This blog discusses how funding for the Combimouse requires a combination of an investment and crowdsourced funding such as Kickstarter.
Investment is required to cover startup costs, including completion of the design, IP costs, emission standards testing, tooling(very expensive) and other costs. Angel List will be used.
When all these startup activities are completed we can then raise funds on Kickstarter. Kickstarter would only cover costs to purchase components for a production run and other costs related to manufacturing including, labour, transport etc.
There is a lot of interest in the Combimouse. The website has been viewed over 200,000 times and a Google search generates about 50,000 results.
In the past we have used Indiegogo for crowdsourced funding. On 27 August 2013, Kickstarter announced that they will be expanding to Australia soon. Research has shown that projects are more likely to succeed on Kickstarter and projects raise about 6 times as that raised on Indiegogo.
We have completed the proof of concept phase and are looking for investors to help us get to the manufacturing phase.
We are looking for an investor to fund startup costs.
We can only go into production once the startup tasks are completed. Startup costs include funding to complete the design, cover emission standards testing(FCC and CE costs US$30K), pay for tooling (tooling is the custom manufacturing equipment to make the plastics and custom keyboard – these costs need to be confirmed but are currently about US$90K) and other startup costs.
Only when the design is complete will we have an accurate manufacturing cost.
We require about US$250K for the startup costs.
This excludes manufacturing costs. Manufacturing costs include cost for purchasing components, labour costs and costs to distribute the product. Manufacturing costs will be raised via Kickstarter.
When the design is complete and we are ready for manufacturing we will have a good estimate as to the manufacturing cost. We will then launch an Indiegogo or Kickstarter crowdsource funding campaign to cover the manufacturing costs for the first production run.
So for the Combimouse project, Kickstarter can only fund production costs.
So Kickstarter is useful in that it significantly reduces the amount that is required from an investor.
Crowdsource fund raising for hardware projects is not suitable for covering development and startup costs as pledges have to be kept low. So pledges should be priced to cover the manufacturing costs with a small profit. The full profit should not be priced in at this stage as the product has not yet launched and there is some risk to the contributors.
For example, if the pledges are priced with a $30 profit then we would need to get 250,000/30 = 8,300 pledges to cover startup costs. This is probably too much.
According to Kickstarter “To date the most popular pledge amount is $25 and the average pledge is around $70.”
The manufacturing cost is expected to be higher than $70 and and so for a successful campaign it is not realistic to price the pledges much higher than the manufacturing cost.
It is important to wait until we know what the manufactured cost will be before we launch a Kickstarter campaign. This will ensure, that we don’t make the first production to fulfil the Kickstarter pledges at a loss.