Product Startup Podcast Episode 233: How to Raise Money and Scale With Crowdfunding

00:00:00 Kevin Mako: Hello, product innovators. Today, we learn how to leverage a successful crowdfunding campaign to grow exponentially bigger from one of the world's leading experts on crowdfunding itself.

00:00:10 Kevin Mako: This is the Product Startup Podcast, a show to learn from top leaders in hardware product development, prototyping, manufacturing, product selling, and everything in between. Hosted by Kevin Mako, the leading expert on product development for hardware startups.

00:00:24 Kevin Mako: Welcome back, everyone. I'm very excited to welcome back Will Ford to the show. Will is the President and Co-Founder of LaunchBoom, the leading crowdfunding agency helping hardware startups launch on Kickstarter and Indiegogo.

00:00:36 Kevin Mako: Today, Will shares valuable knowledge for inventors, startups, and small manufacturers on how a successful crowdfunding campaign can lead to exponentially higher investment money raised after the campaign, increased sales to many different channels, and general best practices on both raising hardware startup funding and crowdfunding best practices for your invention product.

00:00:53 Kevin Mako: Now, onto the episode.

00:00:54 Kevin Mako: This show is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors. Take your product from idea to store shelves at MakoDesign.com. Now, onto the episode.

00:01:14 Kevin Mako: Hey, Will. Welcome back to the show.

00:01:16 Will Ford: Hey, Kevin. It's great to be back. How's everything going? How are you?

00:01:20 Kevin Mako: All is good. Appreciate you asking, and I'm excited today to talk about kind of the next step in crowdfunding.

00:01:24 Kevin Mako: So, anybody listening in that hasn't heard the prior episodes, we've had a couple with both Will and his partner, Mark. Great episodes about leading into crowdfunding and then crowdfunding itself. Today, we're going to talk about the advantages to hardware startups post-crowdfunding campaigns. After you succeeded in your crowdfunding campaign, what happens next? Will, before we get into all that fun stuff, just give us a bit of a backstory of how you became the success story that you are today.

00:01:52 Will Ford: Yeah, sure. So I'm like many people listening, Kevin. I'm a serial entrepreneur.

00:01:54 Will Ford: I've launched multiple companies from the ground up, and I've had some huge exits. I've also had some even bigger epic fails along the way. I'd say I've raised millions of dollars in capital to support a lot of these various businesses that I've launched over the years. I've raised money from angel investors. I've raised money through debt, like convertible notes. I've raised money from venture capital.

00:02:22 Will Ford: And I made some mistakes early on with my first couple of businesses.

00:02:24 Will Ford: With my first couple of businesses, I remember my first business, I raised a ton of money super early before I had even really validated the concept. And in that specific deal, it turned out to be super successful. But I gave away way too much equity for such a little amount of capital. Once I scaled that business and ended up exiting, I ended up making my investors a ton of money, and I did okay. And I remember being a little resentful about that experience because I did all the work.

00:02:54 Will Ford: I put all the sweat hours in, and I made everyone else rich. And I came out with maybe a solid double when I was hoping for a grand slam like all my other investors ended up on that deal. You know, I learned from that experience. I'd say the biggest takeaway, Kevin, was learning that when it comes to raising capital for any business, you really want to bootstrap as long as possible to really get as far as you can before you place the value on your company, which is why in my second business, I ended up leveraging convertible debt.

00:03:24 Will Ford: Convertible debt is also a great instrument that really serves the entrepreneur because you can leverage the capital today to grow your business before you value your company. And then once you're ready to make that valuation, that convertible debt will convert at a discount normally of whatever that valuation is. So it's much, much better for the entrepreneur to leverage convertible debt. And then eventually, Kevin, that's what led me to crowdfunding.

00:03:51 Will Ford: I couldn't believe when I learned about Kickstarter and Indiegogo that I could take a prototype, I could take a product idea, and I could literally pre-sell it to thousands of people worldwide on these Kickstarter and Indiegogo platforms. I could pre-sell thousands of units, then take all the money off the platform, and then have all the time in the world to work through manufacturing, fulfillment, and eventually delivering a positive experience to those backers that came in and pre-ordered my product on Kickstarter and Indiegogo.

