Last Updated Dec 10, 2010 11:39 AM EST
When Apple released the latest iPod Nano, I immediately thought that it would make a great watch. I came up with a prototype watch conversion kit and tried to sell it to a big company -- they didn't buy it. So a few months ago I decided to develop it on my own, raising money through the crowdfunding platform Kickstarter. And it worked: I've already sold more than $700,000 worth of product.
Here's how I did it.
An idea with potential
I run MINIMAL, a design studio in Chicago. Most of our work involves designing game consoles and other products for big brands like Microsoft and Dell.
I've always had the bug to develop my own products, but it's a lot harder when you don't have the backing of a big company. Generally, you need to go out and raise money from venture capitalists in advance. You can bootstrap it, but then if the product becomes popular before you're ready, you end up giving away half the company just to keep things running. Neither of those ideas appealed to me.
So, after I tried shopping around the prototype for my TikTok and LunaTik multi-touch watch kits with no luck, I figured the product would go nowhere unless I decided to market and sell it on my own. That's when I turned to Kickstarter.
A friend of mine, Scott Thomas, used Kickstarter to raise the initial funding for his book about art from the Obama campaign. He had a very positive experience with the process, so I decided to try the same route. Most of Kickstarter's projects are related to art or music, though, so I wasn't sure how well a consumer product would work. I figured it couldn't hurt to give it a shot.
Kickstarter is a no-risk way to sell a product. You create a page to present your idea and ask for a set amount of funding through small, crowdsourced payments. The key element is that no one pays until your total pledge limit has been met.
I created a video showing off the TikTok and LunaTik watch kits, offering backers the opportunity to receive the watch kits for below retail cost. I set the pledge amount at $15,000, which would cover what we needed to place a bulk order at the factory we work with, and hoped I'd at least reach that goal. I never expected the response I got.
Beyond my wildest dreams
There's a built-in fan base for anything associated with Apple products, so as soon as I created my Kickstarter page, orders began rolling in. By mid-afternoon on the first day, we were up to a few thousand dollars. I was hopeful we might hit $10,000 by the end of the day. Sometime during the evening Gizmodo, a huge tech blog, linked to my Kickstarter page and suddenly orders were pouring in. By the time I went to bed that night, we'd received more than $60,000 in pledges.
Since then, people have continued to spread the word through Facebook and Twitter, and on various other blogs. We're over $700,000 in sales, and we're gaining about $25,000 in new orders every day. The products are being manufactured now, and will begin to ship just before Christmas.
While these aren't huge numbers from a retail perspective, they're pretty big considering the product hasn't even been produced yet. We were thrilled to see how many people were willing to stand behind it.
A worldwide focus group
Generally, with product development, we use focus groups to test the product. They're time-consuming and expensive, and at the end of it, we still don't know for sure if our sample audience represents the consumer market at large. But with Kickstarter, I got instant global validation for my idea. Nothing shows the strength of a concept like consumers opening up their wallets to buy your product even before you've manufactured it.
This is an innovative form of funding for creatives and entrepreneurs, because it allows you to get your idea out there and skip the first run of venture funding. If you want to scale from there, you may still need to get investors involved, but why not go to the public in the early stages?
Doing it this way isn't free: Kickstarter takes a five percent commission, and Amazon, which processes their payments, takes roughly another three to five percent. But compared to giving up a stake of your equity to early investors, it's a small price to pay.
Not for everyone
The Kickstarter model works well for my company, because we're familiar with developing products and can turn them around quickly, thanks to our existing manufacturing contacts. We already knew what went into manufacturing and delivering a product, such as packaging, creating UPC codes and partnering with a shipping company.
Kickstarter may not work out so well for people who are new to product development. It's not that hard to get consumers excited about a concept, but once you've reached your pledge mark, you need to deliver.
But if an entrepreneur is prepared, it can be an ideal way to get a product to market. I'm looking forward to seeing how other people will sell products that otherwise would have been scrapped because of big company politics. Because with this model, it's the consumer that decides.
Scott Wilson formerly worked as global creative director for Nike, where he designed watches and other products.
-- As told to Kathryn Hawkins