Kickstarter Advice

I read with a combination of interest, sympathy and a little bit of “not surprised” when it was reported that Coolest, the company that had the second most successful Kickstarter campaign ever, was struggling to meet its promises. In spite of raising over $13 million for its all-in-one picnic cooler, it failed to meet its promised February 2015 ship date. Not only was the company behind, but they were apparently running out of money and selling full-priced units at $499 on Amazon before fulfilling all of the $185 Kickstarter orders. That appears to be backfiring with Amazon reviewers, including Kickstarter supporters, both those who were waiting and those who had taken delivery, panning the product and giving it mostly 1-star ratings.

While Kickstarter seems like a dream come true for hardware companies that need to raise funds, it’s not exactly what it seems. There are lots of misunderstandings, particularly from those who become supporters of a project, and a lot of things that can and often do go wrong.

I was involved in one of the largest campaigns that raised $6.2 million for a hi-resolution music player called Pono. It was hugely successful for several reasons. One, the product idea struck a chord and promised a high performing product at a very reasonable price. More importantly, it was developed by Neil Young, the famous rock star. That created international awareness and brought in a huge number of supporters from eighty countries. The product was delivered within 6 weeks of the promised schedule and its technology successfully delivered the high-resolution sound it promised. But I learned a lot from this campaign.

Because Kickstarter requires that a campaign needs to begin before the product is available, there’s always a risk the promise of delivery cannot be kept. Kickstarter campaigns are often an idea promoted with a slick video and beautiful product renderings, well before the company has completed the engineering, identified a manufacturer, or even staffed up to engineer the product.

The natural optimism of entrepreneurs often leads to promised features, cost targets, and ambitious schedules that may not actually pan out. Product development and manufacturing activities are hard to predict and most companies get something wrong along the way, needing more time or more money. Some fail altogether.

How could Coolest raise $13 million and run out of money? What’s often not understood is a large part of the money raised is generally used for prepayments for product. In the case of Coolest, they had orders for 60,000 coolers. If the coolers cost $150 each, that’s $9 million dollars off the top. Kickstarter and the order processor take another 8%, or about $1 million. So very quickly, before you pay for the development, tooling and manufacturing, you can be underwater.

From my experience in several Kickstarter campaigns, there are other obstacles to deal with as well. Many of the supporters don’t understand the premise of Kickstarter. They are pledging money in exchange for a reward to help a company get off the ground. In return, they may get their reward. But there’s no guarantee and there’s no real recourse if the company fails to deliver. They are neither investors nor making a purchase.

It’s important to keep your supporters informed along the way. Most are understandable about delays or changes, but a few may not be. Companies often find themselves trying to contain supporters that can quickly turn into an angry on-line mob.

If you decide to run a campaign here are some recommendations:

1. Establish a conservative development schedule and lengthen it by 50%. Most projects never go according to plan. Include plenty of time for testing. If you’ve never developed a product, get some advice from someone who has.

2. Carefully determine the promotional product-selling price on Kickstarter, and include a profit. Product costs often rise and you’ll need some cushion. It’s tempting to price your product low to have a greater chance to meet the funding goal, but you’re just creating a problem down the road.

3. Be very forthcoming about the risks, and remind supporters they’re not buying, but pledging. There’s no guarantee they’ll get the product.

4. Kickstarter campaigns are a little like apps. There are so many, you need PR help to create awareness to have a successful outcome. You may want to hire a professional Kickstarter manager to help you run your campaign.

5. Pay particular attention to the shipping. Obtain addresses, phone numbers and email addresses of your supporters, in spite of many pushing back due to privacy concerns. It can be expensive and time-consuming to ship internationally. UPS or Fedex may reject addresses provided by your supporters if they cannot be verified or are incomplete. Many of your supporters will have moved by the time the product ships.

6. Make it clear the supporters may face taxes levied by their country. Many countries assess VAT and other taxes that can double the cost of the product. Some countries also impose import restrictions on certain products and materials. Because these rules can be so complex, you may want to limit countries from where you accept pledges.