00:04:21 Will Ford: And for me, that was like when the light bulb turned on. And that's when I realized, wow, there's a much bigger opportunity here. I first started crowdfunding back in 2014 when I was advising a young college student at UCSD, and he was launching a consumer product on Kickstarter. He approached me and said, Will, I need help raising $30,000. And I'm like, what's the $30,000 for? And he goes, basically, I want to put the 30 grand into pre-launch advertising.

00:04:51 Will Ford: So I can build a hyper-focused community of people interested in my product before I go to Kickstarter. And I'm like, and what's your hypothesis? What do you want to do with that 30 grand? He was like, I want to turn that 30 grand into $300,000 in pre-sales. So that's like a 10x return on ad spend, Kevin.

00:05:09 Will Ford: Once he said that, I was super interested, and I helped him raise $30,000. And that's when I went through my very first Kickstarter experience with him. And we ended up turning that $30,000 into $750,000 in pre-sales.

00:05:23 Kevin Mako: Wow.

00:05:23 Will Ford: So it was a massive ROI, and I'd never seen returns like that on advertising spend before. So I started doing more research in Kickstarter into Indiegogo, and I realized that they were growing super fast. And I made a bet that they would be here 10 years later. And here I am, Kevin, 10 years after deciding to start LaunchBoom.

00:05:42 Will Ford: And it's been probably one of the most incredible entrepreneurial experiences of my life, because I literally get to work with entrepreneurs every single day.

00:05:51 Will Ford: I get to work with super smart, talented product creators all over the world. And we've launched over 1,000 successful launches on Kickstarter, on Indiegogo. We've been scaling really fast the last couple years, where we're now launching hundreds of products a year. It's a really, really exciting time to be in crowdfunding, to be here at LaunchBoom.

00:06:14 Will Ford: But the reason I started LaunchBoom was being an entrepreneur, to be able to validate and test a new product idea.

00:06:21 Will Ford: And then do the hard part, which is like actually pre-sell it and prove that the market has demand for your product. And then being able to take that capital from the platforms, manufacture and deliver a good experience, it gives the entrepreneur so much more leverage, right?

00:06:38 Will Ford: Because once they go through that Kickstarter or Indiegogo crowdfunding campaign process, and they have a successful outcome, now they have way more leverage. So if they want to go raise capital at that point, that's the time to do it.

00:06:50 Kevin Mako: Right.

00:06:51 Will Ford: And then they can look any investor in the eyeballs and say, hey, the last few months, we just raised hundreds of thousands of dollars, if not millions of dollars in pre-sales. And clearly, there's massive demand for the products we're launching and that we plan to launch in the future. Now the entrepreneur has much more leverage to justify a much higher valuation. And now the idea is they can raise way more capital faster and give away much less equity and still keep full control of their companies.

00:07:18 Will Ford: So that honestly is like why I started LaunchBoom.

00:07:21 Will Ford: And what's been even more interesting, Kevin, and we haven't ever really talked about this on our personal calls, but we've seen massive success over the years are when our clients go through our system here at LaunchBoom, and we deliver these massive Kickstarter campaign outcomes.

00:07:38 Will Ford: Once they deliver that positive experience or that product to those backers on Kickstarter and Indiegogo who are just pre-ordering the products.

00:07:47 Will Ford: And for everyone listening, the only reason Kickstarter and Indiegogo…

00:07:51 Will Ford: continue to thrive is because backers go to these platforms, they want access to the coolest products, they want to get a discount on retail, and they're happy to give you their money and wait for you to figure out manufacturing and delivery before they receive it.

00:08:05 Will Ford: So you're actually not giving away any equity, you're just pre-selling product.

00:08:09 Will Ford: And what's really interesting is when we take our clients that have been through Kickstarter and Indiegogo, and then we take their companies over to the equity crowdfunding platforms, like Wefunder and StartEngine.

00:08:20 Will Ford: What we can do is through just email marketing without spending any money in advertising, we can send an email to the backers from Kickstarter and Indiegogo thanking them for supporting the campaign.

00:08:32 Will Ford: Because of them, now that product is real, and it's in the market, and it's thriving.

