Hacking the Crowdfunding Model for Success Over the Long Term

By expanding upon traditional crowdfunding offerings, Dragon Innovation lends expertise to all stages of the Making process to build a foundation for profitable growth.

Editor’s note: Makers and computer hardware and software creators come together to build the future at the Intel Developer Forum 2014 in San Francisco from September 9-11. Inventors and innovators can register to receive a complimentary day pass.

When it comes to Maker success stories, it’s hard to find one better than MakerBot. Now a favorite 3D printer for many do-it-yourselfers, MakerBot itself was actually developed at NYC Resistor, a famed Brooklyn ‘hackerspace,’ which is basically a community center for budding innovators. But ramping up from hacker to mass production can be a serious challenge. MakerBot got some help from Dragon Innovation, an established consultancy that works with hardware developers to launch their big ideas.

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Dragon offers companies like MakerBot a variety of advisory services. Most recently, it launched a crowdfunding platform specifically for hardware projects, offering an additional 100k to any company able to raise 1M on its platform. This kind of niche fundraising fits right in with a trend we’ve identified within the DIY movement that is seeing an explosion of creative, Maker-friendly sources of capital.

We’re calling this trend ‘Elastic Finance’ because of the way these new models for fundraising are innovating right alongside the Makers themselves. We talked with the CEO of Dragon Innovation, Scott Miller, to get his take on the phenomenon and where Dragon fits in.

A sense of history, viewed in parallel to the current landscape for ‘Making’ is important to understanding why there was a demand for his service, Miller explained.

“Back in the day, If we wanted to fix a motor, we had to figure out what size transistors or what size flyback diodes we needed and so on, which took a long time and pretty hard-core expertise. Today, you can buy alternating motors over the web in half an hour, but it’s still very hard to go from one to many.”

He said Dragon was born to help customers with everything from finding a great factory to figuring out supply chain, manufacturing and the all levels of production.

Miller said Dragon jumped into the crowdfunding game to help the clients stay on track on the financial side.

“Companies would come to us after having run a crowdfunding campaign and either they wouldn’t have raised enough money, or they would have promised an unrealistic schedule, or they would have sold something that they couldn’t possibly build. By that stage it was too late to intercede, as they had made a monetary commitment to their backers that they really weren’t in a position to deliver on.”

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In other words, crowdfunding can put the proverbial cart before the horse, but that doesn’t deter from its greater importance of pushing the Maker movement forward, says Miller. Crowdfunding is not only essential from a financial standpoint for would-be creators, but it also more interestingly functions as a source of market validation.

“It provides the missing piece of the puzzle for the democratization of what’s now becoming the hardware revolution. People are opening their wallets to buy a product that doesn’t exist yet.”

Through crowdfunding, Innovators gain validation that their product is viable much earlier in the process, so if they have to shift course, they can.

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So crowdfunding functions as a litmus test for gauging feedback from consumers – arguably the best kind of marketing there is: word of mouth. Splashy stories like those of Pebble and similar platform darlings that garner millions from the masses and generate buzz on all the tech blogs have created a new archetype for entrepreneurial innovators.

With their combination of expert advice and market publicity to go along with the infusion of cash, will crowdfunding platforms like Dragon’s replace more traditional sources of funding for hardware developers? Miller doesn’t think so.

“At the end of the day, hardware is more capital intense than most software development. You need money to buy the tools, to buy inventory. We believe firmly that institutional funding is still required to scale up a company, because that’s going to require significant cash. So it’s not like crowdfunding is a substitute for that, but it is a step along the way in terms of getting institutional funding.”

There are no guarantees in crowdfunding, but the platform at Dragon Innovation is built into an ecosystem of industry-specific advice that will hopefully smooth the runway for Maker startups and give them a leg up in the quest for capital. Given Dragon’s focus on hardware developers that aspire to big market impact, we couldn’t resist asking Miller where that next big impact might happen.

“We see the next chapter across many verticals. One of the big ones is quantified self, but now we’re seeing the next generation of that, where they’re really carefully measuring not just activity, but all sorts of other bio-signals and will do something useful with it. It’s going to be fascinating to see how it all evolves.”

Did you get that, all you DIYers? The next MakerBot story is out there waiting to be written, and Scott Miller is looking for authors.

The ‘Maker’s Manual’ spotlights the do-it-yourself Maker Movement and how new computing technologies are helping democratize the creation of things once limited to craftsmen and professionals.  This 10-week series from PSFK and iQ by Intel will explore trends and feature interviews with artists, inventors and entrepreneurs who are turning their ideas and dreams into reality.

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