When Vancouver-born entrepreneur and engineer Eric Migicovsky thought of the idea for a new, “smart” watch, he went the traditional route, asking venture capitalists for help financing his investment.
Yet, even after multiple attempts, Migicovsky was unable to secure any funding for his new project—the Pebble Watch, or just Pebble. But Migicovsky didn’t give up; instead, he turned to Kickstarter, a popular crowd funding website.
Less than two hours after the project was post on Kickstarter, Migicovsky and his partners at Pebble Technology raised $100,000, reaching their goal.
But the group’s fundraising did not stop at $100,000. By the end of the first night, the Pebble raised over $600,000. By the next morning, donors had pledged over $1 million to Mr. Pebble Technology’s new project. By the end of the first week, the watch became the most funded project in the history of the crowd funding website.
By Thursday May 10, Mr. Migicovsky and his partners had “sold” 85,000 watches to 66,434 backers, raising more than $10 million in the process. The Pebble Watch was so popular that Mr. Migicovsky decided to limit pre-orders to 85,000 watches, a number that was reached more than a week before the project’s original end date on May 18.
According to Pebble’s Kickstarter page, Pebble “is the first watch built for the 21st Century.” Pebble has an easy-to-read electronic-paper display. Like that on the popular Kindle, Pebble’s e-paper display allows watch-wearers to read the watch in any light, both indoors and outdoors. Pebble is also fully customizable, with dozens of different watch faces available—both digital and analog. Changing watch faces is as simple as touching a button.
But Pebble is so much more than a watch. Pebble connects to iPhone and Android smartphones via Bluetooth, alerting the watch wearer, via a silent vibration, to incoming calls, emails, and text messages and so much more. Watch wearers can also control their music with the simple touch of a button. The Pebble Watch also includes a number of built-in apps, many of which are internet-connected. Cyclists, for example, can use Pebble as a bike computer, while runners can access speed, distance, and pace data right on their wrist. Other apps are in development and will be available via download in the future.
The watch comes in four colors: Artic White, Jet Black, Cherry Red, and a forth color, to be voted on by the project’s backers. In September, the Pebble is set to hit stores. But without Kickstarter, the largest of a number of “crowdfunding” websites, turning the Pebble concept to reality would have been immensely difficult.
The Wisdom of the Crowd
Kickstarter’s premise is simple. Entrepreneurs upload a brief business plan or description of their creative project—a summary of their idea, usually accompanied by a brief video—and set a goal as to the amount of money that they hope to raise. (For example, Pebble’s Kickstarter page can be viewed here). People can then view others’ proposals and choose to pledge funding.
Unlike traditional forms of investment, individuals who pledge funding on Kickstarter do not receive shares of the company’s stock, nor do they see their initial investment returned. However, companies on Kickstarter do offer users rewards for pledging specified amounts of money. In the case of Pebble, for example, backers who pledged $115 or more received a Jet Black Pebble watch, which will retail for $150 when it is released to the public.
Kickstarter is also based on the idea of “all or nothing funding.” Unless an entrepreneur reaches his specified funding goal, he or she receives no fund.
Projects found on Kickstarter range from technology to film to food. While the most popular products on the website are music or film related projects, hardware projects, like Migicovsky’s Pebble Watch, have been the most successful.
Other notable projects that received their start on Kickstarter include the Printrbot, the “world’s first 3D printer,” and the Elevation Dock, the “best dock for your iPhone.”
To date, more than 20,000 successful projects have raised over $200 million using Kickstarter. The 20,000 successful projects represent approximately 44% of the total number of projects uploaded to the website.
While Kickstarter launched back in 2008 by Perry Chen, Yancey Strickler, and Charles Adler, the crowd funding website gained real polarity this year. In February, Kickstarter had its first million dollar projects: the Elevation Dock, Double Fine Product’s new action video game, and the Order of the Stick. The Elevation Dock is a new and innovation iPhone manufactured by ElevationLab. The Order of the Stick is comedic webcomic, satirizing role-playing games and medieval fantasy.
The Kickstarter Founders: Perry Chen, Yancey Strickler, and Charles Adler
Kickstarter provides entrepreneurs with so much more than an outlet to seek investment. The website also provides inventors and businesspeople with a medium through which they can float ideas a test if there is a market for their new product. If members of the public (the consumers) won’t invest a few dollars to help a product reach shelves, they probably won’t purchase the product if and when it does appear in stores.
Uploading a campaign to Kickstarter is free. However, if the campaign is successful, Kickstarter takes a 5% service charge. Amazon, the company responsible for processing the payments takes between from 3% to 5% of the final amount.
Legalizing Crowdfunding
Currently, federal and state securities laws prohibit companies from offering equity to investors via crowd funding websites. That may soon change, however. Last November, the U.S. House of Representatives passed the Entrepreneur Access to Capital Act by an overwhelming majority. The bill has yet to pass in the Senate, however.
The Entrepreneur Access to Capital Act, which would allow companies to offer securities to investors via crowd funding websites like Kickstarter or social media websites such as Facebook, would mean a lot more than fuller pockets for a few hundred or so investors. Many believe that the Act, now being pushed through the Senate by majority leader Harry Reid, would cause explosive growth in crowdfunding. Consequentially, the nations economy would experience substantial growth, as increased investment spurs innovations and creates jobs.
About Dylan Kraslow
Dylan is technology editor for NBR. He primarily writes about the start-up space and the business of sports.
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