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Guest: Mark Pecota, Co-Founder of LaunchBoom.
Host: Kevin Mako, founder of Product Startup and the leading expert in hardware startup consulting. A hardware entrepreneur since 1999, Kevin has advised more than 1,500 founders and built and scaled MAKO Invent through its acquisition by TriMech in 2024.
Crowdfunding Strategy From Preparation to Scale
LaunchBoom cofounder Mark Pecota explains how hardware founders can prepare, test, market, message, and scale a crowdfunding campaign with confidence. The conversation also examines crowdfunding strategy, campaign partners, launch readiness, marketing, product planning, funding, and post-campaign growth.
Episode transcript
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Kevin Mako: Hello, product innovators. Today we learn from one of the biggest names in consumer product crowdfunding on best practices for launching a Kickstarter or Indiegogo campaign.
Narrator: You're listening to the Product Startup Podcast, the show that helps bring your product idea to life by chatting with successful inventors, product developers,
Narrator: manufacturers, and hardware industry professionals. Our goal here is to get to the bottom of what makes a product successful, from initial idea to getting your product on store shelves.
Narrator: We're taking you step by step to build a functional product and scale your product business. Hosted by Kevin Mako, one of North America's leading experts on hardware development for small product businesses.
Mark Pecota: Now, on to the show.
Mark Pecota: Welcome back, everyone.
Kevin Mako: Today I'm very excited to introduce Mark Pecota to the show. He is the author of Crowdfunded, the leading book on the subject. He's also the co-founder of LaunchBoom, one of the first and leading crowdfunding agencies, an agency which has raised hundreds of millions of dollars for hardware startup clients.
Kevin Mako: He also funded and runs LaunchBoom Academy, an educational platform for going from start to finish of a campaign. Today, Mark is going to share some valuable knowledge on what crowdfunding is, how to best prepare for and test for a campaign, how campaign marketing works, how to scale your funding
Kevin Mako: round, and best practices in campaign messaging.
Mark Pecota: Now on to the episode.
Kevin Mako: Hey, Mark, welcome to the show. Thanks for having me. I'm pumped to be here. Hey, excited to have you on, talk all things crowdfunding.
Mark Pecota: today. What, just a curiosity, what are some of your favorite podcasts you're listening to right now? Mainly one, Lex Friedman, it's pretty cool because he, he's from MIT. He's our artificial intelligence, like, researcher. And it used to be called the Artificial Intelligence podcast,
Mark Pecota: but since he started, he started to talk to just like a wide variety of experts and all different types of topics. And so he changed it over to his own branding. But the reason why I love it so much is because, like, I also love a large, like a wide variety.
Mark Pecota: variety of topics, but seeing how that that larger amount of topics like converge together and overlap and to essentially build like a, say like a more accurate worldview, just as an
Mark Pecota: example, like over the past few weeks, he's been talking a lot about economics and Bitcoin and cryptocurrency. You're talking to experts in that space to like people interested in philosophy,
Mark Pecota: to consciousness, to psychedelics. Like, you know, it's like a pretty wide variety of topics. But
Kevin Mako: find it really fascinating and it's really long-form content as well. Yeah. And I love the fact that, you know, this is a very intelligent statistical based researcher who can then kind of use that style of thinking, that scientific modeling to start thinking about these kind of greater questions
Kevin Mako: of consciousness and, you know, drilling it down and bring it back to science, bring it back to numbers and then it's interesting how you say it all weaves together. And I know obviously
Kevin Mako: at LaunchBoom, you guys are very data driven, but also on the flip side, are selling the dream of products and using the consumer insight to really understand value
Kevin Mako: and what clients are looking for and consumers are in buying and then using the data to all back
Mark Pecota: it up. So it's almost somewhat complimentary in a way. I also understand you just wrapped up the big crowdfunding conference that you guys run as well. Yeah. Yeah. So we had our second one for the
Mark Pecota: crowdfunded summit. Yeah, our first one was last year in September. And we just had our second one two weeks ago. We had about 10,000 people sign up for it. And so I think we had 60 plus speakers.
Mark Pecota: It was kind of wild, to be honest. I think we had, it was a three-day event. So like every hour we had around like two to three speakers on the hour.
Mark Pecota: It was really cool. I mean, it's really cool to see. It's like crowdfunding, which we'll get into is like a global market. And so there's global interest, both on the consumer side and like the crater side.
Mark Pecota: And so it becomes like a global event. So it's cool to ask people where they're from in chat. People are like Romania, you know,
Mark Pecota: like Argentina, Mexico, Canada, you know, like states in the U.S. to Hong Kong.
Kevin Mako: So yeah, it was a really cool event. We're already starting to plan our next one in October because these things turned into big, big productions. Well, that's the beauty of these new digital conferences, right? Especially with crowdfunding. It is a global thing. And, you know, I'm excited to
Kevin Mako: talk at your next one and that should be that should be a lot of fun as well but uh you know seeing the success from from the first couple but um having that digital presence is incredible with the conferences i've watched i've been doing a bunch of keynote speaking i'm sure you have as well um at some of these
Kevin Mako: digital online conferences and i must say maybe in somewhat of a greedy manner i like it because i don't
Mark Pecota: have to hop on a plane for every uh keynote these days it really it's amazing how many you can actually do when you can just do it from the comfort of your house yeah yeah i mean And we've talked about, you know,
Mark Pecota: a year from now we're going to get the, because I live in San Diego, we're going to get the conference center and downtown San Diego. But then we started really talking about it.
