The Post-Kickstarter Conundrum: Delivering Companies DOA?


Picture this: two guys in a garage coding The Next Big Thing. It’s an iconic and familiar image. Now imagine their ubiquitous computer keyboards being overtaken by a colony of 3-D foam models or CAD drawings. Now your mind’s eye sees these same guys (or gals) hacking away at something entirely different.

This shift in creative attention is being labeled a “renaissance” by folks like Y-combinator’s Paul Graham. Chris Anderson boldly declares, “Hardware is the new software.” Whatever you choose to label it, the happy result is an overflow of terrific new consumer products.

(And, for the record, no one who really creates consumer products for a living would call them “hardware!”)

Why are innovative products multiplying like rabbits? It’s not complicated: people naturally gravitate to creating physical things. It’s simply human nature. This is not a fringe “techie” or coastal phenomenon: nationally, 2011 was a record year for patent filings, up 10 percent from 2010. Further, as the economy is pushing more people to take matters into their own hands, people are seeing if they can go it alone. In fact, 51 percent of millennials want to start a business in the next five years, according to the Kauffman Foundation. Add available resources such as online access to manufacturing options—and crowdfunding platforms like Kickstarter or Indiegogo—and any ordinary person can potentially get an idea funded. This is huge. But it’s only a tiny part of the road to success.

Tech and design projects on Kickstarter had a total of over $79 million dollars pledged in 2012, with nearly 5,000 projects launched. That’s a lot of demand for cool products. But, the untold story is that these numbers represent a boatload of entrepreneurs being set up for financial loss and heartbreak. Why? Because crowdfunding platforms are really just the kindergarten stage of getting a product scaled and sustainable. People are getting romanced by “massive success” on Kickstarter without realizing that the 5,000 unit volumes of even the very largest Kickstarter products (think Pebble watch) are just chicken scratch in real-world consumer product terms.

The Post-Crowdfunding Stage

There’s a lot more work to be done getting these products to market. The JOBS act has inspired the expansion of crowdfunding, but that will only cloud matters more. So these products get even more funding. So what?

Kickstarter is just that, a “kick-start.” It’s a way to get an initial production run funded. But this narrow echo-chamber proof of demand is not predictive of true mainstream adoption. A project on Kickstarter has a long way to go to succeed. Building (and funding) a better mousetrap is hard. But those activities pale in comparison to the heavy lifting of getting it scaled and in national or international distribution.

For instance, if you want to get your product into Target or Williams-Sonoma, those retailers need to know that you … Next Page »

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Jules Pieri is the co-founder and CEO of Daily Grommet. Follow @julespieri

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6 responses to “The Post-Kickstarter Conundrum: Delivering Companies DOA?”

  1. Wade Roush says:

    Really great insights, Jules. Seems to me there’s a big kink in the crowdfunding model that has yet to be ironed out (though it’s starting to be): it’s the misperception that reaching your fundraising goal on Kickstarter or Indiegogo means your project has been de-risked.

    Far from it — there’s now a well-documented pattern of crowdfunded projects that can’t even deliver the units promised to funders, let alone scale up to meet mass market demand. The truth is that donating to a project on Kickstarter is at least as risky as being an angel investor or venture capitalist and putting a $500,000 seed investment into a three-month-old startup. Professional venture investors assume that they’ll lose money on most of their investments, on the theory that the 1-in-100 home run will pay for all the rest. The odds for a startup don’t change just because you raised their seed round on Kickstarter.

    I think the huge benefit of crowdfunding — the reason it’s such an amazing invention — is that a lot more builders and proto-entrepreneurs will get a chance to test their product ideas. But the overall hit rate won’t go up. Donors to crowdfunded projects need to know this going in, and builders need to be more realistic and probably even more transparent about the risks.

    • Agree Wade! Crowdfunding cracked a big piece of the puzzle that was already getting solved by giving people access to tools like 3-D printing, video marketing, internet resources for marketing intelligence that previously only in the hands of pros, info on professional resources like designers and engineers. But it all still had to be funded and tested, on the product level. It’s a key advance. I remember when I used to put Kickstarter in all my public talks and I had to pull them off the slides because no one understood what they did. SO glad we are past that point.

  2. Shipwire says:


    Thank you pointing out readers to Shipwire. It is very much appreciated.

    I couldn’t agree more about a lot of Kickstarter projects being sling-shotted into the market with thousands of backers only to land with a thud when it comes to successfully working with retailers, discovery sites, flash sales or wholesale distribution.

    After talking with hundreds of project owners we’ve put together a series of tips and best practices to try and educate the project owners so they don’t paint themselves into a corner without even knowing it: Designing packaging, wholesale verse consumer distribution, international shipping challenges, shopping cart selection, etc.

    Wade Roush brings up some good points. I’ve personally backed quite a few products – I’m still waiting for the delivery on a few of them and hoping for the best :-) I personally don’t think the model is broken, I think that some of the challenges come from “unexpected scale”, “communication” and “experience” and can lead to breakdown if expectations are not managed. It’s one thing to come up with a product concept and eyeball a manufacturer for a few hundred or a thousand units for an idea. It’s quite another to have the project be successful and suddenly have to deliver 5000 units to buyers all over the world, with a new “brand”, for a product that has never been in the market before, and 5000 expecting and excited buyers. That kind of initial scale requires thoughtful execution and often more funding than expected and a lot of communication.

    There is a lot of learning going on right now across the entire ecosystem. It feels like the community is focusing in on the right issues and I’m really proud that Shipwire is being called out as a great partner.

    Nate Gilmore
    Shipwire Team

    How can we improve?

  3. Jim says:

    No one who really creates consumer electronics for a living calls it hardware?

    I’m an electrical engineer that creates consumer electronics for a living. It’s hardware. Who are you?

    • Hi Jim, I’m an industrial designer and was speaking about consumer products in general, ie. cars, chocolate sauce, apparel, kitchen gadgets, exercise equipment, etc. Sure, you can call electronics hardware, no problem. But Williams Sonoma does not buy hardware from its suppliers.