Crowdfunding vs. Traditional Marketing for Electronics

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If you’re developing a product to sell, you need a way to ‘get it out there’. This can involve significant expenses, like certification testing and manufacturing of a minimum order quantity. Crowdfunding is a popular way for small businesses (including hobbyists) as well as large companies to reach new customers and help cover the upfront costs of releasing a new product. I have run several Kickstarter campaigns and have been involved in multiple other campaigns it’s a stressful but potentially rewarding process that could help bring your product to life. 

When you boil it down to its essence, a crowdfunding campaign is a fancy pre-order system with some built-in marketing. The backers/contributors of the campaign don’t own any part of your company, intellectual property, or other rights. They are just placing orders for the product in advance of production, typically for a significant discount.

Launching a small business that sells an electronics-based product would involve you (or your company) designing the product, manufacturing an initial run and then launching it on your website. It can be very daunting for a new company to go down this route for several reasons, primarily:

  • Upfront costs
  • Getting the word out that your product exists
  • Driving traffic to your website

There’s no point launching a fantastic product if nobody knows it exists! Marketing then becomes an indispensable part of your campaign and can make or break your product, regardless of how good the product itself is. History is full of examples of technically inferior products being far more popular than superior products. This all boils down to good marketing. Some of that is merely letting people know the product exists, and some of it is telling people they must have that specific product. Apple is an excellent example of a company with great marketing, whether you’re a fan of their products or not. On paper, their products are highly priced, and there are technically superior products available for less, but Apple’s marketing power is enormous; therefore, their products sell very well. Now, if you’re not a company the size of Apple, you probably don’t have the marketing budget, reach or contacts that it has, so how do you get the word about your product out there?

Getting blogs/social media/news sites to talk about a new product from a small company is hard, especially if that product is only available on your website. If your company is a bit larger and already has a customer following, this can be easier to accomplish but would still take significant effort. By crowdfunding your product, you can give a blog/news site something more to talk about than yet another product from yet another small company. Having a well-written campaign with an excellent video and photos can make you stand out from the crowd when it comes to the editors of these sites looking at your product.

Even if your project budget covers the cost of production and marketing, crowdfunding could be yet another marketing tool for you. Having your product be successful on a crowdfunding platform can provide ‘social proof’ marketing by showing that your product is popular, thus encouraging potential customers to buy it because all these other people have done so. It also allows people to feel emotionally invested in the product by helping bring it to life, and those customers can become brand evangelists for you in the future, helping with the marketing of your future creations.

Use Cases

As I see it, there are two primary use cases for utilizing a crowdfunding platform for your product launch. I will note here that in this series of articles, I expect that you have a product pretty much ready to launch – you’re launching a product, not an idea. Crowdfunding is not the place to launch an idea and make it into a physical product, these projects almost always fail to gain funding and for a good reason – people want the thing, not the process of developing that thing.

Covering Costs 

You’ve spent months/years putting all your (or your employees’) heart and soul into the development of this product. It’s been prototyped, it’s gone through EMC pre-compliance and it’s been through some user testing, but your manufacturer needs you to order a minimum of N? units, and that’s beyond your budget. Alternatively, perhaps it needs RF, electrical safety, or some other certification and/or an injection mold or two, all of which are very expensive. 

Increasing Sales Reach

If you have your expenses and first manufacturing run covered, you might want a faster return on that investment. You use the crowdfunding site(s) to gain sales from the customer base already on the crowdfunding platform. Some platforms can give you 30%-70% of your funding goal, despite your best marketing efforts, purely from users seeing your project on the platform, rather than being directed there via your efforts. Combine this with your marketing efforts, and you can make your product launch a much bigger success.

Cost

It’s not free to crowdfund, everyone wants their cut of the revenue, and you’ll have quite a bit of labor expense just to handle the campaign itself. 

Before you even get to launch, you may need to hire someone to create the crowdfunding campaign’s video if you don’t have the skills to do it yourself. The videographer/editor could be anywhere from $500 to $5000 or more depending on whom you choose to help out and what they are giving you. You’ll also need some professional photos and graphics for your campaign which could cost another $500-5000 if you are not skilled in these fields. You might think you can wing it on these, however, the more professional the campaign videos, photos, and graphics are, the more likely you are to be successful. The video and photos provide the potential customers their first impression of you and your product.

You will also need prototypes to send out for marketing purposes if you want to make an impact. Expect to be making at least 20-30 prototypes to send out.