7. Once you’ve completed your campaign, budget carefully the amount you have. You’ll probably need more. The fulfillment to your backers is just the beginning. Once the Kickstarter pledgers have received their product, in order to sell to the general public, you’ll need a PR/marketing campaign as well as money to buy parts to make more products. The original Kickstarter money is gone.

If companies keep all these things in mind, Kickstarter can be a godsend for hardware developers. While it provides funding without needing to give up equity, doing a Kickstarter campaign adds to the sweat equity needed and introduces more pressure and risks.

Too Many Gadgets?

Can we possibly have too many gadgets? Over the past dozen years, as a product reviewer, I’ve seen so many new products that offer the promise of helping us to be safer, healthier, richer. Yet frequently, they required a lot more work than was expected to set up, maintain, and deal with unexpected issues. The result was often disappointment and waiting for a better gadget.

Nowhere is this more true than in the area of home technology specifically, the Internet of Things. Products have become more complex with the addition of WiFi, Bluetooth, and user interfaces. They often depend on working with an app, the phone’s operating system, and the cloud, any one of which can lead to time-consuming problems we never thought about before buying.

The Nest thermostat was a brilliant product when it was introduced. it utilized our home WiFi network, our home environment, and information retrieved from the cloud to control our home’s temperature and to save money.

I was one of the first to get one and my enthusiastic reviews for the product likely sold many more. Yet as time passed, there were some issues, including non-compatibility with my heating system, failed downloads, and intermittent drops from the WiFi network. Nest addressed each one over time, but it took my attention and time.

I recently reviewed a Canary home security camera that’s designed to monitor unusual activity in my home and send an alert to my phone when it detects motion. But it invariably sends false alarms, apparently triggered by reflections of light reflecting off of a wall.

This past week, I installed a really clever product — the Ring Video Doorbell that’s intended to alert me to a visitor at the front door and allow me to greet the person from wherever I am, at home or away. But I found the device makes my door bell ring on its own. I’m now working with the company to figure out the cause.

At times I think it might be just me with these unexpected issues, especially since I tend to be an early adopter. Clearly the ads and product descriptions never talk about the time and attention it takes. But the more I read the online reviews and discussion boards, the more I find I have plenty of company. These experiences are common and there’s often a large community helping other users to solve the problems.

And from the perspective of a product developer, it’s not surprising we should experience these difficulties. Everything is becoming more complex and the odds of problems are much higher.

It’s really hard for product companies to anticipate all of the various circumstances that their products will encounter once they start shipping. In spite of lots of testing, only after the product gets into the hands of thousands of users, each with their own unique situation, do they really have a good understanding of what the real problems are.

That’s why return rates for new products are often in the double digits. Not because of defects, but because of their complexity contributing to buyer’s remorse.

What’s ironic is many of these new devices are replacing tried and true products that have existed for years, doing their job perfectly well. A $125 connected smoke detector replaces a standalone one costing $20, a $100 smart band replaces a $15 pedometer, a $100 connected scale replaces a $25 one, or a remote door lock controlled by the cloud replaces one with a key.

But, in spite of these problems, there’s an attraction to many of us, a need to be first in line to try and buy that new gadget to do something that might only be an incremental improvement.

I should talk. I’m drawn to new gadgets like a moth to a light bulb. After reading Walt Mossberg’s review, it took a lot of willpower for me not to get excited about the new iPhone, described as being the best phone ever. I almost upgraded my 6 Plus to a 6S Plus, even though it was less than a year old and working perfectly well. Fortunately, my Apple store didn’t have one when I felt the urge.

With the Internet of Things exploding, the complexity is just going to increase. The number of gadgets in our home connected to the cloud is going to increase exponentially. Even if they all work as designed, we’re going to need to figure out a way to manage them, to know when to react, and to know what to do.

