Ignored by venture capitalists, Pebble smartwatch has raised over $4M on Kickstarter and counting

VCs always have a war story about the one that got away. Time to add the Pebble smartwatch to the list. The creators of the Pebble had some initial success raising $375,000 in angel funding. But when it come to raise a series A, Pebble was roundly rejected by venture capital firms that didn’t want to risk betting on a hardware firm. So the Pebble team put their project on Kickstarter, where they have now raised $4.2 million and counting without giving away any equity in their company.

In a way, this is the dream of crowdfunding in action. The recent JOBS Act put new structures in place that would allow companies to raise small amounts from a big pool of investors. In that case they would be exchanging stock for funding, whereas Kickstarter allows a project to exchange rewards for donations. With hardware like the Pebble, much of the donations amount to a pre-sale, with backers receiving the watch before it goes on sale to the general public.

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While physical projects like Apple accessories and the Pebble smartwatch have been the most successful at this, software too can employ this tactic. Retro PC games have raised over $6.7 million on Kickstarter in 2012 alone. And Light Table, an open source development environment, has banked $38,000 since debuting its project yesterday.

“With VCs, they worry about models and size of market and stuff like that,” Pebble founder Eric Migicovsky told Bloomberg . “With consumers, one of the things I love about the videos, we just showed how you’re going to use it.”

As for hiring in the hyper competitive Silicon Valley scene, Migicovsky has a powerful tactic. He shows potential recruits the Kickstarter page when they arrive. “After we stopped talking,” he told Bloomberg, “I told them to refresh.”