00:08:37 Will Ford: And what we do is we position the email and let the backers know that now for the first time ever, they can actually own stock and shares in their company.

00:08:46 Will Ford: And so what we do is through literally just simple email marketing, Kevin.

00:08:50 Will Ford: And we can retarget those backers from Kickstarter and now convert the consumer into investors on the equity crowdfunding platforms.

00:09:00 Will Ford: Over the years, it's not abnormal to see 30% or more of those backers from Kickstarter put more money in the deal and become investors through just simple email marketing.

00:09:10 Will Ford: So there's so much opportunity for the product creators and entrepreneurs that are leveraging Kickstarter and Indiegogo to not only do the hard part, which is the validation,

00:09:19 Will Ford: and proving that there's demand.

00:09:20 Will Ford: But now they have more leverage to take that deal to venture capital, to equity crowdfunding.

00:09:26 Will Ford: We've seen so many of our clients over the years, Kevin, go through the LaunchBoom crowdfunding process and have a massive campaign outcome.

00:09:34 Will Ford: And then we get them plugged into our e-commerce partners.

00:09:37 Will Ford: We get them plugged into our retail partners and our Amazon partners.

00:09:40 Will Ford: And we've had so many clients that may raise a few hundred thousand dollars in pre-sales on Kickstarter go on to do tens of millions of dollars a year.

00:09:50 Will Ford: Through these other channels like Amazon and retail and e-commerce.

00:09:55 Will Ford: What keeps me excited and fired up every day here at LaunchBoom, 10 years later, is the fact that I've seen so many of my clients come to me who have never launched a product before.

00:10:05 Will Ford: We take them through crowdfunding.

00:10:07 Will Ford: We get them plugged into our partners to help them scale.

00:10:10 Will Ford: And watching some of these clients of ours exit for tens of millions of dollars.

00:10:15 Will Ford: We've even had some clients exit for hundreds of millions of dollars.

00:10:19 Will Ford: A great example of that.

00:10:20 Will Ford: I'm sure you've heard of Dr. Squatch.

00:10:23 Will Ford: Yeah, of course.

00:10:24 Will Ford: And the founder, Jack, he was a guy who lived down the street from us here in San Diego.

00:10:29 Will Ford: And he came into our office one day and he had these cool bars of soap.

00:10:33 Will Ford: And he goes, hey, you know, I'm thinking about launching this on Kickstarter.

00:10:36 Will Ford: And so we took him through our system.

00:10:39 Will Ford: We raised six figures in pre-sales on Kickstarter.

00:10:42 Will Ford: Eventually, he called me up a few years ago and he goes, hey, Will, you're not going to believe it, but I've got a Super Bowl commercial.

00:10:48 Will Ford: And I'm like, that's so cool, man.

00:10:50 Will Ford: And then a year later, he exited for a massive, a massive amount.

00:10:55 Will Ford: He ended up crushing it.

00:10:56 Will Ford: And so being able to work with people all around the world who have really cool product ideas to take them through this crowdfunding process,

00:11:03 Will Ford: which is the fastest, easiest, most affordable, most efficient way to validate and test any new consumer product,

00:11:10 Will Ford: and then help them pre-sell hundreds of thousands of dollars, if not millions of dollars worth of product within a 30-day period of time,

00:11:17 Will Ford: really sets them up for massive success.

00:11:19 Kevin Mako: And that's so powerful because when most people think of crowdfunding at the very beginning,

00:11:25 Kevin Mako: of course, I get to talk to these clients when they're just in the ideation, sketching, industrial design, mechanical, electronic engineering phases.

00:11:31 Kevin Mako: So we're in the very early development phase.

00:11:33 Kevin Mako: So many of our clients are looking at crowdfunding as kind of like almost an end state.

00:11:39 Kevin Mako: I know they want to grow beyond that, but really they're looking at it to say like, what can I raise on crowdfunding?

00:11:43 Kevin Mako: How can I do it?

00:11:44 Kevin Mako: And of course, LaunchBoom is amazing because you do the pre-crowdfunding, as we talked about on prior episodes.

