What's Your Problem?

When to Crowdfund?

Welcome to Highway1's hardware advice column, where we take questions from our startups and pose them to our amazing community of staff, mentors, partners and suppliers.

Today’s edition of What’s Your Problem is about the eternal quandary of crowdfunding. For our answer, we turned to David Austin, head of startup programs at PCH.

When is the right time to crowdfund?

David Austin:
Launching a crowdfunding campaign before you’re ready can, at minimum, lead to angry first customers who wait and wait and wait for you to ship. At most  –  especially if you haven’t done the math  —  your impatience to launch a campaign can sink your company.

There are only three times, therefore, when you should crowdfund:

  1. When you’re ready to go to market and you want to maximize your pre-order campaign strategy. In this situation, you’re at least at the design for manufacturability stage (DFM), preferably at the design validation test phase (DVT), and you know what your bill of materials (BOM) is.
  2. When you’ve done this before, you know what you’re doing, and you’re going through the process of market validation. Not your first validation, however. If a crowdfunding campaign is the first time you’re putting your product into customers’ hands, you’ve already failed.
  3. When you need a Hail Mary. You’re out of options, a bridge loan isn’t possible, and you need to infuse your company with some money. This is the riskiest option, and it requires the most analysis and thought to determine if it makes sense. And remember, you’re not using this money for product development; you’re using it to ship.

 

You can read more of David’s advice on crowdfunding in this Medium post.

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