher than previously, but as Guy explains, “If we could not reach that goal, the product would be off the table. It is very expensive to produce, so without this validation it simply would not make any sense to move forward.”
In other words, the campaign sought market validation, and the funding goal had to reflect that motivation. It is risky to move forward with such as high-profile product without having a strong signal of customer-interest and -commitment. Now that the validation is there, this project takes Miggo to a different area of doing electronics.
On the marketing side, PICTAR was a bigger gamble as well. The team flew out to Las Vegas and London to show case the product to high-profile outlets in the industry. This is one of the often-overlooked secrets behind bigger crowdfunding campaigns. The PR efforts often start months in advance of the campaign and companies have to create a lot of traffic and make sure that the buzz starts exactly at launch.
Besides market validation, Miggo once again leveraged the crowd’s feedback to improve on the initial idea. For instance, they had not planned to offer PICTAR for the iPhone 6S Plus, but after two days of receiving requests for that, they decided to take a closer look at the viability right away. “In less than an hour, we found the numbers to support this extension, and create a stretch goal for this version,” says Guy and continues, “For a big company it can take months to make a decision like that. For us it was just a matter of listening to the crowd, find additional data, and recognize the viability. After two days we had sold about 250 units for the 6S Plus. That is a living example of how you can listen and react… and this is what we love about the crowdfunding model.”
The PICTAR campaign reached the $100,000 goal in less than 48 hours, and reached a funding-to-goal ratio well above 300%.
Thinking about launching a campaign? Here are four recommendations from Miggo’s table to yours:
- Go/No-go! Not every service or product fits the crowdfunding model. Can you pitch it? Can you sell it? Can you ship it? Can you protect your idea?
If the answer to any of these question is “no,” you should think twice.
- Pre-pitching! You need to have thousands of people WAITING for you to open the doors… otherwise, don’t do it!”
- Know your numbers! Plan for every funding level. We are starting to see that some campaigners cannot deliver what they have promised for the money they have received. These adverse effects scale up with your funding level.
- Consult! Do your homework. Ask other campaigners for advice – People and companies in the crowdfunding space are generally very collaborative and helpful.
… Moreover, once you become knowledgeable remember to share your experiences.