Hardware crowdfunding grows up and out of Kickstarter with new specialized platforms

By Erin Griffith , written on November 20, 2013

From The News Desk

Kickstarter was built for creative people -- filmmakers, songwriters and artists. The fact that tech projects and gadgets have found a home there is just a very lucrative bonus for the company. Since it's genesis in 2009, Kickstarter has facilitated $881 million worth of pledges. Tech is its fourth-largest category, beating out music, art and publishing with $96 million in pledges.

The problem comes when those tech projects bring their own unique commercial challenges, which many amateur inventors aren't prepared to deal with. Often they launch a campaign based on a prototype they've built as a way to see whether anyone is actually interested in their cool idea. When they suddenly find themselves needing to manufacture and ship 10,000 units, things can get ugly. Pebble Watch is the most famous example -- the company's idea for a smartwatch was extremely popular and broke Kickstarter's fundraising record with more than $10 million in pledges. But it was late to deliver its product and a minor backlash ensued. Kickstarter made it clear to the world that it is not responsible for what happens after you fund a project with its blog post, "Kickstarter Is Not a Store."

Plenty of enterprising people see opportunity in Kickstarter's hands-off position. Crowdfunded hardware is ripe for commercialization and professionalization. For example, a former post officer PandoDaily profiled is on track to make half a million dollars this year selling Apple accessories from Kickstarter campaigns on his site, Bitemyapple.

Commerce is not the only area where Kickstarter has taken a hands-off approach. Kickstarter does not vet its projects before they begin to fundraise. Instead, the site asks backers to do their own research before deciding to back a project. From the site's policy:

Kickstarter does not guarantee projects or investigate a creator's ability to complete their project. On Kickstarter, backers (you!) ultimately decide the validity and worthiness of a project by whether they decide to fund it.
Again, where Kickstarter takes neutral ground, others see opportunity. Boston-based Dragon Innovation, which PandoDaily profiled in September, is one such company. Run by the hardware vets behind the Roomba, Dragon Innovation has operated for years as a consultant to young hardware startups. CEO Scott Miller and his team have deep connections in China and have helped companies including Pebble, as well as Makerbot, Orbotix and Romotive grow from cool prototypes to real businesses.

This year Dragon Innovation launched its own crowdfunding site tailored specifically to hardware products. The idea is that Dragon Innovation's consultants can offer expertise in design, materials, costs, manufacturing, packaging, shipping, pricing and distribution -- far beyond Kickstarter's hands-off approach -- to young hardware tinkerers. And in exchange, they can cut into Kickstarter's dominant market position as a source for new, innovative gadgets. Besides, even though tech is the fourth-largest category of Kickstarter projects, tech campaigns have one of the lowest success rates at 34 percent. What's more, the majority of tech projects ship late.

Dragon Innovation hopes to change that with a better track record. And yes, it is a store, too.

Today another hardware-focused competitor launches, with even closer ties to Asian manufacturing -- it operates out of Hong Kong. HWTrek has been called a cross between Kickstarter and Alibaba. It was created by Lucas Wang, who has been a venture investor with the firm TMI Holding Corp. TMI operated an incubator for hardware startups, and decided to open that program up to become a platform.

Wang has built a network of hardware 80 experts who team up with startups who list their crowdfunding campaigns on the platform. These experts volunteer because they want to keep their fingers on the pulse of hardware design and innovation, Wang says. They include Charles Huang, who co-created Guitar Hero, Idan Beck, who founded the company which makes gTar, and Brian Lamb, who founded Swivl.

Startups sign up because they want access to the manufacturing connections HWTrek and its experts have. The company plans to have business relationships with 150-200 manufacturers, Wang says.

More important than the connection to manufacturers is the design expertise. HWTrek helps startups optimize for costs, timing and future orders. For example, Wang says, "Sometimes startups are using TI's solutions, but maybe those are not in production anymore, or they are closing it and cut down support. If you try to use it for mass production, it would be super expensive. … We know which solutions are most popular and can find a balance between price and effectiveness."

While it is free to launch a campaign, HWTrek charges a healthy fee to startups which decide to use its consulting services on production management. The fee ranges depending on the complexity of the product. But Wang maintains that his experts can help startups save 30 percent to 40 percent of their costs, which more than makes up for the fee. "If you cannot ship or have troubles with production, we charge nothing," he adds.

The site launches with five projects: Guardian, a bluetooth tracking device for parents, Snooperscope, an infrared camera for low lighting and darkness, The SIM+, an iPhone 5 case which connects multiple SIM Cards to a phone at once, VisitorBot Mini,a small, smartphone-operated robot, and Zuke, an iPhone backup battery.

Early participants will be awarded matching funds from a $200,000 fund which HWTrek has set up, Wang says.

This post has been updated to clarify that it is free to list a project on HWTrek. 

Image via Wikimedia commons