The platform will end up receiving about 8%-12% of your funding amount comprising their fees (about 5%) and payment processing fees (3%-5% + a set charge per payment). If you’re on IndieGoGo or Kickstarter, you might end up handing over another 2%-10% to a company like BackerKit to help with managing the campaign after it’s finished just dealing with shipping hundreds of units can be a nightmare.

For labor, you’re probably going to spend a month before you launch creating the campaign, and doing pre-marketing (contacting news sites/blogs). Additionally, you can expect to do very little else but marketing and email during the 30 days your campaign runs. If you have staff, expect most of them to be doing this full time as well.

Post-campaign, you will probably be doing a lot more customer service than a typical web sale, as it’s a pre-order and people will want to know the status of their order. Some will email you incessantly. You also need to deal with the inferior backer tools that IndieGoGo and Kickstarter provide if you utilize their platforms. Customer service can add hundreds of working hours of labor compared to the same volume of webstore sales.

To sum it up, unless you can do high-quality graphic design and video editing in-house, you can expect to need $2,000-$12,000 upfront to get your campaign launched. You’ll lose around 12% of any funding gained to the platform, and it will cost you two months of wages before/during the campaign and potentially 1-3 hours per order for customer service/data management post-campaign.

Pros to Crowdfunding

Despite the costs, there are some great reasons to consider crowdfunding.

  • Make more pre-sales than you’d otherwise be able to.
  • Built-in marketing through the platform.
  • Blogs/news sites may be more likely to write about your product if it’s on a crowdfunding platform.
  • Guarantee you have the money to launch your product.
  • It can be quite entertaining!

Cons to Crowdfunding

  • A significant amount of effort to create/launch/manage a campaign.
  • Typically expected to offer the product(s) at a significant discount (eats into margins).
  • Some platforms (IndieGoGo mainly) are considered fraudulent by many banks, and the customer’s funds will never make it to you. Likewise, they can have low trust in some online communities.
  • It can be extremely stressful!

There are many other pros and cons to crowdfunding, some of which are platform specific and some of which will be project specific. IndieGoGo, for example, offers a funding mode which allows you to keep the funds even if you don’t reach the goal. If you are using crowdfunding to raise funds to launch your product, I wouldn’t recommend that. If the campaign doesn’t reach the goal, you’ll still need to raise the additional capital to manufacture the product to fulfill the orders that were placed. Even if you use the typical ‘all or nothing’ campaign funding, you can still get caught short with unexpected expenses or project delays that eat through your budget.

Crowdfunding a new business or an existing side business can help you immediately jump into the project as a full-time job, potentially with paid staff to help you out. Depending on your circumstances, this alone could be worth ignoring the drawbacks and launching a product you’ve been working on through a crowdfunding campaign. If you have an existing business, it could allow you to grow your business far more rapidly than you could otherwise.

IndieGoGo, in particular, has excellent opportunities for a successful campaign to proceed to venture capital funding. If you want to go down the venture capital route, a highly successful campaign on the right platform could give you the right connections to make that happen as well as provide a clear demonstration that your product is in demand.

If you are looking to distribute your product through vendors such as Digi-Key or Mouser, using Crowd Supply as your platform can give you the introductions you need to become a supplier. If you feel a distribution model is key to making your business continue to thrive, it could be worth the effort to run a campaign.

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Make a PCB Online From Start to Finish

Using the right online PCB design software gives you flexibility and lets you collaborate with other designers.

Whether you’re a hardware or software person, you’re probably ingrained with that entrepreneurial spirit. You’ve got the vision and the knowledge you need to turn your electronics dreams into reality, but you’ve still got one more obstacle to overcome: you need to build it.

Sometimes budgets don’t measure up to the overall vision of your device. Unless they have the cash to spare, entrepreneurs have to operate on shoestring budgets and need to find the most cost-effective ways to reach their goals. Since the circuit board forms the central nervous system of your electronic device, you’ll need access to PCB design software that can meet your device requirements without breaking the bank.

That’s why online PCB design software might be the best choice to start designing your device. So what is the best way to get started? How do you get from a design on paper to creating deliverables for a manufacturer? The road from concept to product can be made smooth with a great online PCB design software platform.

Which Platform is Right for Me?

If you start searching for an online design platform, you might be unsure which platform is the best for you. So how do you pick the right platform? First things first, avoid the freemium sites. No one wants to spend hours designing their device, only to be told that they need to pay in order to keep their schematic.

When you find a platform, you should make sure it takes you all the way to generating your manufacturer deliverables. An online design platform should actually be a complete platform that includes schematic, circuit board layout, and bill of materials features. The platform should also be integrated with a thorough components library.

