“I’d rather eat a bullet than do a Kickstarter campaign again,” says Moore’s Cloud founder Mark Pesce in the latest Decoding The New Economy video when asked about crowdfunding his project.
Moore’s cloud is an internet of things company that focuses on lighting, “we think it’s interesting and something that expresses emotion” Mark says.
With their first project, Moore’s Cloud looked to raise $700,000 to build their first project but fell well short of their target.
Falling short lead to Mark and his team executing a classic business pivot from a static lights to Holiday, a system of intelligent fairy lights.
“We took exactly the same technology and put it into a different form factor,” said Mark. “It’s as if we took the light and unwound it.”
The failure of the Kickstarter campaign gave the Moore’s Cloud founders an education on how crowdfunding works.
Customer focused from day one
An important aspect of crowdfunding is it’s very customer focused. From day one of the campaign, the venture has to devote resources on relations with those who’ve pledged a contribution.
Most startups don’t have those resources, or the time and skills, to deal with those relations.
“People say it’s a better way of getting investors. I would have to say ‘it’s not better, it’s different.'” Mark says about crowdfunding.
One of the differences is the psychology of investors. Mark was urged by the CEO of Indiegogo, Slava Rubin, to set a low target as participants like to back successful campaigns.
“There’s a whole bunch of psychology I didn’t understand going in,” says Mark. “If we’d had a goal of $200,000 we probably would have filled it in the first two weeks.”
“Once a campaign is fully funded, it tends to get overfunded.”
A truism of business is that banks will only lend to you when you don’t need the money and it strangely appears the same thing applies to crowdfunding.
We’re in the early days of crowdfunding and there’s more to be learned about the way it works and for which ventures the fund raising technique works best.
The experience of campaigns like Moore’s Cloud are part of how we’ll discover the nuances of crowdfunding and the psychology of the crowds that contribute.