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Pre-commerce: Funding the Hardware Revolution

Katherine Hague (ShopLocket)
Companies
Location: Conference Center - Golden Gate Room

The number of hardware startups using crowdfunding as a means of launching their product and raising funds is doubling every year. Whether it’s Kickstarter, Indiegogo, an open source platform, or ShopLocket, this trend towards selling an idea or a prototype before it actually exists is now known as Pre-Commerce.

Katherine Hague, CEO of ShopLocket has conducted in depth interviews with dozens of founders that have used pre-commerce to bring their hardware products to market. In addition, she has worked with hundreds more in helping them move from the pre-commerce stage to traditional product sales.

In this presentation, Katherine will cover what you need to be aware of when using crowdfunding or some form of pre-commerce to launch your hardware product. She will use specific examples to discuss key benefits and risks associated with pre-commerce, along with trends in the industry and tools that are emerging in the space.

Benefits of Pre-Commerce:
*Get Market Feedback: Through pre-sales, companies can build a community and gauge the popularity of their product early in it’s life cycle, rather than the typically long and costly R&D cycles of the past. (ex: Ouya)
*Collect Evidence to Convince Investors: If a company has not been able to raise angel funding or venture capital, something that is fairly common for hardware startups in the early stages, a successful pre-sale campaign can help prove there is demand for a product making it attractive to investors (ex: MYO)
*Become First To Market: Lets companies introduce products months if not years before they otherwise would have been, attracting market attention and resources. (Ex: Canary – home security)

Risks and Lessons Learned:
*Death of ‘Stealth Mode’: Pre-sales opens up opportunities for competitive products to enter the market even before a company’s first product is shipped (ex: Pebble and the emergence of new smart watches)
*Manufacturing knowledge gap: Many crowdfunders are manufacturing a product for the first time and are unaware of the true costs involved in getting to market. Reliance on accelerators or manufacturing partner/contractors has become common. (Amiigo’s work with Flextronics, HAXLR8R, PCH, Dragon Innovation, Lime-Lab)
*Hard Commitment to Ship: Bringing a product to market can be unpredictable, late shipping is common. (75% of crowdfunded projects deliver late or don’t deliver at all)
*False hopes: Launching is much easier than growing out sustainable distribution. Many companies currently don’t have the knowledge, connections or resources to make it in the long term. New distribution channels and knowledge Sharing need to emerge to help build sustainable revenue streams.

Trends
*Social media “pre-sale” campaigns, without taking actual orders (ex: PhoneBlocks)
*Entrance of large businesses into the crowdfunding space to build awareness for new products or as wholesale buyers (The Bay was the first department store to back a campaign on Indiegogo)
*Emergence of hardware focused accelerators to help bridge the manufacturing knowledge gap

Photo of Katherine Hague

Katherine Hague

ShopLocket

Katherine Hague is the Co-Founder of ShopLocket, a platform for hardware entrepreneurs looking to bring innovative products to life and into the hands of visionary consumers. Prior to founding ShopLocket, she worked as an independent digital media consultant and in a variety of marketing positions for Toronto-based startups. In January of 2014, ShopLocket was acquired by PCH International to help make a world where passion is the only requirement to bringing a product to life.