Late last year seasoned travellers Doug Barber and Jimmy Hayes, the entrepreneurs behind startup company Minaal, launched a campaign on crowdfunding site Kickstarter. The aim of the 30-day campaign was to raise US$30,000 in 30 days to help them bring a carry-on travel bag they'd designed to market; it ended up capturing the imaginations of 1,634 backers to the total tune of more than US$340,000.
It's the stuff of dreams for startups, and such success stories are undoubtedly fuelling the popularity of crowdfunding - where capital is raised for ventures or projects via pledges made online - as a means to make entrepreneurial dreams a reality.
Barber, who shares his story in Small Business this week, says Minaal took the crowdfunding route for a number of reasons.
"In addition to raising crucial funds, we saw crowdfunding as a great tool for both market validation and the marketing of our new product and brand," he says. "Although we consulted countless road warriors during our many rounds of development and product sampling, it's not until people throw money down that you know you've created something they really want."
Barber says they chose to run their campaign on Kickstarter because it was the platform that had the greatest international reach and profile at the time, but there are loads of different options out there.
Belinda Tuki of The Honest Food Company, who also shares her story in Small Business this week, ran a campaign on local site PledgeMe, for example, successfully reaching her target of $35,000 to set up her own gluten-free, raw food kitchen. Also sharing their story is Snowball Effect, a local equity crowdfunding platform, which enables investors to take a stake in startup ventures.
But crowdfunding campaigns that are a runaway success, like Minaal's, are the minority and many don't reach their funding goals at all. At the time of writing, for example, Kickstarter's statistics showed 43% of campaigns on that platform successfully reached their funding target.
Sean Gilbert launched a Kickstarter campaign earlier this year to help fund his startup business, Re-Fuel Packs by Activate Nutrition, producing healthy, shelf-stable, high-protein ready meals. While the project didn't meet its funding goal, Gilbert still says he learned a lot from the experience and is moving forward with his business.
"The Kickstarter campaign taught me lots about what still needs to be done on the product, the amount of interest that's out there, and that I was on the right track," he says.
Gilbert says he spent lots of time researching successful campaigns prior to his launch, and others echo that preparation is key.
Sam Lee used Kickstarter earlier this year to successfully raise funds to launch meMINI - a small, wearable video camera that allows users to capture their favourite moments retrospectively.
Lee says preparation for the meMINI crowdfunding campaign started months before launch, and included launching their company website, getting word out with the help of a PR company, and a trip to the US to gain media coverage and other exposure. Drumming up support from friends and family was also crucial.
"One thing people say about crowdfunding is you have to bring your own crowd, and then others will follow on from that," says Lee. "So it was a case of talking to our friends and family and getting that support, because the number of people that back you shows you're legitimate, even if they just give a little."
Doug Barber, Minaal
Can you tell me about your crowdfunding project?
My co-founder and I started Minaal when we couldn't find travel gear built for the rigours of life on the road, but professional enough to take into the office. To bring our Minaal Carry-on bag to market, we set a US$30,000 goal on Kickstarter and ended up raising over US$340,000 in 30 days.
Why did you choose to crowdfund the project, rather than raise the funds you needed some other way?
In addition to raising crucial funds, we saw crowdfunding as a great tool for both market validation and the marketing of our new product and brand. Although we consulted countless road warriors during our many rounds of development and product sampling, it's not until people throw money down that you know you've created something they really want. And as for marketing, launching on Kickstarter provides an incredible amount of exposure, particularly to early adopters.
We chose Kickstarter because it had the greatest worldwide profile and reach of crowdfunding options at the time. There are great New Zealand-based crowdfunding platforms too, but we were keen for Minaal to have a strong international focus from day one, so it made sense to find a platform that enabled that.
What kind of preparation did you need to do before the project went live?
As part of the development of the bag, we'd been reaching out to people in our target market for feedback many months prior to the Kickstarter campaign. We then took our close-to-final prototype on further travels and met with many like-minded 'pro-travellers' in the process, many of whom kindly helped us spread the word once the campaign launched. Finally, a solid few months were spent filming, editing, writing and rewriting the video and project page.
What strategies did you find were effective for getting support while the campaign was running? Were there any strategies that you tried that weren't so effective?
It's important to do the vast majority of your outreach before the campaign launches, as early momentum is key, and there'll be plenty else to keep you busy once your campaign is out in the wild. An effective marketing tool for us was cross-promotion with similar projects that were live on Kickstarter at the same time.
Not so effective was a limited experiment we ran using a 'crowdfunding PR company' who pitched us on spreading the word to mainstream media - this gained few, if any, results. Community is the clear winner in this environment.
What stage is the company at now, and what are some of the immediate plans ahead?
The most pressing challenge right now is keeping up with demand, which is one challenge we're fairly happy to have! Our flagship carry-on bag model is sold out at the time of writing, but new stock is rolling in soon. We're also working on some exciting new complementary products to flesh out the range.
What are three key pieces of advice you'd have for other small business owners wanting to run a successful crowdfunding project?
1. Involve your target users in development of the product - you'll likely end up with a much better product and some product evangelists to help spread the word for your campaign.
2. Don't assume you'll be able reach out for publicity once your campaign has already launched. Make sure you contact anyone you want to before launch, even if it means pushing back launch a little.
3. The video and text accompanying the product are both extremely important, especially the video, as that can easily be shared via social media. Give yourself a few weeks or even months to get this right and take feedback from a range of people. And make sure they're people who give brutally honest opinions!
Coming up in Small Business: Australia is often the first market small businesses target when going offshore, but it's not always easy to crack. If you've got some war stories to share about your small business crossing the ditch, drop me a note: email@example.com.