As the adage goes, there are many ways to skin a cat. The same is true with financing a business startup. Savings, begging or borrowing from friends and family and “bootstrapping” are just a few of the many ways to raise money for a business. Some experts even advise to start selling before you build your product. Kickstarter allows creators to pre-sell products on a platform that only distributes money to completed projects. If you need $50,000 to bring your product to market, but only get $25,000 in pledges, your project fails and contributors get their money back. On the other hand, if it succeeds, the creator gets their funds and the contributors get their product.
Utah business Dark Energy practically built their company from a successful 2013 Kickstarter campaign that raised $173,000 for their initial product called Reservoir. It’s a rechargeable battery pack for consumer devices like smart phones, video cameras and tablets. The unique features of Reservoir are its high power at 8000 mAh which allows connected devices to be recharged multiple times before it needs recharged and its compact, lightweight housing.
I spoke to Dark Energy CEO Garrett Aida about their Kickstarter experience and how it can be a viable funding option for certain types of startups. To begin, Kickstarter has specific rules about projects and requires a functional prototype of the product offered. Aida and co-founder William Lam used their personal savings to develop what he described as a “late stage prototype.” “Once you get there, you’re good to go,” he explained. They also raised funds from friends and family, but didn’t wind up having to use them because of their Kickstarter success.
When I asked him what he thought was the biggest contributor to their achievement, Aida remarked it was timing. However, other things he mentioned suggest timing wasn’t the only factor. To begin with, Dark Energy optimized the algorithm of Kickstarter which kept their project on a list of popular products for six straight weeks. They did this by reaching out to their network of friends and family and asked them to contribute just one dollar for Reservoir. Kickstarter’s algorithm values small contributions from a larger number of people over larger contributions from a smaller amount of people. That tactic pushed their project to the popular page which then leveraged Kickstarter’s natural traffic.
Dark Energy’s founders connected with friends who have influence online and they directed visitors to the Reservoir project. The video placed on the project clearly demonstrated their product and made an impact. More importantly, the video was scripted to reach the Kickstarter audience. Instead of making a video just about the product, they made it about the user and that resonated with the Kickstarter community. In the end, the Reservoir campaign raised $173,000 and Dark Energy is now valued at five million dollars.
A waterproof, shockproof version of the Reservoir was recently launched. Aptly named Poseidon, Dark Energy is currently running a Kickstarter campaign. Using similar methods as before, the Poseidon campaign quickly received $50,000 in backing and currently sits around $83,000 with several weeks left to go.
At a cost of five percent raised (plus credit card transaction fees), Kickstarter was cheaper money than venture capital investment. Kickstarter also provides market validation. When asked if Dark Energy would now consider venture funding, Aida responded, “Yes.” Besides making the battery packs, Dark Energy sells connector cords to fit the various devices that plug into the Reservoir and Poseidon. The company has plans for new products and product lines in the coming months.
Preparation was cited as being the most important factor of their latest campaign. The Reservoir campaign was conceived and executed in a week. Dark Energy planned more this time around by creating a better video, adapting to changes Kickstarter made, performing market research and making sure the launch timing was right.
The best types of merchandise for Kickstarter are “products or demonstrations of products that are unique, funny or useful,” Aida concluded.