I suspect that will mean another level of technology to solve this. Perhaps a gadget with an app that sits between us and our other gadgets to monitor, fix, and report the important information to us. Yes, something else that needs to be maintained!

Online Advertising is Broken

Technology is letting us down. After all, isn’t it supposed to serve us ads on our phones, tablets, and computers that make us want to buy more? Isn’t it supposed to show us ads selected for us based on our activities on the internet and the information it learns about us? But, most importantly, it’s supposed to predict what we might want to buy next and offer us some suggestions for these products and services. From all I observe and experience, it does a terrible job, even while it intrudes into our privacy.

If I click on an item or buy a product, it never lets me forget. On site after site, that same item pops up, based on the assumption that the more impressions the better. That may be true with TV or newspaper ads, but for most of us, it’s the opposite with internet ads.

Repetition is one of the reasons online advertising drives us crazy. A word or two to the wise should be sufficient. But seeing the same Harry’s Razor ad for weeks and months after purchasing one does not endear me to the company.

In fact, I almost stopped buying blades from them because the ads were so incessant and I became sick of seeing them on every one of my devices. I even tried clicking on the option to tell the ad delivery company it was too repetitive, but to no avail.

A while back, I clicked on an ad that promised a free pair of boxer shorts. Turns out, it wasn’t free and I ignored the ad. But now, six months later, how embarrassing to see boxer shorts plastered all over my computer screen!

What the online advertising industry forgets is too many “in your face” ads can create animosity and turn off potential customers. I pay almost $30 per month for online access to the New York Times yet often when I navigate to their site, up pops up an ad right over the top right corner of the front page, where I often go to click on an opinion piece, preventing me from accessing what I paid for.

Do the editors of the New York Times really think I’m going to pause to read this ad before reading the column? Of course not. I’ll look for the X to terminate the ad, if it can be found.

Advertisers know this and now think nothing of moving the X around or hiding it to make the ad more difficult to escape. Trying to outsmart me does nothing to endear me to these websites. It only suceeds in causing me to avoid them. I’m not interested in playing a video game called “Find the X before reading”.

Then there are some ads that say it will take you to the site you were heading for in 15 seconds. Just wait (and watch our ad). I can’t fathom how this behavior sells products. We need to bring in some psychologists to explain to the ad makers about what make ads more appealing and useful. It’s certainly not erecting obstacles to our efforts to work efficiently and to get things done.

But complaining is easy, so here are some ideas to try to address these problems.

• Allow us to read an ad later, just like in a newspaper. Some of us actually like newspaper ads, but would read them between reading articles, not during or not if we are heading to a story we want to read. If we see an ad of interest, let us be able to click on it to read it later. Have a browser tab accumulate links to these ads. In fact, ad sellers could access the list of ads we defer for later viewing and do a better job of figuring out what our interests are without invading our privacy.

• Do not repeat the same ads so often. If we don’t click on it after a few times or after a few days, let it go. You have our answer.

• Do a better job associating products to other products we might like. If we click on a watch ad, show us ads for pens, since those who like one often like other. Don’t keep showing us ads for the same or similar items.

• Avoid ads that contain a lot of content and slow things down. The increased number of ads with video and high-res images are depleting our smartphone batteries and using up our data allowances. Using up these scarce resources for advertising is just like sending junk faxes that use up our printer ink.

Actually, what I’d really like is the ability to go onto an ad free internet where I would pay a couple of hundred dollars a year to avoid all advertising. Would you and millions of others be willing to do this as well?

The advertising industry had better make changes. Clearly, the algorithms they are using are primitive and exhibit poor psychological intelligence. Ads should attract and intrigue customers, not annoy them. If they don’t get this fixed, we’ll all start using blocking software to opt out of these ads entirely.

Desktop Product Development

Remember when the invention of high-quality printers, Adobe Postscript, and design software brought publishing to the desktop? No longer did you need to rely on experts to design your newsletters, presentations, and brochures. Individuals were empowered to do more on their own in their offices.

