Last week, I went to the Hardware Pioneer’s Demo Night, which is one of my favourite hardware community events in Europe. I was very excited to see the hype for hardware innovation in the London hardware scene. The event was hosted on the Google campus, and the venue was so packed that there was no room for late attendees to even stand. Everyone was so excited to see the startups show off their innovations.

I could see the excitement from the entrepreneurs. They were really excited about their prototypes, and they could not wait to develop them further.

Sadly, like Zano and Coolest cooler, another high-profile crowdfunded startup, Skully, is closing shop yesterday after raising $2.4M on Kickstarter and $11M in Series A VC funding. I cannot help but worry about all the exciting entrepreneurs I saw at the demo night, and I sincerely hope they are prepared for the road ahead.

Marc Andreessen, the co-founder of one of the most well-known silicon valley VCs, Andreessen Horowitz, said about startup success:

“The only thing that matters is getting to product/market fit.”

However, product/market fit are very different stories forsoftware startups and hardware startups.

For software startups, once you reach product/market fit, you are ready to scale your business, and fundraising is much easier at this point.

However, for hardware startups, product/market fit is just the beginning of another battle. Many hardware startups see crowdfunding on Indiegogo or Kickstarter as the best way to validate the product/market fit, and they are doing their best to run big, successful campaigns.

Ironically, the more successful you are at crowdfunding, the more likely you are to fail to deliver your product. Why?

Imagine you have a target to sell 3,000 units of your product on Kickstarter. You have found a manufacturing partner to help you with that, and you think you are prepared. Suddenly, your crowdfunding becomes so successful that you sell 20,000 units on Kickstarter.

In manufacturing, making 3,000 units is totally different from making 20,000 units. It is likely that your initial manufacturing partner cannot handle that volume any more. You find another manufacturer that can handle that volume, but they tell you they need to re-design your product for that volume.

Suddenly, you know you are going to miss the milestone timeline you promised your backers right away. Your cost estimation is also completely different. All the horror starts to add up, and your excitement for your Kickstarter success disappears.

Can you imagine how frustrating it is when the market wants your product (product/market fit) but you cannot ship it?

What can you do?

I have asked myself many times how to solve this problem, and I have discussed it for quite a while with my colleagues at Koobe/Foxconn, who have decades of manufacturing experience. We are working on a new framework for hardware startups, which we will share when it has been fine-tuned and tested.

However, I can share the following ideas.

- EVT prototype for crowdfunding

Usually startups conduct a crowdfunding campaign with a fully functional, working prototype. Decent hardware startups should have talked to manufacturers already.

If you are familiar with the hardware product development process, you have probably heard of the term “engineering validation prototype” (EVT) in the design for manufacturing process. If you have gone as far as EVT, any decent hardware design house has probably completed a product review document (PRD) for you, considering all the possible hardware design, manufacturing, bill of materials, component analysis, and supply chain issues.

If you conduct crowdfunding with an EVT prototype, you should have a much more realistic view of your delivery time and cost.

If you are well-funded, I highly recommend that you go as far as EVT before you run your crowdfunding campaign.

- Don’t use crowdfunding for early market validation

Crowdfunding has evolved and matured to the point that it is no longer a great tool for early market validation. Hardware startup founders naively think that the more money they raise on Kickstarter, the most promising their startup is.

In my view, that is vanity metrics.

If you just want to know whether the market wants your product, you do not need to go to Kickstarter right away. You can easily run an early market validation experiment yourself. For example, can you sell 100 units of your prototype to people you know or those on your mailing list?

Once you are ready, you can use crowdfunding as one of your marketing and sales channels.

- Get manufacturing advice early

Very few hardware startup teams we know have manufacturing expertise. Many startups have told me that they have hardware engineers on their team, so they are really confident with their products.

Please remember that engineering and manufacturing are different beasts. Your engineers can probably make the best product prototype, but that does not mean they know how to mass produce the product.

Luckily, many people are now willing to support startups. Apart from the tons of hardware accelerators out there, you can also get advice from decent manufacturers.

Dragon Innovation has always been really willing to chat with hardware startups and give them advice. We at Koobe offer office hours so you can to talk to our guys, Foxconn veterans with decades of hardware design and manufacturing experience, for FREE.

Hardware is hard, but it is not impossible to conquer.

The connected world is coming, and many great opportunities in the hardware/IoT space are appearing. It is always important to learn from other people’s mistakes, use the resources out there, and plan things carefully to avoid making the same mistakes.

If you have any comments or ideas for avoiding crowdfunding failure, please feel free to share them!