00:11:49 Kevin Mako: And then the crowdfunding campaign itself, so you know how to successfully achieve what you need to do to make it a six-figure deal or more on the actual crowdfunding platforms.

00:11:58 Kevin Mako: But the beauty of that is that is just the start of a much bigger business.

00:12:03 Kevin Mako: That's why I really was excited to have you back on the show today to talk about kind of what happens after the crowdfunding campaign,

00:12:08 Kevin Mako: because I think one of the main messages, and you and I were kind of talking about this before we got on the show,

00:12:13 Kevin Mako: a really important message that you've kind of threaded through all this, which I appreciate, is the whole funding option.

00:12:19 Kevin Mako: And I know hardware startups are always thinking about funding and typically are trying to raise money too early.

00:12:25 Kevin Mako: They end up giving away so much equity, which in the beginning, I think, well, it's no big deal because the business isn't worth anything anyway.

00:12:32 Kevin Mako: So I'll give half of it away for 50 grand or 100 grand.

00:12:35 Kevin Mako: And it sounds like a good idea in the beginning.

00:12:38 Kevin Mako: But then when you look at it downstream and see how many hundreds of thousands or millions of dollars you could have raised for a fraction of that equity,

00:12:45 Kevin Mako: That will both heavily stunt you going forward, to be able to scale.

00:12:49 Kevin Mako: But also, as you alluded in both your story and as we've seen in so many hardware startups,

00:12:54 Kevin Mako: even if it's a very successful venture, you end up with peanuts compared to everybody else at the end of the day.

00:12:59 Kevin Mako: So this is your invention, your product, your idea.

00:13:02 Kevin Mako: You've got the tools here with LaunchBoom and with crowdfunding to be able to execute, prove the model.

00:13:08 Kevin Mako: You've got the tools, obviously, here at Mako Design, or through your own design teams or engineering, to actually get the product to manufacturing.

00:13:13 Kevin Mako: You have a great product.

00:13:14 Kevin Mako: You have the way to launch it.

00:13:16 Kevin Mako: Use that to springboard and get that money in advance.

00:13:19 Kevin Mako: Then, like you said, take the heavy lift of actually manufacturing and delivering those products.

00:13:24 Kevin Mako: Then, if you really need the money at that point, raise it then.

00:13:27 Kevin Mako: Don't raise it early.

00:13:28 Kevin Mako: And you'll raise exponentially more money for less equity.

00:13:32 Kevin Mako: And that is so powerful for a hardware startup that is really in the infancy of what is the scaling phase of their business.

00:13:39 Kevin Mako: At this point, you're past the development.

00:13:42 Kevin Mako: You're past the first manufacturing, let's call it.

00:13:44 Kevin Mako: And now you're into the growth phase of your business.

00:13:47 Will Ford: Yeah, exactly.

00:13:48 Will Ford: And Kevin, I mean,

00:13:49 Will Ford: that's honestly why I think you and I have become so close over the years is because, you know,

00:13:54 Will Ford: Your team at Mako does a great job helping these product creators take their ideas and turn them into real products that can actually be manufactured.

00:14:02 Will Ford: Where you can control the cost, have all that nailed down before you even start with us here at LaunchBoom.

00:14:08 Will Ford: And then when you start with us here at LaunchBoom, the beauty for any hardware consumer product creator is the fact that now they can leverage LaunchBoom to basically help them validate and test.

00:14:19 Will Ford: We can help them maximize their average order value so we can help them really nail down pricing.

00:14:23 Will Ford: We can help them build a huge engaged audience of potential consumers that are going to convert really, really well once we get ready to launch on Kickstarter.

00:14:33 Will Ford: And that's really what we've pioneered here at LaunchBoom is what we call pre-launch.

00:14:37 Will Ford: And we have a pre-launch system and process where we can help our clients understand how to set up the messaging, the positioning, how to maximize their average order value.

00:14:45 Will Ford: We can pull from our tens of—we have over 10 million backer emails in our database

00:14:49 Will Ford: that have bought one or more of our products over the last 10 years.

00:14:52 Will Ford: So we can share those audiences with our clients to help them target certain audiences that we think are going to be like the ideal avatar and consumer for their product.

