Crowdfunding has given entrepreneurs and inventors greater access to startup capital. You might not be able to get seed money or Series A funding from a venture capital firm for your idea, but backers on Kickstarter or Indiegogo could give you just the leg up that you need.
Crowdfunding marketing is a strategy to raise funds for a project by asking a large number of people to donate money, usually in small amounts to fulfill the financial goals of the project. Crowdfunding, on the other hand, gives you a quick place to showcase and share your pitch with a bigger audience.
Crowdfunding has launched everything from the Pebble smartwatch (it was the Apple watch before there was an Apple watch) to the Exploding Kittens card game to movies like Veronica Mars. Increasingly, crowdfunding is used not only by startups, but also by established companies to fund the launch of a new product.
Most crowdfunded projects offer backers some kind of reward. Projects that fund product development usually offer the finished product as an incentive to backers.
One thing successful crowdfunded projects have in common: a need for crowdfunding fulfillment services. At the end of every fully funded Kickstarter or Indiegogo campaign, there will be a warehouse full of product that needs to get into the hands of your backers.
There is much more to shipping rewards than throwing products in a box and slapping on a label. Crowdfunding fulfillment is your closest contact with the customers who will be your most loyal audience as you grow your business. Careful and professional fulfillment can send your product out with a bang and point your company towards success.
Crowdfunding Fulfillment Basics
When you calculated your startup expenses, you probably figured out manufacturing costs down to the penny. If you’re like a lot of small business startups, however, you might have forgotten to figure in fulfillment costs, including shipping and warehouse storage fees.
You could pack every product lovingly with your own hands, and you might be tempted to do that. After all, that geode science kit or spiffy new bicycle design is your baby. You have been working on the product development for months or years, and you want to make sure that each and every one is sent off with loving care.
Going it alone, however, may give you more trouble than you bargained for. When a backer decides to purchase your geode kit for every science teacher in Illinois, you could end up with a house bursting with science kits. Without proper storage, you risk damaged boxes, lost product, and diminished profits. In the case of the bicycle, you probably don’t have the space or ability to handle packing each one into a special box and arranging for delivery.
Fulfillment is your eCommerce muscle. A crowdfunding fulfillment provider can track and warehouse your products once they arrive from the manufacturer. You supply the list of backers, and your crowdfunding fulfillment warehouse will match them with their chosen rewards, and then pack and ship your products.
Fulfillment companies have expertise in dealing with bulky or oversized packages. They can suggest the most economical shipping options and even negotiate volume discounts with shippers.
You don’t have to give up the personal touch when you choose crowdfunding fulfillment to ship your rewards. A good fulfillment warehouse can carefully place additional materials in every box. You can add a personal letter, a catalog of additional products, or even a bonus thank you gift for your most generous backers.
Outsourcing your crowdfunding fulfillment can provide quality control and eliminate the rookie mistakes in packing and shipping that lead to unhappy backers. Your crowdfunding fulfillment warehouse can make sure that your inflatable chairs arrive with no holes and your custom glassware ships without breaking.
There are hundreds of crowdfunding platforms, but Kickstarter is by far the biggest. Since its founding in 2009, Kickstarter has raised more than $3 billion to fund almost 125,000 successful projects, for a total of over $5.3 Billion in economic impact! It has the highest success rate of any crowdfunding platform (more than 35%). Kickstarter is a great way to get visibility for your new product or your startup.
On Kickstarter, you set a funding goal for your project and the deadline to collect your goal amount. You can offer different rewards for different pledge amounts. A backer who gives $25 might get a promotional t-shirt, while $50 gets a first pressing copy of your new board game and those who give $1,000 get a chance to play the game with you.
If your Kickstarter project gets full funding within your timeline, you get all the money pledged to you on the platform and your new product gets a green light. If you fail to meet your funding goal, Kickstarter returns the pledges to the backers. The advantage of this all-or-nothing approach is that it ensures that projects will have adequate backing to fully launch and that backers will get a return for their pledges.
There have been a number of success stories of entrepreneurs who raised much more than their Kickstarter funding goals because their products generated so much excitement. Your best preparation for success is to make your Kickstarter fulfillment plan at the beginning. You don’t want to scramble to find a fulfillment warehouse with capacity once you realize the orders are stacking up.
When Fulfillment Problems Become Reality
Just take the story of The AirHook, invented by Craig Rabin in his basement, Chad was astonished when his innovative airline cup took off on KickStarter faster than the jet planes his products were designed to be used on! His initial $15,000 goal was fully reached in just 73 hours, and within 30 days, over $78,000 worth of orders had been placed!
Yes, these are the kind of problems entrepreneurs and inventors dream of having, but they’re big problems nonetheless. With so many orders placed, the question of how Craig was single-handedly going to fulfill over 4,000 orders to his eager customers became a primary concern. Craig was no longer an inventor, he had to go into full-time logistical planner to find a solution.
Fortunately, Craig partnered with a fulfillment specialist in the eastern part of the country which complemented his location in Seattle, Washington. While AirHook’s surge in KickStarter orders is a great problem to be dealing with, it’s critical for growing and established brands to understand what core competencies are driving their business growth, and to ensure that your company is able to focus on those functions that will continue to “move the needle” for your online store. Having a dependable fulfillment partner is a great way to ensure that your time is spent on those core competencies.
When you build a relationship with a Kickstarter fulfillment company early in the process, you can build fulfillment costs into your funding model. In addition, you can tailor your offerings based on the capabilities of your fulfillment warehouse, and not just your manufacturer.
For example, your crowdfunding fulfillment center can handle the customs forms to allow you to ship internationally more easily. This expands your pool of potential backers—and your future market for your startup.
Indiegogo started the year before Kickstarter and has raised hundreds of millions of dollars for projects. The second largest crowdfunding platform, it has a much broader international reach than Kickstarter: Indiegogo funds projects in over 200 countries around the world, while Kickstarter funds projects based in fewer than 20 countries (though it accepts pledges from across the globe).
Only 9% of Indiegogo projects reach their full funding goals. That doesn’t mean that 90% of Indiegogo projects fail. Unlike Kickstarter, the money you raise on Indiegogo goes directly to you, no matter how much you get. This gives you the option to leverage your crowdfunding capital with other funding sources to launch your product.
There is an even stronger case for setting up Indiegogo fulfillment than for Kickstarter fulfillment. Because you know you will get at least some level of funding from Indiegogo, you know you will need to ship product to your backers.
Perhaps the money you collect on the crowdfunding platform only allows you to produce 10,000 3D printers instead of the 30,000 you had hoped for. That’s still a lot of 3D printers. And that’s not counting the orders you get after your crowdfunding round, when you continue to market your new product online.
Working with a crowdfunding fulfillment provider could be the beginning of a beautiful relationship. As your company grows and matures, you’ll want a reliable third-party logistics company to handle your fulfillment. After your Kickstarter or Indiegogo success, your fulfillment warehouse can keep your products flowing to your customers for years to come.