Crowdfunding has led to a number of high profile consumer product launches in recent years. At the same time, it’s lead to more disappointments stemming from delays and unfulfilled promises. The issue, which is especially acute for the most successful fundraisers, is that it’s incredibly difficult to go from a product concept to an efficient business that must solicit, manufacture, and fulfill orders.
Portland-based Crowd Supply aims to address many of the most difficult operational challenges with the first ever conception to delivery crowdfunding marketplace. From the moment a product concept is submitted for approval, Crowd Supply begins contributing engineering, marketing, and business guidance. Once a campaign is approved, the platform facilitates fundraising similar to other well known portals, with a few entrepreneur-friendly tweaks.
The big differentiator between Crowd Supply and existing options like Kickstarter and Indiegogo occurs once a fundraising goal is met. At that point, the company offers creators pre-order management, warehousing, and fulfillment to help them make the transition to operating business. Once all pre-orders are satisfied, the product’s Crowd Supply page becomes an ecommerce reseller, purchasing products at wholesale prices and converting any ongoing traffic into additional sales.
Crowd Supply’s founder and CEO is Lou Doctor, an investor with Highland Capital and serial entrepreneur who owns and operates a network of sports ecommerce sites including GolfClubs.com, Billiards.com, and cycling enthusiast site Velotech.com. This mean he knows ecommerce. It also means he has established a nationwide warehouse and fulfillment infrastructure that can now be leveraged to support upstart consumer product companies.
The platform takes a few key steps to assist entrepreneurs in meeting delivery deadlines. First, Crowd Supply releases funds as soon as a minimum funding goal is reached, rather than at the end of a campaign. In many cases, this can mean that a successful project gets access to capital six to eight weeks earlier than they would otherwise, and thus can begin working toward manufacturing. Secondly, it structures the delivery dates promised to backers according to capacity – for example, 2,000 units per month for the first three months and then 5,000 units per month thereafter. The result, hopefully, is that the earliest backers don’t have to wait as long for their products, and there will be less delays overall.
Crowd Supply’s fee structure matches that of Kickstarter. Entrepreneurs pay 5 percent of all funds raised, plus credit card processing fees passed through at cost (it uses Stripe). Fulfillment is optional and is handled via a separate services agreement. Packing and shipping costs $2.70 per box plus the cost of UPS deliver passed through at cost – although priced at a significant discount reflecting the scale of Doctor’s existing ecommerce businesses and the totality of Crowd Supply’s.
Doctor raised a $500,000 angel round for his crowdfunding platform approximately two months ago and will likely pursue additional financing later this year once it has a few months of proof of concept under its belt. Given the size and scale of its competition, having a big war chest can only come in handy.
The new product crowdfunding portal launches today with 10 initial products in active fundraising, and hopes to add at least one additional product per week going forward. Early standouts include: The Reactor, an iPhone case with a built-in ultra-thin generator capable of charging the phone’s battery; The Rollo, a new dog collar concept with an integrated leash; and Asylum Cycles which is building a full-carbon cyclocross bike.
I asked Doctor about the possibility that Crowd Supply might expand into equity crowdfunding once the details of the JOBS Act become law. “I think we’re more inclined to raise a small seed fund, if anything,” he says. “I don’t think small companies need 1,000 shareholders.”
It’s inevitable that Crowd Supply will be compared to Kickstarter, which has become to crowdfunding as Rollerblade is to inline skate. But it’s a big market expected to double in size in 2013 to $6 billion, and the two platforms offer entirely different value propositions. In September of last year, Kickstarter explicitly declared that it is “not a store” and has deliberately shied away from promoting itself as a destination hardware projects. Rather, it would rather be known as a platform for funding creative arts, such as the recent Oscar winning documentary Inocente. In the wake of these events, Indiegogo has begun moving from the role of category red-headed stepchild to a destination for exciting hardware projects.
Crowd Supply thus launches at a time when the category is both more active and more unsettled than at any point in recent memory. With its unique combination of consulting, fundraising, and fulfillment offerings, the site already stands out among the crowd. The remaining challenge, which is anything but a sure thing, is to attract compelling projects and the backers to fund them. The unique model should attract the entrepreneurs, while the presence of interesting campaigns and the increased likelihood that they will deliver as promised should take care of the consumers.
“Crowdfunding follows an entirely different model than traditional business,” Doctor says. “Here we have the luxury to say, ‘If they come, we’ll build it.’”