Why over-funded crowdfunding campaigns can really suck

You put your campaign up on Kickstarter or Indiegogo, and it’s just been overfunded like crazy. Great, right? Well, yes, it’s the greatest thing that could happen. But it comes with a lot of problems.

When we first set out to raise funds for our piece of hardware on Indiegogo, we were hoping to reach our goal and we dreamed of surpassing it. However, when our campaign closed at nearly $1.3 million (becoming the most funded European campaign on Indiegogo at the time), we were shocked. None of us had expected such success, or the delays that come from being too successful.

Here are seven things we learned the hard way about over-funded campaigns:

1. Hardware is hard!

Even though a lot is happening in the world of hardware manufacturing, with 3D printing and big manufacturers that are starting to offer their help and support to young makers, hardware still needs to be physically created at some point. Whether it’s tooling that has to be made for the injection molding, the PCB that needs to be certified before final mass production start, or packaging that unboxes nicely, all of it needs to be created. Moreover, any change in design or packaging requires restarting the manufacturing process, and that, of course, takes time and a lot of resources.

2. Your preparation goes out the window

You can’t prepare for being massively overfunded, because all the preparations change at scale. You therefore often have to rewrite your entire action and delivery plan.

3. You now have tons of funders to keep in the loop

In order for your funders and backers to stay happy and excited for you, you need to keep them in the loop, answering their questions and addressing their concerns. Saying: “Thanks for your contribution, see you in a year when we’re ready!” is not an option.

Setting up support and answering everyone in near real-time is something even bigger companies with way more resources have difficulty doing. So for a young company, it can be quite an obstacle to overcome. Moreover, crowdfunding is a very new financing form, and some people think it means that they have made a standard pre-order.

4. You know nothing!

There’s a first time for everything — and the first time you don’t know squat. After the campaign is over, no matter what you think you know, you actually have to learn EVERYTHING: manufacturing, hiring, fulfillment, customer service, and the list goes on. You need to plan months ahead, and it’s often very hard to predict and plan everything at such an early stage. This is also one of the reasons the schedule often slips. Take manufacturing, for example: You often know very little about the exact development and manufacturing prices and component costs. That means you often don’t have that high of a margin on your product. Especially when you take early bird discounts into consideration. Contrary to popular belief, most of the funds do actually go into manufacturing, so an overfunded hardware project doesn’t make you rich or capable of doing more than initially expected.

5. Your quality standards cost you time

Since most founders are perfectionists, the number one goal is to deliver something remarkable. And they’re ready to sacrifice everything to achieve that rather than ship something where people just say: “It works.”

When your campaign is done, you realize you can only focus on two of the following three things: time, budget, or quality. You can choose to deliver on time and stay within your budget, but odds are the product will be of awful quality. Alternatively, you can deliver on time with the promised quality, but then costs go up considerably, which is not an option given limited resources. Lastly, you have an opportunity to deliver a high quality product that stays within the budget, but later than promised. In most scenarios that’s just the best option, even though it’s not optimal.

6. You’ll need to find a new manufacturer

Choosing a manufacturing partner beforehand is nearly impossible, since you don’t know how many units you’ll need to make. Even if the partnership is in place, with an overfunded project, an immediate need for choosing a much bigger partner arises. And that process can be comparable to raising funds — whether that’s through crowdfunding or from VCs. It takes time.

7. Entrepreneurs don’t heed warnings

Things always take longer than what you expect them to take. And no matter how many people tell you to leave a margin for error, you probably won’t, or at least not completely, since your optimistic nature kicks in and takes over. The smart thing to do is to leave buffers, for design for manufacturing, tooling, the manufacturing itself, certification, shipping and hiring. But you’re not going to listen to me. I know I didn’t.

Jonas Gyalokay is founder and CEO of Denmark-based Airtame, the highest-funded European Indiegogo campaign ever. Airtame is a high-performance wireless HDMI dongle for enterprises.