Crowdfunding site, Dragon Investment, Helps Hardware Startups

dragon innovationDulcie Madden has spent two years developing a monitor attached to a onesie that tracks an infant’s breathing and temperature and beams the data to a parent’s smartphone. Her five-person Boston startup, Rest Devices, raised $600,000 from angel investors to build a prototype. To secure the funds she needs to manufacture her monitor, Madden bypassed better-known crowdfunding websites and turned to Dragon Innovation, a new site run by a consulting company of the same name.

On Kickstarter and Indiegogo, entrepreneurs solicit donations and promise a product in return. Yet for many, raising money turns out to be the easy part. Ethan Mollick, an assistant professor of management at the University of Pennsylvania’s Wharton School who authored a paper on crowdfunding, found that in a sample of 48,500 projects, more than 75 percent didn’t ship on time. “A lot of these people are extremely overconfident,” he says. “Most people do deliver in the end. It just takes a long time.”

Dragon founder Scott Miller, who led the team that developed the Roomba vacuum at IRobot, started the company four years ago to help entrepreneurs mass-produce their inventions. Dragon’s staff of 20 is divided between Lexington, Mass., and China. Miller decided to create a crowdfunding platform after people who raised money on other sites had trouble delivering their gadgets on time and turned to Dragon for help. “They wouldn’t really know what stuff costs. They wouldn’t include labor. They wouldn’t include factory markup,” Miller says. “They totally forget tools, which can be tens of thousands of dollars.” His consulting clients include the 3D printing company MakerBot Industries and the smartwatch maker Pebble.

Like Kickstarter, nobody gets funded on Dragon unless pledges reach a minimum level. Unlike Kickstarter, Dragon charges a $5,000 fee to list a project. Clients then get help preparing plans, buying the lowest-cost components, and ensuring that the funding goals and timelines are realistic. Says Miller: “We’ve got the guardrails around them so they can be confident they’re going to deliver.” Dragon also takes a 5 percent cut of projects that get funded. The upfront fee acts as a “filter” to make sure creators on the site are serious about manufacturing in volume. Miller is seeking people who want to raise at least $30,000 and manufacture at least 1,000 units.

Dragon also promises to introduce entrepreneurs to four partners Miller’s lined up: General Electric (GE), Qualcomm (QCOM), Freescale Semiconductor (FSL), and Arrow Electronics (ARW). Hardware startups could get training and advice from larger companies’ staff, assistance in licensing patents and using software tool kits, and other help that’s usually out of reach for small businesses. “Though some of the ideas may be new and may be small to begin with, they have the potential to offer high volume,” says Jason Zheng, the Shanghai-based head of emerging businesses at chipmaker Qualcomm Atheros.

Dragon’s site launched on Sept. 5 with eight projects. Three met their funding goals in the first week. If Madden’s startup reaches its $200,000 goal, it plans to deliver the baby monitors to customers on Dragon in December and to retail stores the following month. In the meantime, she and her crew are testing their prototypes for durability. “We’ve washed onesies more times than you can possibly imagine,” she says.

Source: John Tozzi – Bloomberg Business Week

Link: http://www.businessweek.com/articles/2013-09-19/crowdfunding-site-dragon-innovation-helps-hardware-startups-get-real

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