Mark Pecota: It's like, how much of that is our ego talking? You know, it's like, what's the actual, what's the actual benefit of getting a physical space right now? I mean, there for sure are
Kevin Mako: elements of it. But it's like there are, I mean, it's very, anyone can see it's much more complex to plan like an actual physical live event than a virtual event.
Kevin Mako: Sure. And yeah, the scalability of the virtual events are really cool. So for us, well, hey, look, I would be at the crowdfunded summit, whether it's digital or in person in any case, because it's a big one. So we're excited to talk today about crowdfunding,
Kevin Mako: top to bottom. We're going to describe what it is and then really trickle down from Mark. You know, one of the leaders in the world when it comes to crowdfunding, one of the best
Kevin Mako: crowdfunding companies on Earth. LaunchBoom, very curious to start at a high level and
Mark Pecota: then trickle down to best practices,
Mark Pecota: kind of in a pyramid here, in order as well chronologically. So why don't you just kind of kick us off to what crowdfunding is, some of the basics, and then we'll drill down into it into best practices. For sure. So actual idea of crowdfunding is it applies to many things. I mean,
Mark Pecota: if you just take the word itself, it's like you have a crowd that is funding a thing, you know, quite literally. And so there are multiple types of crowdfunding. You have debt, equity, donation based.
Mark Pecota: And so the realm that we play in is what's known as like donation or reward-based crowdfunding. And the two top-top platforms for that type of crowdfunding are Kickstarter and Indiegogo.
Mark Pecota: I would say Kickstarter probably has the most well-known brand in the space, but both are quite large getting tens of millions of eating visitors a month. And how these platforms work, you know, people hear like donation or reward-based are like, is this a charity thing?
Mark Pecota: you know um but really how it works is that um as a creator um of a product or an idea
Mark Pecota: you get to create a campaign on these on on one of these platforms and say that i want to raise you know if i raise x amount of money let's just say 50 000 in this case um then i will bring
Mark Pecota: this project to life and instead of people just like donating to uh to the cause people you on a campaign, you can put up a reward. So let's say, I'm raising $50,000 for this bottle right here.
Mark Pecota: And one of the rewards is that you can get this bottle at $59.
Mark Pecota: And if we get funded, I will then go create this bottle and then ship it to you. So people might already be reading between the lines. In this type of crowdfunding, you do not have to have created all the inventory for the product.
Mark Pecota: in order to launch a campaign.
Kevin Mako: How it works is that you really just need to have a prototype for the product. You can then do all the marketing around it, build this campaign,
Kevin Mako: pre-sell all this product, and then get funded, and then use that money to get funded and then use that money to then go manufacture your product and then ship at a later date. Sometimes it's quite a bit later.
Mark Pecota: So essentially, you're pre-purchasing product, right? As a user, you're looking at these products, which are in the prototype phase,
Mark Pecota: you've got videos and whatever else to describe all of that. And as a user, you get the ability to purchase it to be the first one or the first collection of people to actually get that product and generally at a discount or some other deal that goes along with it. Yeah, exactly.
Mark Pecota: Generally, I mean, it's, I like to think of using this term lately. It's like crowdfunding is like, it's like distributing risk.
Mark Pecota: So if you think about, you know, the traditional way or typical way that a creator would have to get their product off the ground, which you're well aware of, it's, you know, they
Mark Pecota: would do all the, you know, ideation, design, prototyping and then actual manufacturing the product to get the inventory to then support the launch so that, you know,
Mark Pecota: let's to say if they were doing e-commerce launch, they have to like actually be able to fulfill the product right away. Well, that's a lot of risk. And so now it's taking, let's say, hey, let's launch before we get to the manufacturing. manufacturing stage. And now we're going to distribute like that that difference in risk that
Mark Pecota: was at the manufacturing stage is being distributed to all these people that are now purchased pre-buying your product, you know, because they're they have risk too. Yes, they're getting usually the product at a discount, but there might be delays on the product. No one's really reviewed the product.
Mark Pecota: You know, there's there's again, like there's a lot of things that could go wrong. And so it's the amount of people, the amount of customers or consumers that are willing to take that risk is definitely much smaller. We're not talking about mass market here.
Mark Pecota: We're talking about appealing to a subset of people that are known as early adopters,
Kevin Mako: which is still a large enough audience to be pretty meaningful for launching a new product. And yeah, like you already said, like these people are very interested in getting in first to things.
Kevin Mako: They're like your kind of annoying friend that always wants to tell you about like, you know, about that song first or whatever the thing might be.
Kevin Mako: But yeah, you probably find those people on Kickstarter and Indiegogo.
Kevin Mako: So anyways, that's… And it's great. And I know a lot, like a lot of our clients have gone through crowdfunding to help fund the production run. And the reality is it's a very minimal risk for that end user with great upside. You know, they get to be first to have this product. They're getting it usually at a discount.
Kevin Mako: Other, you know, there's other little perks sometimes that can be thrown in and whatever else. But the amazing thing as the producer, I love how you use that, too, dilute or diversifying the risk or diluting or distributing the risk, right?
Kevin Mako: Like, it's an amazing concept because, yeah, somebody might pay 60 bucks for that bottle. That's the worst that they're going to lose, right?
Kevin Mako: But you do that amongst thousands of people worldwide and all of a sudden now you've paid for your production rent, which is an incredible framework to essentially allow startups, innovators, early stage
Kevin Mako: hardware folks to essentially both test the market and get real user feedback, but also,
Mark Pecota: get actual sales much lower in the investment pendulum. And that really is an incredible thing with the Kickstarter Indigo revolution that's happened.
