Hardware entrepreneurs & fees from crowdfunding platforms

Photo Courtesy of TomLP7 Flickr PhotoStream

Photo Courtesy of TomLP7 Flickr PhotoStream

//Note: In an earlier conversation, Scott Miller, Dragon Innovation’s chief executive officer, had told me that their new site charged a prep fee of 2,000 dollars. When I connected with him later, he told me that it had been miscommunication and that the prep fee charge is 5,000 dollars//

Last week, I wrote about Dragon Innovation’s new crowdfunding site.

The site, which charges a prep fee of $5,000 for an assortment of services prior to a crowdfunding campaign, has drawn a mixed reaction from entrepreneurs and competitors. While the latter derided the Boston-based firm’s move as a “marketing” gimmick, entrepreneurs were curious about returns on the initial investment for prep fee.

“They are charging $5,000 for service that we provide for free because we don’t have that huge overhead,” says Greg Fisher, founder of the Berkeley Sourcing Group, a Berkeley-based manufacturing services firm. “The Dragon Innovation guys are very good marketing guys but they have very little going in China (the site of Dragon’s manufacturing facilities).”

Fisher’s firm works with a different pricing model for hardware entrepreneurs. They charge on a cost per piece rolled into their initial estimates. Thus, the bigger an entrepreneur’s production run, the greater BSG’s earnings. In contrast, Dragon Innovation charges an upfront fee for each consulting phase.

The Reasoning Behind Dragon’s Crowdfunding Fee
Context is necessary to understand the value proposition for Dragon’s crowdfunding prep fee.

As venture capitalists hesitate to invest in hardware startups, entrepreneurs in this space are increasingly turning to crowdfunding platforms to finance their projects. Because they work on a commission basis, crowdfunding platforms have added incentives to make campaigns succeed.

A successful campaign, however, is where the rubber hits the road for most hardware startups. Production begins and their estimates, which were factored into the crowdfunding campaign goal, are tested. Unlike an artiste’s crowdfunding campaign (whose delivery depends on his or her vision and productivity), a hardware entrepreneur’s campaign’s delivery model is dependent on multiple stakeholders from their contract manufacturing personnel to suppliers. If the entrepreneurs overcommit or forecast incorrectly, they might run into delivery problems (as noted smartwatch maker Pebble recently did).

Thirty-three-year Carlos Herrera, founder of PintoFeed and Dragon Innovation client, told me that his consultant at Indiegogo, a popular crowdfunding platform, was simply interested in taking credit for a successful campaign. She asked him to set a low funding threshold without much knowledge of his product or manufacturing costs. “She wanted me to overachieve my goal,” he says.

Naturally, the Dragon prep fee is a “no-brainer” for Herrera, who says he was really naive about manufacturing before his first venture.

Pages: 1 2

Tags: , , , , ,


ForbesHow Crowdfunding Can Supercharge Your Campaign In 2016ForbesThey say that there are about 7.45 billion people living in this world right now. Imagine that if you could get each of these seven-and-a-half billion people to contribute one cent to your project, well, you know what I [...]

ForbesHow Crowdfunding Can Supercharge Your Campaign In 2016ForbesCrowdfunding has helped a lot of businesses recently. Want to join the queue? Here's how to raise funds for your projects.and more » [...]

The Jewish Press » » Funny Jewish Women's Crowdfunding Video ...The Jewish PressThe Women's Performance Community of Jerusalem and OU Israel are creating harmony among the women of Greater Jerusalem through the creation of a ...and more » [...]

BdailyAndy Murray has invested in UK startups WeSwap and Perkbox through the Seedrs crowdfunding platformBusiness InsiderTennis star Andy Murray has backed two more early stage UK tech companies on crowdfunding platform Seedrs, bringing his startup portfolio up to 17 companies. The wo [...]

Corporate Counsel (registration)FTC Hears From Company Leaders as Crowdfunding Grows ...Corporate Counsel (registration)"You're going to see people developing an expertise and really move on from this initial stage of everyone kind of exploring crowdfunding in a more general [...]

Singularity HubHow Crowdfunding Has Changed the Startup Game - Singularity HUBSingularity HubThe development of innovative technology — from virtual reality headsets to space exploration to solar-powered roadways — is no longer the province of ...and more » [...]

KNWACrowdfunding Sends NWA Family to Wrigley - Story | NWAHomepageKNWAThis World Series matchup features the two franchises with the longest world series title drought, a combined 176 years without a championship.and more » [...]

BillboardCrowdfunding for His Life: How GoFundMe Helped Save a Punk Legend's LifeBillboardSo on the advice of a close friend, Julian -- like an increasing number of aging musicians without a lucrative record contract -- turned to crowdfunding, launching a campaign on the No. 1 pl [...]

Minneapolis Star TribuneSEC releases new, relaxed rules on investment crowdfundingMinneapolis Star TribuneNew rules announced this week will make it easier for small companies to raise capital from small-time investors, another step forward for Minnesota's fledgling investment cr [...]

The GuardianCrowdfunding: the new buzzword for academics needing research moneyThe GuardianArchaeologist Dr David Petts, from Durham University, has also used crowdfunding, raising almost £25,000 to fund a project on Lindisfarne, off the Northumberland coast. The dig, in June, led to [...]

CFB Finance

Press Release

CrowdFund Beat News

Hello @CrowdFundBeat's 17363 followers - thank you so much for following! Wishing you all a happy Thursday! >> bit.ly/_want_this_free

Live Crowdfunding .tv

What's Next Step in Regulation A+ JOBS ACTS Title IIII :L Interview : Steve Cinelli with Brian Korn Securities and Crowdfunding/Peer-to-Peer Lending Lawyer, Watch more video library | Conference | Interview | Campaign Showcase | Research | Education |