The crowdfunding hardware problem: red flags and success factors

Crowdfunding success: this wasn't their first rodeo
Crowdfunding success: this wasn’t their first rodeo

Over the past two years, hardware has gone from cuss word to the new cool in the world of startups and venture capital, in large part because of the frenzy of innovation being seeded by Kickstarter and other crowdfunding platforms.

But things often go wrong between the jubilant days of reaching a project’s target and delivering the device.  More often than not, a project is delayed, often by months if not a year or more, and sometimes they never ship at all.

The problems leading to a project being delayed or even not getting delivered are fairly obvious:

  • the company has an unanticipated problem with their technology/device/manufacturing
  • the company under-estimated how much capital/time it takes
  • the company didn’t actually have the technology/leadership/creativity/you-name-it to actually deliver on what they promised the first place
  • some combination of all of the above

No matter what technology category, you’ll find a number of campaigns that have either not delivered or under-delivered.  One I’ve followed pretty closely is smartwatches. Over the course of the past few years, quite a few campaigns popped up on Kickstarter and Indiegogo, and taking a quick look at where some 2013 smartwatch crowdfunders are doing today,it looks like some are having issues post-campaign:

  • Agent watch: originally promised to deliver by December 2013, the latest estimate is mid-2014
  • Kreyos: ship date was originally November 2013, but it looks like it will ship mid to late spring this year at the earliest
  • Neptune Pine: original ship date of January 2014,  In an update in February, they said shipments were to start in late March, but there’s been no updates since and commenters are getting restless.

But there are a couple smartwatch companies that have actually shipped, which include (obviously) Pebble and Metawatch. And while OMATE hasn’t yet shipped to all the backers, they are shipping in limited batches at this time and look like they’re going to make it.

So, are there lessons to be learned? Here are a few I would suggest:

  • If a company hasn’t really started any product development prior to start (meaning their idea is mainly just an idea), there’s a very good chance they will not deliver or the end product will not be anywhere near what was promised.
  • If the company is fairly new or is really just a result of some folks looking to start a company if the campaign succeeds, chances are there could be trouble.
  • If what the campaign is promising seems extraordinary and almost a miracle, it probably will be one if the actually deliver product.
  • If the management team had no pedigree, be forewarned.

Listen, I’m no expert, but having watched this sector closely, it becomes obvious looking at the two companies born from crowdfunding that have really made it and are succeeding so far are Pebble and Meta.  Pebble was driven by the singular vision of Eric Migicovsky, and Meta’s success is largely the result of the knowledge and connections of long-time connected watch pioneers in Bill Geiser and Dave Rosales. both of which came out of Fossil.

Pebble had the advantage of being a first-arriver in terms of being the first really big smartwatch campaign to succeed on Kickstarter, and that resulted in significant cash which helped ultimately fuel the company, but bottom line is both companies had experienced and passionate founders which had been developing product for some time.