That thought came to mind when I read about what’s happening at the Texas Medical Branch at Galveston. They’ve created the first “makerspace” in the country for care providers. Called the MakerHealth™ Space at UTMB in John Sealy Hospital, their announcement said it would allow nurses, doctors, and other medical staff to develop their ideas for improving healthcare.

They went on to say that, “Over the past two years, MakerNurse has uncovered resourceful nurses across the country who are hacking the supply closet and using everyday materials to improve upon and create new tools and devices that lead to better ways of caring for patients. Cough pillows made out of hospital blankets wrapped in medical tape, tactile patient call buttons using tongue depressors and pieces of silk—these are just some of the simple fixes made by nurses that ensure patient comfort and safety.”

From my years in consumer product development, I know some of the best ideas come, not from engineers or large companies, but from those individuals performing day-to-day tasks who often create new ways to do their job. These people have unique insights and a passion to solve a problem or do something better, and see it differently than others. But they’re rarely versed in the area of product development and shepherding their ideas all the way to the market.

Following the conventional product development route is not something most of these individuals can afford to get into without giving up their jobs and needing a huge amount of capital. The process is long, arduous and expensive, and few succeed. I’ve come across too many would-be inventors who ploughed their life savings into getting a patent or who were taken to the cleaners by one of the fraudulent invention submission companies. But perhaps this is all changing, as exemplified by MakerNurse.

New technology over the past few decades has brought us a long way towards simplifying the design and building of products. In electronics, we’ve gone from discrete components to integrated circuits to chips that contain an array of capabilities. We even have chips containing a complete computer or phone. That makes it easier for the less experienced to develop products by assembling these building blocks like Legos.

In mechanics, 3D printing equipment is simplifying building physical parts. No longer do you need to use a model maker or create costly tooling to build mechanical parts.

3D printers, design software, and other tools are moving from being used by experts to almost anyone, just as occurred in the days of desktop publishing. As a result, opportunity opens up for those with little product development experience.

As for funding these ideas, there’s even a replacement for the professional investor, using crowdfunding (such as Kickstarter) where which people with common interests band together to fund the development of a product.

But we still have a long way to go. Current capabilities limit the complexity of the products that can be done and I can’t imagine ever eliminating the need for talented designers, engineers, and manufacturers and, of course, professional investors. Just as graphic designers are still needed to create professional content, we still need product development and manufacturing experts for most products.

Like most things in high tech, desktop product development will likely take a long time to become common practice. But this trend towards putting creative power into more people’s hands is coming. That has to be better for the world.

Why can’t the US build consumer electronic products?

I recently returned from a short trip to Shenzhen, the large Chinese city less than an hour’s drive north of Hong Kong. When anyone wonders why we don’t build consumer electronic products in the United States, the one word answer is Shenzhen.

When I first traveled to this city more than 30 years ago, I’d walk out of the train station and see locals hawking live chickens and the sidewalks filled with homeless people. I’d get into a cab that was usually filthy, both inside and out, and pray for my life while the driver navigated gravel roads full of ruts with his head sticking out of his window because the windshield was covered with mud. At that time, the area was full of factories making cheap consumer goods. Now, Shenzhen is a large modern city comparable to Shanghai or even Hong Kong. As I was reminded on this trip, Shenzhen has turned into the world capital of consumer electronics manufacturing. Shenzhen is to the making of these products as Silicon Valley is to designing them.

In fact, there’s a practical bond between the two areas, evident each day at breakfast at any one of the dozens of internationally branded hotels, such as the Sheraton, Shangri-La, Hyatt, Hilton, Four Seasons, St. Regis and Westin.

At breakfast you see tables full of young American engineers and project managers from Apple, Google, HP, GoPro, Amazon and dozens of smaller startups beginning their day before heading into the factories to solve problems and get their products into production. For many, it’s a constant shuttle between the San Francisco and Hong Kong airports — as often as twice a month for some.