Mark Pecota: And obviously you guys with LaunchBum right at the forefront of that. So talk about the technical elements of that. How does this actually work? And feel free to use LaunchBoom as an example. So when somebody comes to you, how do they actually, you know, where do they need to be at? You mentioned prototyping, go in a bit of detail about that.
Mark Pecota: And then how do they actually work with you? and then thus work with Kickstarter and Indiegogo to start selling those units to those buyers. Yeah.
Mark Pecota: So when we started back in 2015, we actually under a different company name, run a couple crowdfunding campaigns. And back then, you know, everyone was kind of trying to figure it out, like what was
Mark Pecota: the best way to launch these products and stuff. And we really pretty early on, this was back in 2000, probably 2014 or something. before we were officially launched boom. We were part of a campaign called EcoQC,
Mark Pecota: where for that campaign, we tried to do a lot of lead generation, so like building up a big email list before you actually go to launch.
Mark Pecota: And so why that was so important, what was so powerful about that was that we built this big community for in during the pre-launch, then used that to get funded extremely quickly. So like right when the campaign went live, we blew past the funding goal,
Mark Pecota: it became like a very popular project, all this all this money started coming in for the project um and then we we built off that success
Mark Pecota: and so pretty early on we were we saw the value of uh of the pre-launch and like that being a crux of like the strategy if you want to have a really successful campaign um and so we really built
Mark Pecota: LaunchBoom under that like using that strategy it's like we're going to focus you know on the pre-launch like the whole idea of we want to if you do everything right, here in the pre-launch, then when you turn that, when you click the launch button, like,
Mark Pecota: you're pretty much guaranteed to have a successful campaign.
Mark Pecota: Now, now,
Mark Pecota: along this story, we're like, okay, this is kind of easy. Like, all we need to do is build an email list before we launch. I'm going to keep this pretty high level. We can get into it. We're going to, like, build an email list before we launch. Like, we've seen this work before, and then build up all the marketing assets, the video,
Mark Pecota: the campaign page, all that stuff.
Mark Pecota: And then we're going to go to launch. well then we started to have some campaigns that didn't do so well all right and we're like why like why is this happening well it's you know if you think back to this
Mark Pecota: pre-launch stage where we're doing lead generations and we're driving traffic to the landing page saying hey like sign up for this launch you're going to get a discount we don't really know
Mark Pecota: how qualified that email is like how qualified that person is how likely they are to buy because all we know about them is that they like we're willing to give us their email address
Mark Pecota: And so that was where we started to think, you know, there has to be a better way for us to, you know, actually validate and really learn, you know, which validate the product, both validate
Mark Pecota: the product pre-launch, but then also learn, like, get more data about those leads so that we understand who is really like likely to buy, which campaigns are really going to do well
Mark Pecota: before we actually commit to going to the launch. And so the reason why I'm telling you this story is, like we saw this like this opportunity to create a better pre-launch funnel and to get more
Mark Pecota: data up front, which then would allow us to understand which which campaigns were actually going to be successful before we launch. And so what we did was that it was actually a pretty
Mark Pecota: simple shift, but I would say it's pretty profound like in how it works, is that instead of just having like a website, like a landing page that people go to and then they can put their email address
Mark Pecota: in and then that's it. And then we'll email them when, you know, we're getting ready to launch.
Mark Pecota: The second step of the funnel after they give us their email address, we say, okay, awesome, you're in. Now, if you can put down a deposit, like let's say a $1 deposit to reserve this product
Mark Pecota: when it launches at the best discount. So we're going to give you like an even better discount if you even put down a $1 deposit. And what's so cool about that is that we learn through testing
Mark Pecota: that someone that puts down an even $1 deposit is on average 30 times more likely to buy than a lead that doesn't. Wow. And so now it's like the wheels are turning.
Mark Pecota: It's like, okay, now we've built a funnel where we have, just even like this simple other data point, or now we can look at the cost for someone to put down a deposit,
Mark Pecota: we can get a better idea of how qualified is this email list. And then you go a step further. And as you get more data, you start to learn. that we can build a model, like a predicted model, to say, okay, if we have this many people that
Mark Pecota: gave us their email address and then this many people that also put down a deposit, and we can make assumptions about what percentage of these two groups are going to actually convert once we go
Kevin Mako: to launch. And then you can get an idea of you also know what your price point is going to be. So it's like, you know, if you have this group converts at 30% at $100 price point, you get X amount
Kevin Mako: of dollars when you launch and then we spend this much on ad spend so you can start to get an idea of what the actual return on the ad spend might be. And so I know I kind of quickly went
Kevin Mako: into the weeds on that one, but I want people to understand that, you know, in terms of like building the funnel, I would, we call this the reservation funnel,
Kevin Mako: always like we're not like teaching people to do this, even if they don't work with us on the agency side. It's like you need to build an email list, you need to have, give them an opportunity to put down a deposit
Kevin Mako: and, and build those reservations because just knowing that data will allow you to build a more qualified audience, which then you are going to use to launch.
