Severin Marcombes is the CEO and co-founder of Lima (photo), a new device that allows you to display the same files on your smartphone, computer and tablet. A year ago, he launched a Kickstarter campaign for his product with an initial goal of $69,000. The project reached its goal in 12 hours and ended up collecting $1.2 million dollars thanks to 12,840 backers. In May 2014, Lima announced a $2.5 million Series A round with Partech Ventures. Here, he explains what crowdfunding means for young hardware companies.
Building a hardware company is hard. Hard, and extremely costly.
When you’re a young engineer like me, with no startup or exit track-record but feel that you have a project of a lifetime, it’s difficult to go to a VC and say you need money to build the next Apple.
– If you go to an investor with an idea, he’ll want to see a prototype.
– If you go to an investor with a prototype, he’ll want to see a product.
– If you go to an investor with a product, he’ll ask you to sell a thousand of them.
All of these steps are legitimate:
– from the idea to the prototype, you’ll prove the feasibility of the project and understand how you’re going to execute your idea technically,
– from the prototype to the product, you’ll demonstrate your ability to build an incredible user experience, rather than a geeky gizmo,
– from selling the product, you’ll show that people are actually genuinely interested in what you’re building, and most importantly, ready to pay to have one.
Crowdfunding can help you with these two last steps. Funding will help you get from the prototype to the product, and the crowd will demonstrate that the world actually needs it.
It all starts with funding…
Unlike a software company, a hardware company creates products which are physical and tangible. You can’t make a physical update of your product to improve user experience once you’ve shipped. Once a user gets your product, he’ll keep that product forever.
That’s why you need to give him a product and not a prototype: a prototype only provides features, whereas a product brings the user a complete experience. A hardware product is an object: you need to feel it, touch it with your hands and manipulate it. In order to transform a prototype into a product, you need to work on materials, the form factor, design, color, miniaturization, etc. There are a lot of things that will very quickly prevent you from building it with your own hands. You’ll soon need a factory, that will tell you that there’s a minimum order requirement, which is where you’ll first have a serious need for funding. For us, that minimum order requirement was a thousand devices.
That’s where crowdfunding can be such a godsend: if you can get a thousand people to support you, you can get enough funding to start production, without the need for a VC, at least in the early stage.
… but the real deal is the crowd. Crowd is traction.
Having a product is one thing, but are people going to buy it? If you want to take things to the next level and produce produce on a massive scale, you’ll need to put a lot of cash on the table even though you don’t know if it’s going to sell.
That’s where crowdfunding gives you this incredible opportunity: prove your product’s market fit before spending big bucks (or asking VCs to give you big bucks).
Crowdfunding a unique chance to reveal your brainchild to the world and see how the world reacts. This opportunity should not be taken lightly: you need to be very well prepared for your crowdfunding campaign. Why? This audience is neutral and there’s a big difference between convincing your friends that your product is great and convincing a complete stranger to give you money for it. You need to be ready.
For geeks like me, it’s a hard but important reality check: how do you market your product? How do you position yourself when so many brands seem to have preempted your value proposition? (even though you’re confident they only did a tenth of what they promised). How do you refrain yourself from talking about technical achievements and focus on features instead? And so on.
And the skills that you need here are totally different from the ones you needed to build your product in the first place.
– testing your message with your target market;
– finding relevant use cases to appeal to your audience so they can best understand how and where they can use your product in similar or new ways;
– creating attractive and user-friendly communication tools to explain your product (pictures, diagrams, videos, etc.)
Some people choose to hire marketing experts. I think it’s essential at this stage for the founders to be capable of making their product sexy themselves. My co-founder Gawen and I spent nights pitching Lima in different ways to hundreds of people. We rewrote our project presentation 19 times. We rewrote the video scenario 23 times. This was really important because talking to people enabled us to understand the real value of our product and forced us to make an enormous qualitative leap in terms of marketing. We didn’t want to miss the opportunity of a lifetime.
Our crowdfunding success gave us the chance to bring our project to the next level: mass production and a market launch of Lima, together with the creation of a giant community of passionate users willing to give us feedback so we can most effectively improve our product along the way as we ramp up to ship.
Yes, hardware is hard, but the crowd can boost you to levels you couldn’t have imagined and bring your dream to reality.
PS: A lot of people have asked me what we would have done if our Kickstarter campaign had failed. If it had failed, the lack of interest would have told us that our idea wasn’t ready for prime time yet. We would have taken a deep breath and spent more time talking to the community. If that happens to you, modify your product features and design as well as your message until people actually say “Wow” (and not just your mother). Continue that process for as long as you truly believe in your product and are committed to see it through to the end.