Just because an online platform is free doesn’t mean that it can’t contain advanced design features. The most powerful online design software should include rules checking and design constraint features. This will ensure that your designs will meet basic quality standards. Other features like a 3D viewer are extremely useful.

One great way to break into PCB design and bring a new device online quickly is to use a development board. These boards are very versatile and contain many features that can help expedite your design process. The documentation on these boards is very thorough, and tutorials for using these boards can be found online. These boards also mount easily to PCBs and make it easy to interface with other components.

Schematic and Layout

Whether you’re designing online or you’ve spent a bunch of money on a software package, you’ll start designing your product by drawing up a schematic. Your schematic will contain all the electronic components and display your connections between components. You can also write some important notes for yourself in the schematic. Think of it as a blueprint but without all the measurements.

At first glance, it may seem unnecessary to build a schematic of your design. Why not just jump straight into a PCB layout? Why should I have to build the device twice? Once you complete your layout, it may not be obvious how components are connected. This is where schematics are invaluable: they give you a broad view of your device. It is easy to see how components connect to each other, while these connections can be less obvious on a finished PCB layout.

Once you finish your schematic, your layout should be automatically captured and generated based on your schematic. The generated layout will include all the components in your schematic and will have pre-mapped connections between components. You’ll still need to route between components, place copper pours for power and ground, and arrange components to your liking.

When you view your layout for the first time, you may find that it is not how you imagined. Components might appear in odd places, and connections between components might not appear as you imagined. The layout might not initially meet your form factor requirements, and the schematic gives you the opportunity to rearrange your components to fit your packaging.

Once you are inside the layout, you might find that it becomes useful to use more advanced design and routing techniques to save space in your design. Placing traces in multiple layers is important in PCBs with a large number of components but strict form factor requirements. An online platform should include via placement capabilities so that you can route between multiple layers.

Enforcing Design Rules

PCB design is one of those fields where it is easy to start building simple devices. When you are not worried about high speed, high frequency, low power, high current, high temperature, RF communication, or mixed-signal capabilities, most designs you create will likely operate just fine. Designing in consideration of these other requirements is difficult to master and requires adhering to a specific design rule or many.

If you have not designed devices in any of the above areas in the past, you may not have all the relevant design rules memorized. That’s why your online design platform should have the capability to enforce standard design rules for different applications. Not all design rules are set in stone, meaning that certain design rules are meant to operate as constraints. Certain constraints on feature sizes and clearance need to be met in certain applications.

Certain features, especially those appearing in multilayer boards, should also be customizable in an online design platform. Trace sizes, pads, via dimensions, and copper pour areas should all be customizable. This is especially important if you work with certain parts like development boards, as the footprint of these devices cannot be changed. You will need to design your routing and copper pour features to accommodate development if you decide to use them.

Automated PCB manufacturing

Manufacturing Deliverables

It should go without saying that you should always build and test a functional prototype of your device before you start ordering fabricated prototypes. Ordering a large-run is only a good idea if you have tested your functional prototype and your fabricated prototypes, followed by completing any required redesigns. All prototypes should be thoroughly tested before moving to full production, and this will give you an opportunity to fix any problems in your design if needed.

Once you finish your design, checked that it meets standard design rules, and decided you are ready to fabricate a prototype, it’s time to prepare deliverables for your manufacturer. Your design platform will need to generate certain documents based on your board layout. A great online design platform should quickly generate your manufacturer outputs. These documents include a bill of materials, Gerber files and Excellon files, and CAD/CAM files of your device.

All of these files will tell your manufacturer the information they need to plan out the fabrication and assembly process. The bill of materials is important as it contains sourcing and pricing information for components that appear on the board. It should also contain acceptable substitutes for your components in case there is a problem with sourcing. Always check with your manufacturer and get a list of required deliverables.

Collaboration

If you are putting together a team of designers or you are working in a remote organization, an online PCB design platform is perfect for team collaboration. A great online platform gives the design owner the power to add collaborators and document design changes. You should be able to switch between versions easily and download different versions of finished layouts.

Collaboration is extremely smooth and easy in an online PCB design platform. This type of collaboration is excellent for new designers as it gives multiple people an instant view into a project. When more people are collaborating, there is a better chance that design problems can be caught before a board goes to production.

You don’t need to be a large company with a massive budget to jump into PCB or electronics design. Now you can have access to the tools you need to build your dream device with browser-based design software. IoT 360 helps you achieve your design goals with built-in a ton of built-in components and an intuitive user interface. IoT 360 gives you the power to design professional-level devices while helping you stay within your budget.

Sign-up for our service and contact us for more information if you want to learn more about the capabilities of browser-based design and product development.