Kevin Mako: That's great. Yeah. And that's a big deal. I think one of the big misconceptions,
Kevin Mako: especially for people who are going through their first time and doing a crowdfunding campaign, Kickstarter, Indiegogo, whatnot. One of the assumptions is, okay, design my product, I engineer it, I prototype it, and then I put it on the platform and magically
Kevin Mako: it's going to make sales. And one of the things that we tell our clients is that that is the precursor, but you've got to realize to be successful that on Indigo or Kickstarter, you have to look at it
Kevin Mako: as just a transaction platform, essentially. It's not a place where you're going to drum up your
Mark Pecota: leads. And it can happen. But the way that that's going to happen is by first hitting your ideally early on in the campaign, maybe even the first hour or the first day, really trying
Mark Pecota: to hit that, hit that campaign target so that that snowball starts rolling. And the only way you're going to hit your campaign target on the first day is if you've already got all those users in, I guess you call it the reservation funnel, reserve funnel, whatever else. Those
Mark Pecota: are the people who, with your metric and your philosophy of doing this, you can predict
Mark Pecota: exactly how many of those people are going to convert. And then subsequently, you can figure out for, I guess, how much ad spend you can get each additional user to then start scaling
Mark Pecota: that up, which then probably at some point then starts to get media attention and I can get attention on those platforms as one of the, you know, high moving products, which then gets a more
Mark Pecota: attention. So this is how kind of then that snowball effect seems to occur. And you do, you know, have the possibility of hitting those, you know, six and definitely or occasionally I would say into those seven figure campaigns as those snowballs really start to balloon.
Mark Pecota: Yeah. I mean, you explain that very well. That's exactly how it works. Yeah, I feel like I went too quickly into the weeds instead of explaining some of the high-level strategy. No, that's great. I think you went into that. You explained that very, very articulately.
Mark Pecota: There's one other, just because I was in the weeds for a second, one other quick tip I want to give your audience is that we recently had a campaign that launched about two weeks ago that did $800,000 one day. And it was our
Kevin Mako: biggest, our biggest day one until today, actually, because we launched a campaign. I think it's at 1.7 million today. Well, I think I know of that project, actually. Yep. Yeah.
Kevin Mako: But anyways, the one that I was talking about before was around a $3,000 e-bike.
Kevin Mako: So it's pretty expensive.
Kevin Mako: And that's another tip. Like, a lot of people ask, like, do really expensive products work? They definitely can work. So did $800,000 in one day. And the way that we did it was same, same
Mark Pecota: funnel, reservation funnel. But the point I want to get a across or the tip I want to share is that we tested higher deposit amounts for that for that product we actually had instead of people putting down a one dollar deposit we first tested we
Mark Pecota: went to 50 and that worked and then we did 100 and that's where we did most of our reservations was at a hundred dollar deposit price so we ended up generating a hundred and four thousand
Mark Pecota: dollars in deposit revenue pre-launch and we spent 103,000 dollars to get it so we actually were positive in, you know,
Mark Pecota: sales during the pre-launch. So we basically, like, funded the whole pre-launch campaign using deposit revenue. And then everything else was just gravy. You know what I
Mark Pecota: mean? So I'm going to explain a bit, go into the concept a bit deeper about using ad spend, you know, you know, to generate these lists. Because that's obviously kind of the first question. okay, I like the idea.
Mark Pecota: I'm going to try and get a deposit on my product so that I get this pre-launch list. I get money in the door. Now, you just mentioned you kind of broke even on that ad spend. Talk about how important to ad spend is in terms of building that original list and getting to those targeted customers.
Mark Pecota: Yeah, yeah, totally. So when we're talking about the pre-launch and we're trying to build, you know, an email list before you launch, sure, there are a multitude of ways that you can go about trying to build that list.
Mark Pecota: but by far the most,
Mark Pecota: I would say, efficient form, effective way of doing it is using Facebook and Instagram and advertising through those platforms. We've tried other platforms. Those are by far the most effective ones.
Mark Pecota: And so if you're looking to build an email list in the most efficient manner possible, having some type of ad budget to build up that email list during the email list. a pre-launch is very necessary.
Mark Pecota: Now I always get the question,
Mark Pecota: how much should I have? You know, and my answer is, you know, well, how much do you want to raise?
Kevin Mako: And because I always want people to start thinking about, thinking about it in terms of a model. Like the actual modeling that you do doesn't have to be that complicated.
Kevin Mako: If you think about, okay, I want to raise, again, like $50,000 or something.
Kevin Mako: Now you can start to work backwards. It's like, what are all the variables that like factor into that equation of getting $50,000? And sure, like it can be get really complex, but let's just look at the email list itself.
Kevin Mako: It's like go back to the example that I was talking about like five minutes ago, you're like, okay, if I had 5,000 emails that I generated, you know, and let's say like about, you know, 200 of those put down a deposit.
Kevin Mako: So now I have 4,800 people that didn't put down a deposit, 200 people that did put down a deposit. And remember, the people that put down the deposit are more qualified. And so we say usually about 30% of the people that put down a deposit, we call them
Kevin Mako: VIPs, will convert. Wow. Okay. It's that high. Yeah. And then about 1% on the non-VIPs are
Mark Pecota: the people that didn't put it down. So now it's 200 times 30%, whatever that number is, 4,800 times 1%, you know, 48. And then whatever your, your price point of your product is, multiply it by those
Mark Pecota: expected number of backers that you get. And you get your expected revenue. And then, you know, now, you know, now it starts to make sense, like how this. It's relatively simple. It's relatively simple.
Mark Pecota: Yeah, exactly. The key is, I think, really to look at it and say, you know, if you, if you want to raise $100,000, how do you back that up? And then what the amazing thing that I like the LaunchBoom does
Kevin Mako: is you guys actually run some ads, you start and figure out those metrics to say, okay,
Mark Pecota: if we spend $1 on an ad, that gets us this deposit bucket. And we know that 30% of those are going to transfer. So you can actually start doing the math and realizing that, okay, you know, it's very scalable.