An employee monitors machinery that adheres components to smartphone circuit boards in a manufacturing facility at ZTE Corp.’s headquarters in Shenzhen, China. Brent Lewin/Bloomberg

It’s certainly not much fun to make the 15-hour flight, especially crunched up in an economy seat. But, in spite of that, making the trip is the best way to take your product from an idea to manufacturing with the greatest chance of success — not just for large companies, but even for entrepreneurs with an idea.

Shenzhen companies thrive on building new products and there are usually companies skilled in your area. You can find an experienced team for not much cost, because they want to fill their factories.

Shenzhen looks much like any other large modern city but, with a population of 10.35 million, everything is larger in scale. It has the largest library in the world and the largest city hall. Beneath the appearance of a buzzing metropolis full of skyscrapers and clogged highways is a network of thousands of companies focused on supporting the world’s thirst for the next smartphone, HD TV or gizmo you didn’t know you needed until you read about it.

These companies are housed in factories scattered within a two hour radius that vary from nondescript cement structures to sprawling office parks that look like ones you might see in Japan or Taiwan. Depending on what they produce, they can be as clean as an automated Japanese factory or something resembling a sweatshop from the 1930s. Occasionally, but not often, there will be a factory producing low-cost components that barely skirt the laws of tolerable working conditions but that’s the exception rather than the rule when it comes to technology products.

But what this network in Shenzhen — supported by huge factories in other cities such as Shanghai — does better than anywhere else in the world is build huge volumes of the components that go into consumer electronic products: lithium-ion batteries, LCD displays, touch screens, motors, electrical components, switches, plastic moldings, printed circuit boards, semiconductors, packaging, antennas, speakers, microphones, leather, plastic and other assorted materials. For each component, there are scores of companies in intense competition to keep the prices down and advance the technology.

There’s one human characteristic that’s also important and it’s not labor costs, although that is a secondary factor. It’s the attitude of the people who work in this industry. They have a high work ethic and can-do attitude that gets things accomplished without any fear of failing or thinking something can’t be done — even when sometimes it can’t. Whether companies are thriving or struggling, they will rarely turn away new business and most have an insatiable thirst to try new things so they can learn and grow.

Now, it’s not all rosy. Every company has strengths and weaknesses, A teams and C teams, smart and not so. Interest in taking on your product can wane if sales don’t meet expectation or if a bigger customer comes along. It’s often painful to get things done with junior people. But, in the end, there’s no better alternative. As to copying your product, it’s not a big issue. When it occurs, it’s usually by other companies that become aware of it once the product goes on sale.

I’m often asked why we can’t make these products in the United States. When it comes to a high-volume consumer electronic product that contains a variety of components, building it in the United States is just not practical or often even possible, while still maintaining the cost, quality and fast time to market. Even if it were, we don’t have the same attitude of taking quick action and being responsive.

When Motorola tried building its smartphone in a plant in Texas, the company needed to import the parts from China. There are virtually no companies in the United States that make batteries, displays, speakers, semiconductor chips and wire for mass-produced products. While there may be companies building some of these components in low volume for the military, few are competitively priced.

Can it be Done in the USA?

The United States does build printed circuit board assemblies (PCBAs), partly because it’s a highly automated process using assembly machines and components available worldwide. But you still need to take those PCBAs and combine them with the touch screens, the lithium-ion batteries and the tiny motors and speakers. To import these efficiently you must send them by boat and that takes a couple of weeks and ties up lots of dollars in inventory costs.

But, more importantly, suppose that when the displays arrive, they have a defect. What do you do? If you were building the product in Shenzhen, you would call the company that’s an hour away and they will have engineers in your factory in a few hours to fix the problem. Try that from the United States and you would likely shut down your assembly line for several weeks.

Multiply this by the hundreds of parts and processes that go into your product that comes from China. Not only is it inefficient, but it’s also just not practical to build these kinds of products in the United States. Even if a company were to try, it could not compete with its competitors on many dimensions. A perhaps cruel, but accurate, analogy is trying to build an automobile in the Arctic from parts made in Detroit.