Kickstarter began three years ago as a platform to fund creative artistic projects, but devices like the Pebble watch have quickly turned the limelight toward hardware innovation and in turn, put the crowdfunding movement firmly on the map. Moreover, Kickstarter’s approximately 35,000 projects, with almost $400 million pledged doesn’t even begin to make up the majority of the crowdfunding industry, which raised $2.8 billion in 2012 alone. Even the U.S. government has recognized crowdfunding as a viable--and legal--investment platform with the passage of the JOBS Act last April, in hopes that with more money flowing into small businesses, we can also realize a boost in employment.
While Kickstarter certainly found great success in 2012, it also faced significant growing pains in its breakout year, most of which are related to hardware projects. A recent report by CNN Money found that 84% of the top 50 funded projects in 2012 shipped late. Funding a play, film, or other form of artistic endeavor is much different than funding the next gadget or device; with the arts, there’s no expectation that backers will receive a tangible product as a result of their “investment.” In order to set the expectations right, Kickstarter released a statement and a new set of rules and regulations in September to reinforce the fact that “Kickstarter is not a store,” hoping to dispel the myth that Kickstarter is a site where consumers can buy cool new toys and devices. But they didn’t stop there. This list of Kickstarter “rejects” and the decision to omit their most successful products to date--the Pebble Watch and Ouya Console--from their highlight reel presented at CES indicates that Kickstarter is further distancing themselves from hardware.
As the list of Kickstarter rejects lengthens, the demand for crowdfunding alternatives is undeniable. Look at Indiegogo, which offers the lowest barrier to entry yet, or more interesting, Selfstarter, the platform that was cobbled together by Lockitron after getting turned away by Kickstarter. Crowdfunding as an investment model truly democratizes the fundraising process; the products or ideas that have the most promise in the eyes of the consumer, not a third-party investor, are the ones that make it. But the movement is evolving and through this recent shift we see that crowdfunding has the ability to not just fund the next great Broadway show, but also to significantly impact and direct the hardware renaissance. It’s clear that there’s a need for crowdfunding platforms that welcome hardware. But it’s not that we lack alternatives for raising funds--the root of the issue is the lack of expertise related to the actual product development process.
When it comes to hardware, product development experts will tell you that the biggest challenge isn’t fundraising, but actually developing the product at scale and seeing it through to market.
Christie Street, which just launched in December, and Dragon Innovation, another recently launched company aimed at helping crowdfunded companies, may be on to something. They’ve followed the rapid emergence of crowdfunding platforms and recognized that none of them satisfy the needs of inventors to not only fund their projects, but also get their innovations successfully into the hands of consumers. Christie Street describes itself as a platform providing the infrastructure needed to successfully bring products to market, addressing the problems that crowdfunded products have traditionally faced: generating capital, the vetting process, and the lack of support offered to both the inventors and the backers.
While they clearly understand the need for a supportive ecosystem in place when it comes to hardware, their selectivity does threaten the democratization of crowdfunding, one of its most appealing and market-changing factors. Whereas traditional investment platforms rely on market forecasts, consumer behavior reports, and the like, crowdfunding puts the decision in the hands of the consumers and in turn delivers inventors a predetermined market from the onset. Nonetheless, Christie Street has certainly recognized how the market is shifting, how we’re in the midst of the evolution of the movement. We’ll start to see this grow and an ecosystem pop up around it that doesn't end once the funding is completed but actually brings innovation to market.
Once the importance of product development is understood, and the necessary support in place--think labs for rapid prototyping, consultants for design, contract manufacturing, and the like--entrepreneurs can think beyond a single device. They can develop a pipeline of product ideas from concept to creation, allowing them to stay relevant in today’s fast-paced consumer market.
As the crowdfunding movement continues to evolve, it must figure out its place among the hardware giants that lead the market and influence consumer preferences. Will Apple introduce a smart watch, eclipsing the Pebble watch altogether? Or is Pebble working on a second version that will leverage quantified-self technologies (as Nilay Patel longed for in his review)? Whatever’s next, the big guys and the little guys will be pushing themselves to innovate and create devices faster, in turn pushing product development even further.
What’s clear is that the crowdfunding movement, although still evolving and trying to find its way, is here to stay. And when it comes to hardware, there are certainly steps that need to be taken to ensure that these exciting new devices actually make it to the store shelves. There’s much more to creating an innovative product than coming up with a great idea; the hard part comes after the concept has been formulated, the funds raised, and the product designed. Engineers will be in more demand than ever. And not just the coders and software engineers this time, but mechanical, electrical, and others. This is the true meaning of the hardware renaissance.
--Skooks Pong is the senior vice president of technology at Synapse Product Development, where he leads a team of more than 200 software, mechanical, and electrical engineers who are creating breakout devices in industries such as mobile payments, guest experience, and wearable fitness technologies. Find him on Twitter at @skookspong.
[Image: Flickr user Ralph Thompson]