Mark Pecota: You're going to get a tremendous amount of money if you follow this platform as your AB testing the ads, whatever else to figure out what ads work best. But the interesting thing that I find with that model is that, you know, if you're looking at it down the line,
Mark Pecota: you can also ramp it up. So to say, okay, now I've got a model that can make me 100,000, well, maybe 200,000 is actually better. Well, okay, so you ramp up the very start of that funnel and you create more momentum than you
Mark Pecota: want it, get essentially twice as many leads and now you've got twice as many revenue. You actually create a relatively simple calculation that allows people essentially to scale up to whatever money they think that they might need to pay for, you know, the final steps
Mark Pecota: of the development and going into production and the production units themselves. for sure. Yeah, I mean, usually the model, I definitely keep the models like simple, but they usually don't, you know, scale like linearly,
Mark Pecota: you know, in terms of like they don't, it's not always it doesn't stay constant in terms of like the conversion rate as like the list grows bigger. And typically like if you're doing lead generation at high, high, very large budgets, so let's
Mark Pecota: say like generating an email list with $10,000 budget versus a $100,000 budget, you're usually
Kevin Mako: going to have like some type of diminishing return in terms of, you know, the cost to acquire those emails or those reservations. You start to almost saturize the market and or you can't be as targeted, that sort of stuff. Yeah, you might saturate the audiences you're targeting or you might have to start to
Kevin Mako: look for other ones that just might not be as effective. Right. But something I wanted to talk about just on the ad budget side,
Kevin Mako: kind of one of the final points is I, my recommendation is always to start with at least like a thousand dollars, $1,000 or $2,000 if you can, try to get some data back from the market that will allow you
Kevin Mako: to get an idea of like, how much does it cost for me to generate one email, how much does it cost for me to generate one reservation?
Kevin Mako: And of course, like get a few data points on here.
Mark Pecota: But after you spend that ad budget, you'll have like a thousand or $2,000. So it's for our tests, we do $3,000 in our testing program before we launch. And that gives us enough data
Mark Pecota: to be like, okay, we feel like a high degree of certainty that these metrics are accurate, you know, and we can base our predictions on how successful this campaign may be or like
Mark Pecota: how much we'll have to spend in ad spend to get, you know, this amount raised on the campaign. So that's why I always tell people, you know, just have like even $1,000 and $2,000 an ad budget
Mark Pecota: and start to test to get those metrics because it's so incredibly valuable. to know that information. So then you can start to make more data-driven decisions about, you know,
Mark Pecota: your campaign, what it may cost for you to raise certain amounts of money and how successful you might be, you know. That's great. And that's before you've even gone down the campaign. Now, correct me if I'm wrong.
Mark Pecota: If you're figuring, like you do your pre-test, is it possible that you could actually get more efficient as you go into the campaign because now you've done enough A-B test to really
Mark Pecota: hone in on that. You've also got better marketing materials when you're actually in the campaign. There's other users. So there's hype. There's maybe blog articles happening. Like, can it also go the reverse direction where you actually start finding that every dollar invested in campaign is actually
Kevin Mako: getting, you know, at first it was getting $3 out? Now it's getting $10 out and so on as that kind of snowball effect starts to take place. You know, and does that somewhat counteract against that saturation model a bit?
Kevin Mako: In your experience, what can you talk to on those sorts of things? No, it's a great point. It definitely can. You know, it can go either way.
Kevin Mako: And I would say one of the things that can be really, really useful when you're doing advertising as you start scaling to larger budgets is that if you get to the point where
Kevin Mako: you're spending, you know, up to 100 grand budget, let's say, even 20 grand, 25 grand,
Mark Pecota: you've, well,
Mark Pecota: assuming that you're generating an email for like, you know, a relative. relatively low amount of money. You know, you're not spending like $20 to require an email. But if you're, if you're spending like maybe like a dollar or $2 to require an email,
Mark Pecota: you're going to have quite a lot of emails in the pre-launch. And what are emails besides
Kevin Mako: people that might actually purchase your product? It's data that you can then give back to Facebook and Instagram to build a better audience. So let me, yeah. So let me explain that really
Kevin Mako: quick. So on Facebook, you can generate what are known as look-alike audiences, which can be a really powerful tool. They don't always perform better, but I would say more often than not, it's definitely
Kevin Mako: something you should test. So if you get, let's say, you know, we have 10,000 emails that you've
Mark Pecota: generated during a pre-launch, that's enough emails to give it back to Facebook, basically feeding Facebook, it's doing all of its machine learning. And it's essentially building you like a one to two million person audience.
Mark Pecota: Actually, it's larger than that. It builds you a, of course, quite large audience that are people that they think are similar to those to that to that to that like input group like well that's where that AI comes back into the conversation right face you want
Mark Pecota: to use the power of that we've all heard of these crazy advertising algorithms that facebook and google and all the big players are using right to really figure out what you want before you even know
Mark Pecota: you want the thing yeah so as a as somebody who's launching a new product why not use that and this is where that algorithm really comes into play. Those look-alike audiences are the very thing that
Mark Pecota: those super algorithms are using to figure out for you, okay, based on people who are on your reservation list or even your email list,
Mark Pecota: they, they can you, Facebook can figure out what those types of similar people are and then advertise to them and thus help improve your ROI there. Exactly. And so, yeah, sometimes like when you scale the larger budgets, you'll have more
Mark Pecota: emails, which then you can then plug back into Facebook, which theoretically could give you a look-like audience that is even more qualified than what you were targeting before. More data the better, right? Yeah, exactly.
