The Impact of Crowdfunding on Wearables

impact-of-crowdfunding-on-wearables

Crowdfunding sites such as Kickstarter and Indiegogo have helped bring wearable technologies into the spotlight. Oculus and Pebble are among the best known crowdfunding success stories, with Oculus acquired in 2014 by Facebook for $2 billion and Pebble amongst the best-selling smart watches today. It’s estimated that more than 80% of the total crowdfunding money raised has been towards hardware projects, with wearables making up at close to 25% of that. The rest includes smart home, 3D printing, and other accessories.

If you follow the wearable space, it’s hard to ignore the latest campaigns on Indiegogo or Kickstarter. It almost feels like peeking into a crystal ball to see what’s coming next. There’s no question that crowdfunding has helped hardware-based entrepreneurs raise money and accelerate their businesses without having to sacrifice equity with a VC or angel investor. The crowd can choose the amount of money they want to contribute toward a project, in return securing an early release of the product, score some merchandise, or simply be part of something cool.

So, is this the start of a radical movement where innovation and funding begins at the grassroots? What impact will the crowdfunding economy and innovation have on the larger technology companies like Apple and Google? Will the best wearable ideas emerge from crowdfunding platforms?

These are interesting questions, which I will take a stab at, although no one really knows exactly how this is all going to play out.

  1. We live in a multi-disciplinary world today, and as MIT Media Lab’s Joi Ito says, innovation is happening at the edges or the grassroots. The coming together of the Internet, open development platforms, and low-cost hardware (Arduino, Raspberry Pi) has played a big part in unleashing a wave of innovation. Crowdfunding platforms are funneling some of that multi-disciplinary grassroots innovation to the masses.
  2. The crowd is an important aspect both in terms of the projects that need funding and the backers that fund these projects. A large portion of these projects will fail and be below par. At the same time, it’s likely that backers will miss something truly unique and worthwhile. This is a function of the crowd. Quality isn’t always guaranteed with a crowd.
  3. Marketing is a big part of crowdfunding campaign, with a lot of effort spent in creating the perfect video pitch and website, so much so that many projects falter in the execution stage. While there are a host of specialist companies that design crowdfunding campaigns, this has also given rise to post-crowdfunding startups like Unbits, which help crowdfunding projects scale that difficult step between crowdfunding and distribution.
  4. Manufacturing is the hardest step in the lifecycle of any wearable crowdfunding project as it goes from a prototype to a product shipping in scale. With most hardware and component manufacturing based in Asia, it’s critical that you have the right machinery in place to be able to execute your orders and get them to the distribution stage. Companies like PCH and Dragon Innovation specialize in helping hardware entrepreneurs solve their manufacturing issues.
  5. With the critical pieces of the crowdfunding value chain in place including raising money, marketing, manufacturing, and distribution, the barriers to having a successful hardware-based wearable product are getting lower. Until now, what was regarded as the specialist domain of large hardware OEMs, is now becoming democratized and accessible to everyone. We are still at the very early stages of this revolution with each piece of the value chain likely to mature and consolidate. Expect to see reductions in failure rates for hardware crowdfunding projects.
  6. In the longer run, it will become harder for companies like Apple and Google to keep up with the pace of innovation. They will be forced to acquire some of these startups, just like Facebook acquired Oculus. This will push more seasoned investors into the game and will give rise to equity crowdfunding platforms for hardware, just like Seedrs and Crowdcube are generic equity crowdfunding platforms.
  7. Wearables are a package of good design, ruggedized components, smart UI, and intelligent analytics. Most wearables miss out on one or more of these aspects, being good in design but having rubbish UI, or having a good UI but missing analytics tools. This is true with most Kickstarter or Indiegogo wearable projects as well. As the crowdfunding market grows, expect to see wearable-focused crowdfunding platforms that bring out more of the non-hardware aspects.
  8. Also expect to see more hardware incubators like Highway1 spring up, providing crowdfunding expertise and encourage cross-pollination of projects.

Overall, crowdfunding will continue to play a major role in the wearable space. Value chains will evolve and mature around crowdfunding platforms, and the crowdfunding economy will see a more formalized structure with much more money flowing into it. In the end, it’s about building technology for us, by us.

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