The Newest Lean Startup Tool: Kickstarter

Agreed with shawnc, the article should state Crowdfunding and not Kickstarter. But that aside, I definitely agree with others that using crowdfunding as a "startup tool" doesn't make everything and everyone on there a "startup." If anything, it allows people to get very important market validation which can lead to a startup environment and lead to more outside capital.

I personally don't think software has big potential with crowdfunding platforms since crowdfunding success has been inherently hardware-driven. I also think developers run the risk of pitching a software "idea" to a huge audience where one dev browsing the site can steal the idea and make it while you wait to raise your $50k for "coding." I also don't think it's in the nature of any dev to do that; perhaps kids who have "ideas" for apps, can't code and don't want to spend the money on a 3rd party dev.

There's also an inherent risk with crowdfunding. Sure, we look at success stories like Ouya and Pebble who have both raised a ton of equity-free capital - but those are rare. I never saw the value or appeal of Pebble, to me it's just another useless watch with a display. Similar to a useless Nike Fuelband, but people like gimmicks and "new stuff" so more power to Pebble. Pebble has been plagued with a few issues as well as Ouya and I think a lot of these Cinderella stories are glorified on TechCrunch while forgetting to mention the fact that creating hardware is a very tricky business.

The consumer, of course, doesn't care about your supply chain, tooling, manufacturing, QA, warranty, logistics and 20 other things associated with launching a successful hardware product. They paid for a good, they want it shipped. If it doesn't work, they want a return. And they'll most likely bitch and moan just so you can suffer a little more.

So while we may see certain success stories in the Crowdfunding space, they're primarily hardware, tangible goods driven and rarely reach the $1M range. It is very difficult for any hardware product, even with a high margin and low COG, to make a profit with a sub-$300k crowd raise. So when you see someone raise $125k for some hardware which looks great (renders), has a great video, and a 2 month ship date - that's not reality. They're most likely losing money on that deal. I've personally been involved (as an advisor) with a company that raised over $220k for a high-margin / low COG consumer electronic and they are bleeding money.

On the surface it's like everything else - glistening. But inside, these things are tough. With that said, market validation is the biggest gain you can get from crowdfunding, unless you're pushing the $750k raise range. And I'm sure the Pebble guys made some nice money since that campaign raised so much cash, the HTML on Kickstarter couldn't even handle the number.

I also wonder what kind of products we'll see on crowdfunding platforms. I foresee a lot of informercial-like products coming up, imagine the Shamwow guy selling that crap in front of millions of online users - it could be a big market or rather, a shift from traditional dead media (TV) to the Internet. This includes the funding of independent films, Zach Braff's latest project was somewhat disruptive when it comes to how movies are traditionally made. Be in no doubt, Hollywood and all the other traditional media old farts are all over these sites, forming strategies on how to crowdfund their projects by making it seems like the actors themselves are seeking funds.

Great points by Michael here. Kickstarter has opened the doors as a tool to gain initial funding to meet producing an exact product or service.

What I loved most about Michael's post is he talked about the importance of outreach - tweets from other relevant organizations, guest blog posts and contributing to online forums. Though Kickstarter is a "marketplace" - it likely won't get you all the backers you need without doing your own outreach to potential customers and backers. It's essential to understand their pain points and meet it with your product, just as Real Python did.

This article should say 'Crowdfunding' instead of 'Kickstarter' - that's truly the part of the 'newest lean startup tool'. It's not about Kickstarter being that tool, but what Kickstarter enables when using them. There's plenty of options, including doing it on your own site.

Crowdfunding is indeed a good qualifier for knowing if you're on the right track or not. We actually crowdfunded our product, from the start, on our own website, and it went well enough that we're still at it.

It's actually a product to crowdfund on your own website, so we essentially ate our own dogfood by using it to garner our first 100 customers.

I think Kickstarter is one tool to validate that your idea has people who are interested (assuming you market it well). Since you're putting up one "project", even with stretch goals it's not really the most data-driven way to get to product market fit. You don't really have people using the product in real-time and iterating on it as you would a live web app, for example. But it's still better than putting in thousands of dollars on a hardware investment without even knowing there's interest!

The other problem is if you find you're not building the right thing, you can't scrap it and build something entirely different because if you're funded you've made an obligation to your backers. And that can be a long arduous process to fulfill orders/incentives/perks. Not really the lean startup philosophy, but I still like that Kickstarter is a great way to find demand for an idea.

If I recall, Kickstarter doesn't allow you to run a campaign for something that will be a subscription service after launch. That sort of conflicts with the "best practice" advice[1] for the modern startup, doesn't it? Or does it complement this advice, giving an channel to early revenue for B2C startups that previously had to rely on "runway"?

[1] i.e. do B2[SM]B, do SaaS, do locked-in monthly recurring then try to get yearly up-front for cashflow.

We'd love to help any startups/projects in need of swag.

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By this definition, everything on Kickstarter is a lean startup. How does one draw the line? I'm having a hard time grasping how this is different than, say, Neal Stephenson raising money for a new scifi novel. Would that be a lean startup as well?