Mark Pecota: Inja, usually, yeah, more data the better. Yeah, actually, always, I would say more data than better.
Mark Pecota: So talk about some of the best practices. And then I'm curious,
Mark Pecota: are there certain price points? Because obviously, if your product is too cheap, you won't be able to spend that one,
Kevin Mako: like if you've got a $1 product, it doesn't.
Mark Pecota: make any sense to get a reservation for, you know, a dollar. It'd be very hard to get an ad spend there. Are there certain product prices that are kind of like a minimum price, certain product types that work, certain product types that don't work? Just again, based on your experience,
Mark Pecota: what are you seeing in the marketplace?
Mark Pecota: Yeah, yeah. I mean, in terms of like product types that work,
Mark Pecota: so physical consumer products are the ones that tend to perform the best on crowdfunding sites. And, you know, they're usually like not your like Chatsky product that you might, you know, it might crush it on Amazon or something.
Mark Pecota: It's usually like pretty unique. I always tell people like, go check out crowdfunding. Go check out the sites themselves to do the market research because one of the best parts about crowdfunding sites that everything's public. You can see how much they raised, how much, how many backers they got.
Mark Pecota: So you get a really good idea really quickly of like what works and what doesn't work. And even I tell people if they're thinking about launching what their product on crowdfunding, go try to find similar products on the sites to see like how successful they
Mark Pecota: were because why not? You don't have to reinvent the wheel. That's part of our process is a lot of competitive research.
Mark Pecota: But in terms of the price points, yeah, like what you were alluding to,
Mark Pecota: if your product is inexpensive, let's say like even like $25 and below, it can be quite difficult
Mark Pecota: to generate an email list that it gives you, like, a pretty high return.
Kevin Mako: And that doesn't mean that you necessarily can't launch a successful campaign
Kevin Mako: with a product of that price point. I would recommend looking at ways to bundle those products, though. So usually if we're dealing with something at that price point, we might say, like, if it makes sense for that product, like, try to sell.
Kevin Mako: a three-pack or five-pack.
Kevin Mako: It doesn't always translate. You're trying to get that average ticket price up so the ROI on ad spend makes sense. Exactly, exactly.
Kevin Mako: And I mean, this is kind of down the whole other rabbit hole, which I'm not really going to go down. But at our summit, we had a serial crowd funders named Stephen Ng. If everyone wants to look him up, he's a founder of Elliott.
Kevin Mako: Havoc and Dash Wallets, I think he's done like 10 plus campaigns. Maybe. even more than that, like 20 or something.
Kevin Mako: But his whole topic was about like supply chain and like really understanding all the hidden costs, not really hidden, but just people don't think about that when you're actually producing a product.
Kevin Mako: And so he gave the example of like, people are like, oh, like my cost to produce this pen is like a dollar or something. So I'm going to sell it for like $10 and I'm totally going to be fine.
Kevin Mako: Then he broke down like all the other costs, like picking and packing fees, like everything that happens getting it to the, you know, the consumer's hand. It's like, even at that, you know,
Kevin Mako: huge margin, they would be, uh, they would not make any money. So anyways, a lot of times, some of those really low price point products that may, um, they don't always work out for a variety
Kevin Mako: of reasons. If I was looking at like the best price point product for us, like we're usually looking at like $75 and up, but I would say like sweet spot is in like, like the low hundreds, to be honest,
Kevin Mako: it usually gives us like enough a little bit more to more space to play with in terms of like our cost to acquire a customer.
Kevin Mako: Yeah. And oftentimes some of those products have fairly high margins in general. So yeah, you know, the nice thing about most of our
Mark Pecota: listeners, they're, they're hardware innovators, you know, physical product innovators. Generally, you're coming up with a product that is unique. And usually that means, you know, even in some way, even some small incremental way, you've got a better mouse trap or a different mouse trap
Mark Pecota: or something that serves a certain demographic well. One of the things that we talk about a lot on the show is you really need to understand that your product is a premium product if you're new and innovative, especially if you've designed it well and whatever else. So usually you
Mark Pecota: should have the margins built in to your model, especially if you are innovative, because otherwise you're wasting margins because you have those must have buyers or those early adopters or whatever or else that are very interested.
Mark Pecota: So the nice thing is when you have an invention, it really is important to think of margins. And, you know, Marx gives another example of why margins are so important, especially to a hardware startup. You need to have those margins baked in so you can understand all those different costs
Mark Pecota: and make sure that you have enough baked in there. I like how you mentioned minimum ticket size. I think that makes a lot of sense, right? Under 25, it's almost too small for crowdfunding just because of the sheer cost of advertising
Kevin Mako: right now on the social platforms. It's kind of a minimum bar of a cost per an acquisition.
Kevin Mako: And then thinking further, okay, even if you have a 52, like you said, you had a $3,000 scooter, if you have these items, make sure you have the margins built in. And I think you highlighted something which I'd like to address is make sure you understand your manufacturing.
Kevin Mako: So that generally means for us at a Mako Design, we want to make sure our clients that are going through crowdfunding, have a nice beautiful prototype, but also have done enough of the engineering that they have a pretty good idea on how that's going to, you know, that engineering is either
Kevin Mako: going to be finished or if it already is finished, how it's going to be taken into production. So they have a good idea of their manufacturing costs, the shipping timelines, logistics, whatever else.