00:15:01 Will Ford: And then we can help them actually start doing that testing on Facebook and Instagram so we can understand how to build a massive audience during pre-launch.

00:15:10 Will Ford: That's going to convert really, really well on Kickstarter and Indiegogo once we're ready to go live.

00:15:14 Will Ford: But most importantly, we only launch these Kickstarter and Indiegogo campaigns when we can control that.

00:15:19 Will Ford: When we can actually raise the amount of money that we need to pre-sell on Kickstarter and Indiegogo to then give your client more than enough capital to support that manufacturing and delivery so that now they don't need to raise a lot of capital.

00:15:34 Will Ford: They can do it themselves.

00:15:35 Will Ford: They can continue to bootstrap.

00:15:37 Will Ford: I always tell everyone, again, I'll repeat it.

00:15:39 Will Ford: Don't raise any type of capital unless you really actually need it.

00:15:44 Will Ford: Bootstrap as long and as hard as it may be.

00:15:47 Will Ford: Keep bootstrapping at least until you get there.

00:15:49 Will Ford: Get through the Kickstarter and Indiegogo campaign.

00:15:52 Will Ford: Once that's successful, you're going to get all the capital you need.

00:15:55 Will Ford: Now Kevin's team can basically take you through full manufacturing and now get your product delivered to real customers.

00:16:03 Will Ford: And then from there, it's so much easier for our clients once they have landed a product to now go into e-commerce, go into Amazon, start working those retail connections so that they can get into big box retail if that's part of their strategy.

00:16:15 Will Ford: And then start scaling much faster beyond crowdfunding.

00:16:19 Kevin Mako: Powerful, Will.

00:16:19 Kevin Mako: Much appreciated.

00:16:20 Kevin Mako: And before I let you go, what's the website where folks can go to learn more?

00:16:23 Kevin Mako: And of course, I'll put all the links below in the show notes too.

00:16:26 Will Ford: Anyone interested in learning more about how to launch their consumer products on Kickstarter or Indiegogo, go to launchboom.com.

00:16:34 Will Ford: We have the most free education about crowdfunding in the industry.

00:16:38 Will Ford: It's all there on our website.

00:16:40 Will Ford: We also, if you have more questions or want to speak to an actual human being on our team, there's a place on the website where you can very easily.

00:16:48 Will Ford: Give us a little bit more information about your product idea so we can get you on a call with someone on my team to answer any other questions you may have.

00:16:54 Will Ford: But yeah, launchboom.com is the best place to go.

00:16:57 Kevin Mako: And you guys have literally written the book, well, twice now on the very subject of crowdfunding.

00:17:01 Will Ford: That's right.

00:17:02 Will Ford: That's right.

00:17:02 Will Ford: So if you go to Amazon and type in crowdfunded, that's the name of the book, and you guys will be able to learn exactly step by step how we do this for our clients.

00:17:11 Kevin Mako: Well, much appreciated yet again for all your words of wisdom around crowdfunding, the benefits of it, what they can do after crowdfunding today.

00:17:18 Kevin Mako: Thanks again for being on the show.

00:17:19 Kevin Mako: I look forward to talking to you again soon.

00:17:20 Will Ford: Thank you, Kevin.

00:17:22 Kevin Mako: Thanks, Will.

00:17:22 Kevin Mako: Take care.

00:17:22 Kevin Mako: Bye-bye.

00:17:24 Kevin Mako: Thanks for tuning in to this episode of the Product Startup Podcast.

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00:17:34 Kevin Mako: If you have any questions, guest suggestions, or anything else, feel free to reach out to us anytime at our email, podcast@makodesign.com.

00:17:42 Kevin Mako: This show is hosted by Kevin Mako, North America's leading expert on product development.

00:17:48 Kevin Mako: And the podcast is produced by Mako Design, the original firm providing end-to-end consumer product development services tailored specifically to hardware startups, small manufacturers, and inventors.

00:18:00 Kevin Mako: Take your product from idea to store shelves at MakoDesign.com.

00:18:04 Kevin Mako: That's M-A-K-O Design dot com.

00:18:08 Kevin Mako: Thanks for joining and see you again soon.