Eric Migicovsky hasn’t slept much in the past week. You can hardly blame him. His concept Pebble, a watch that talks to your smartphone, raised $3.7 million on Kickstarter in less than a week–breaking the platform’s crowdfunding record by about 20 days. Another $500K in funding has been added over the last 18 hours to bring the total to over $4.3 million, and there’s still a month to go. They racked up $1 million worth of pre-sale orders in a single day.
Have a Plan (And a Plan B. A Plan C Is Also Good)
As a perk for funding the project, backers get first crack at the goods. Migicovsky estimates they need to produce around 29,000 (and counting) Pebble watches between now and September to make good on their promise to those early supporters, not to mention orders that come in later from consumers. It’s a tricky business for a timepiece that does a lot more than tell you the time. Migicovsky is unruffled.
“We’ve been doing this for four years. We’ve manufactured in a garage with high school students doing the assembly. We also worked with a contract manufacturer in San Jose and we spent time building a network. We originally had a plan for manufacturing 1,000 watches so we had one manufacturer lined up and the order was in,” says Migicovsky. He didn’t stop there. He says he put a secondary plan in place to produce 5,000 watches, too.
In addition to that Migicovsky says “We got quotes from prominent [firm] who helps startups like ours to coordinate the thousands of moving parts” needed to scale a company to the next level, he says.
The talks took place back in January, says Migicovsky but “We didn’t hire them because we didn’t have the money,” he admits. When he saw the quick rise of support on Kickstarter it only took him about eight hours to pull the trigger and hire them. “To help us get [to scale] we are subcontracting parts of the project,” he explains, “So it’s the right thing to do.”
Know the Bank, Don’t Break It
Kickstarter is proving to be a great way to get early support and all important cash. But it isn’t free. And that’s where some startups get into trouble. Migicovsky explains that Kickstarter takes 5% of the funding and Amazon, which handles payment processing, takes a 3% cut. Then factor in production, and attorney and startup fees if the business is moving from concept to reality.
For Star Command, a video game project based in Boulder, Colorado, which raised $36,967 after asking for $20,000, the extra money seemed like a windfall at first. What the company was left with after fees, taxes, soft and hard costs was only $4,000. Though grateful for the support of the Kickstarter community, Star Command wrote a cautionary note to hopeful Kickstarters: “We have still taken a lot of debt on ourselves (over $50K).”
Migicovsky says that thoughtful planning will shield Pebble from the same outcome. Already working out the cost per piece means, “We have more money to work with,” and he has plans to invest the extra in tooling, engineering, and quality of materials and manufacturing processes. “We want to make sure the product is great,” he says.
Migicovsky is a big believer in networking and community building. He says he’s funded several startups on Kickstarter himself and quips that Pebble launched with one email to Engadget and got the rest of the buzz from a passionate group backers like him. “It really is a new world and people care about what they use on a daily basis,” he explains.
In addition to building a number of “cool use cases,” which he admits came mostly from his own experience and that of friends, he says the Kickstarter community does a great job talking about products and providing feedback. Pebble’s backers get the added bonus of getting the new watch before it hits the open market, adding a layer of exclusivity that appeals to anyone, not just techies eager for the next big thing. “It is the new way to launch a hardware company,” he asserts.
Migicovsky also points to the support of Y Combinator (inPulse was a member of the winter 2011 class of startups), along with the social sharing juice of sites such as Pinterest, where he says the Pebble is the most pinned smartwatch.
These networks provided an added measure of trust, which Migicovsky says is critical for companies growing at this fast a pace. He says he’s used the network to forge relationships with manufacturers as well as individuals. The latter is most important because Migicovsky says he had to hire five people over the past weekend.
Though he’s placed multiple interns, Migicovsky says he’s only hired two full-time engineers. “I use trust as a method to screen people. When expanding so quickly it’s impossible to have the processes in place that a larger company has,” he explains. At Pebble, new staff will be taking on 1/10 of the project entirely on their own, “so if I bring people in whom I trust, by extension I know and understand how they work and their motivation.”
Leading By Example
Right now, Migicovsky admits he’s still in “jack of all trades, vacuuming the floor,” leadership mode. If the funding keeps up, he says he knows things will have to change. “We’ll figure it out later,” he says, adding, “I am learning more about delegation.”
[Image: Flickr user Sarah Han]