Kevin Mako: So they have a very high quality product, but also that it's delivered to a cost that they understand end to end, you know, door to door sort of scenario so that when they go to consider their crowdfunding
Kevin Mako: campaign and they do the math that you were talking about earlier, they can look at it in very, easily through a basic spreadsheet, calculate, okay, here's what I want to sell it for. Here's my margin. Here's how much of that is going to advertising. Therefore, I know my customer, my acquisition
Kevin Mako: cost can be this. And if it hits those numbers, you can scale it up to be a six figure plus
Mark Pecota: campaign. Yeah. Yeah. For the whole like,
Mark Pecota: like figuring out the cost of like the entire supply chain, one of the things that Steven said that which I like was like, you know, visualize literally every step from, I guess, the manufacturer.
Mark Pecota: would be the beginning from beginning to end like end being the consumer getting the consumer's hand like what is every single thing that would have to happen in that you know and we start to see like
Mark Pecota: a lot of little costs and i would highly recommend doing that i feel like you know there's some people that love spreadsheets i do personally but i think a lot of people don't but i would recommend
Mark Pecota: like thinking about the financial aspects like very early on in the process at least at least modeling something out to base your campaign on it. And yeah, and you said it, but the having,
Mark Pecota: having enough margin for advertising is really important, not only for crowdfunding, but beyond. Because if you're trying to be a, you know, competitive D to C brand, like you're going to be
Mark Pecota: competing on, on the advertising platforms and leaving enough space there to acquire a customer and still have margin is going to be really important. Yeah. And crowdfunding, you know, the start of an
Mark Pecota: incredible journey. Right. Crowdfunding, although even it can be a big deal, that really is just the beginning of a very powerful product because now you've got a proven market. You've sold to thousands of customers.
Mark Pecota: Eventually you deliver. You get all the reviews. They're loving your product. Now that gives you the opportunity to start talking to some major partners. That's when you can start talking to the distributors, the wholesalers, sometimes direct to retail, various partners.
Mark Pecota: You can look at white labeling your product, et cetera. There's a lot of things that you can do at that point in time. But the reality is, with those options going forward, margins always matter, whether it's you or whether you're even selling your product outright. You know, you're getting acquired.
Kevin Mako: The acquires are going to want those margins so they can build in the advertising and brand building to take it from whatever your campaign was to 10, 50, 500 times the size.
Kevin Mako: That's really where it gets very interesting. Crowdfunding is just a spark. Even a big crowdfunding campaign is just a spark. Most of the products that really end up being brands, you know, known products that really have a success run, that was just a tiny little speck of the iceberg
Kevin Mako: to what their eventual product is. And of course, then the valuations, which are for that, even after a crowdfunding campaign, your valuation skyrockets through the roof, just your equity evaluation, what you're worth. So if you want to raise additional funding rounds and whatever
Kevin Mako: else, all that kind of plays into in a very powerful way. Yeah. And I just have to put this out I put this out there is that there are so many people that like I'm almost hesitant to talk about
Kevin Mako: our big campaign launches like oh we did 800,000 one day it's like yeah I mean that stuff sounds great and it is cool like I'm not I'm not downplaying that it's like cool to be able to do that and like I still think it's valuable but it I feel like it gives people like a false perception
Kevin Mako: of like what success is on these crowdfunding campaigns because success I think for everyone I mean everyone can define it themselves but it's like I'm looking like long-term when I'm building a brand. You know, how am I going to build like long-term brand value?
Kevin Mako: And just to give a quick example, we had a client that we did not work with on the crowdfunding campaign. They did a $50,000 crowdfunding campaign themselves. Their goal was $50,000. They did like $50,000 and won. But they delivered, they had delivered a great product.
Mark Pecota: They got like great product feedback. And then they went to e-commerce. They contacted us and we worked with them on e-commerce last year. They went from $50,000 crowdfunding campaign to doing $5 million at the end of the year in eight months.
Mark Pecota: And it was because they didn't go super big.
Mark Pecota: They really focused on delivering a great product, great customer experience, getting consumer feedback, and then building all their manufacturing up properly and everything. And so then they were ready to scale.
Mark Pecota: And so I always like to make that point because it's like thinking long term. We don't necessarily have to have a huge campaign to build a lot of long, long-term value. Look at Peloton. Peloton,
Mark Pecota: I don't know what they're worth now, a lot of money.
Mark Pecota: They launched on Kickstarter. I think they did like 100,000s or something and like low. And what's the other one that's really big? The shoe company, the marino wool. Allbirds? Allbirds. Yeah. Allbirds also launched.
Mark Pecota: And I think that was a pretty, I think they failed the first time. But anyways, so it's like. Yeah, the keys to getting users. Now you want it to be as successful as it can be, but really getting those users, getting those reviews, now you can have big conversations.
Mark Pecota: And that's how you can really scale your brand from there. So let's talk about just for a moment as we wrap this up as a final segment. What are some best practices in messaging?
Mark Pecota: So even if we go all the way back to building the early lists and then getting the reservation list and then eventually to your crowdfunding campaign,
Kevin Mako: what are you seeing like what kind of different? differentiates the winning messaging from those campaigns that just kind of they don't really resonate with the end buyers, even if they're good products, which as a quick side note, you mentioned
Kevin Mako: kind of failed campaigns in the past. One of the things that I'd be,
Kevin Mako: if you're doing your research
Mark Pecota: and you're looking at other campaigns, don't be totally worried if you see what you might think is this quasi-competitive product that completely flopped. Because like you mentioned, Mark, they might not have gone through that whole process of the correct way to build the list.
Mark Pecota: and then go into a campaign.
Kevin Mako: There's a lot of people who go onto a campaign, haven't done any work, put it on and don't get a single sale. So, you know, there's two elements to think. Like, did they do it well? And is it a good product? So I don't want people to be too afraid if you see a product that really failed unless you
Kevin Mako: really dig deep and understand that they did everything the right way that they could have to build the correct campaign and still fail. Well, now that's good intel. But no, that's the other side. So anyways,
Mark Pecota: our clients, we want to make sure, you know, both for our clients and macrodesign, and especially for the listeners here on the show, what can they do to make sure that they succeed in terms of their messaging and positioning? What makes a great campaign for the end buyers? How much time do we have like three hours? No, I was kidding.
Mark Pecota: To get into a masterclass on positioning. No, I can keep it short and sweet. I'm glad that you brought this up, though, because especially like the failed campaigns, because a lot of times people fail because they just positioned their product poorly, you know?
Mark Pecota: I mean, at the end of the day, good product positioning is conveying like the value of your product to the to the correct audience that like has the problem that your product or service is trying to solve.
Mark Pecota: And so the start of good product positioning is like being really clear on the problem that you're solving, like really, really clear, like understanding it deeply, like viscerally, like how does it make people feel like what would they say about it, like all these different
Kevin Mako: things, envisioning the person that has that problem, like understanding the audience. really deeply. And some of this is like making assumptions, but you can do market research
Mark Pecota: to get a better understanding of this. I would say going back to the market research and competitive research, like look at other competitors, maybe take it with a grain of salt. Try to look at people that you feel, you have a high degree of certainty
Mark Pecota: that they're like fairly successful. You don't have to reinvent the wheel. You can like take, you know, adapt parts of their messaging over to yours.
Mark Pecota: But yeah, and then, And then the other part of it is, you know, if you know the problem really deeply, you know who it is, then think about, like, how your product is the solution to that,
Mark Pecota: literally write out the, like, quite simply, like, you know, it does this. It does this. Like, these are the benefits and features of this product. And like, even having that's written out,
Mark Pecota: the problem, the solution in an audience that you, that audiences that you're targeting, like you're going to be 80% of the way there.
Kevin Mako: And all inventors have this. new proprietary products. You all have this baked in. You don't have to sit there and worry all. Do I have
Mark Pecota: those three positionings built in? You absolutely do. The key is to be able to drill down to them and make sure you're hitting those three elements clearly in your messaging, right? Exactly. Exactly. And if you
Mark Pecota: guys want to go to, I think we still have it up, it's launchboom.com slash positioning. We have like a, just like a free document that like has all the questions that we would ask all of our clients to
Mark Pecota: start the process of coming up with their product positioning. And just describe a bit about what LaunchBoom does, because you basically do everything from that that started the funnel to a campaign. And then now you're even going beyond that
Mark Pecota: to actually helping them scale through e-commerce after they've had their successful campaign. Just give a quick run-through of exactly how the LaunchBoom service works and how people can reach out to you for that to help. Yeah, yeah. So you can think of LaunchBoom that's broken
Mark Pecota: up into three stages. We have a team that focuses on the pre-launch, which we call the test boom phase. That's where we're testing and validating and identifying the best product positioning and creative for these products. Then also validating if they're going to be a good fit
Mark Pecota: for crowdfunding and for us and giving them those metrics back of how successful we think this campaign will be. Okay, they go past phase one and they go to phase two, which is LaunchBoom. That's where we build it up, then launch on crowdfunding, have a big successful campaign.
Mark Pecota: and then phase three is scale boom that's our e-commerce so now we're taking the people have successfully launched and then scaling them up on e-commerce like building up Shopify Shopify presence and our whole model
Mark Pecota: is around like we're looking for long-term partners to talk about the long-term thinking mindset and so we're largely performance base especially as you go deeper into our phases because essentially our partners
Mark Pecota: have become more validated that like there's a win-win scenario here for us working together.
Mark Pecota: But that's how it works in a nutshell. That's amazing. Mark, how can people find out more? Is it launchboom.com, the best place that they can do? And can you also just explain a bit about the crowdfunding summit and LaunchBoom university, because I think all that's valuable. Oh, yeah,
Mark Pecota: for sure. Yeah. So yeah, launchroom.com, we have a ton of free resources there as well. Also have a book
Mark Pecota: crowdfunded that you can check out. And yeah, crowdfunded summit is also our summit that we just did our second one for our next one is coming up in October.
Mark Pecota: And then check out, yeah, Launchroom Academy is our like course and online community as well.
Mark Pecota: That definitely check out. That's where most of our, you know, clients go through because most people, I would say, as we were talking about before Kevin, before we jumped on this on this actual podcast, that most people shouldn't be hiring an expensive agency.
Mark Pecota: Actually, it's a launch their campaign, but there are a lot of resources that we can give you to show you and coach you how to get through it yourself or with a small team. So that's what Launchman Academy is. Right on. Mark.
Mark Pecota: Really appreciate all these insightful nuggets, crowdfunding, explaining it, and then jumping into the best practice and all that. So great to have you on the show. And we'll look forward to having you back again. Thanks.
Narrator: Awesome. Thank you. Thanks for tuning in to this episode of the Product Startup Podcast, the show that teaches you what it really takes to bring your product to market and turn it into a big
Narrator: success. This podcast series is brought to you by Mako Design + Invent, the original and leading firm in North America to provide global caliber in-to-end physical consumer product development
Narrator: to startups, inventors, and small product business clients. If you're looking for product development help on your invention, head over to Mako-design.com. That's m-a-k-o-design.com. For a free
Narrator: consultation from one of Mako Design's Ford Design Studios from coast to coast. Thanks for listening and see you next time.
Prepare the Campaign to Win
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