Latest / Hardware Startups with Fexingo: Devices, Robotics, and Manufacturing Tech Companies / How Hardware Startups Use Crowdfunding for Market Validation
Transcript
- Lucas: Luna, I want to talk about something a lot of hardware founders treat as a fundraising tool, but I think it's actually a much more powerful validation mechanism — and I mean crowdfunding. Luna: Interesting. Because most people hear 'Kickstarter' and they think about the money. But you're saying the real value is the signal? Lucas: Exactly. The money is nice — but the signal is everything. A successful crowdfunding campaign tells you that real people, not just your mom and your college roommate, are willing to pay real money for something that doesn't exist yet. That is hard data. And a failed campaign tells you something just as valuable: your product, your price, or your story is wrong. Luna: Right. And better to learn that before you've sunk a million dollars into tooling. Let's talk about a specific example — I always think of the Flow Hive. Lucas: Flow Hive is a perfect case. In 2015, an Australian father-son duo launched a beekeeping product — a hive that lets you harvest honey without opening the box. They asked for 70,000 Australian dollars. They raised over 13 million. That's a 185-to-1 overfunding. That is not a fluke — that is a signal. Luna: And they had a compelling story. The dad was a beekeeper, the son was an inventor. They had a prototype video that went viral. But the pre-campaign work was the real engine. Lucas: Exactly. Cedar Anderson — the son — had been building an email list for years. He had a blog about beekeeping. By the time the campaign launched, they had tens of thousands of warm leads. The campaign didn't create demand; it harvested it. That is the model. Luna: And the contrast is the Skarp laser razor. Raised 4 million dollars on Kickstarter in 2016. Amazing video, really slick. But the technology didn't work — it couldn't actually cut hair consistently. They never shipped. Lucas: Right. So what did the crowdfunding validate? It validated the marketing, not the product. And that's a dangerous split. The backers were buying a promise, not a working prototype. The founders never did the hard engineering work upfront. Luna: So the lesson is: crowdfunding validates market demand only if you have a real prototype. If you're selling a render, you're just testing your video editing skills. Lucas: Bingo. And the numbers bear this out. Kickstarter's own data — as of 2025 — shows that about 12 percent of hardware projects that hit their funding goal still fail to deliver. That's one in eight. The ones that succeed tend to have a working prototype in the campaign video, not just a CAD animation. Luna: And what about the signal from a campaign that doesn't fund? I've seen founders treat that as a failure, but it's actually free market research. Lucas: Absolutely. I talked to a founder who launched a smart garden sensor on Kickstarter in 2023. Hit only 40 percent of a 50 thousand dollar goal. But in the process, they surveyed their 800 backers — who didn't back — and found the price point was the issue, not the concept. They relaunched at a lower price six months later and funded at 200 percent. Luna: So the failed campaign taught them exactly what to change. That's cheaper than a focus group. Lucas: Way cheaper. A professional market research study for a hardware product can run 20 to 50 thousand dollars. A Kickstarter campaign costs maybe 5 to 10 grand to produce — video, rewards, shipping estimates. And you get actual purchase intent data, not just survey answers. Luna: But the key is that you have to design the campaign to be a test, not just a sales pitch. I think a lot of founders treat it as a marketing launch, when really it's a science experiment. Lucas: Right. And the metrics to watch are: conversion rate from campaign page visitor to backer, average pledge amount, and the percentage of funding from people you don't know. If most of your money comes from your own network, you haven't validated anything. You've just done a friends and family round. Luna: What's a healthy conversion rate? I've heard 2 to 5 percent is typical for a well-targeted campaign. Lucas: That's right. But here's the nuance: if your conversion rate is high but your average pledge is low, it might mean your price is too cheap. If conversion is low but pledges are high, your product might be too niche or too expensive. The combination tells you where you sit in the market. Luna: And this is where the pre-campaign email list becomes the most important asset. Because you can test messaging, price, and rewards with that list before you go live. Lucas: Exactly. I know a hardware startup that did three price tests with their email list before the campaign. They asked: 'Would you back at 99, 129, or 149 dollars?' The 129 option had the highest net promoter score. So they launched at 129 and funded in 48 hours. That's a validation loop. Luna: And the platforms themselves are evolving. Kickstarter and Indiegogo are still the big names, but now you have equity crowdfunding on Wefunder and StartEngine. That changes the validation question. Lucas: It does. With equity crowdfunding, you're not just validating product demand — you're validating investor interest. And that's a different signal. A hardware startup raising 500K on Wefunder is saying: 'There are 200 people who believe in our team and our vision enough to take equity risk.' That's a powerful endorsement when you go to VCs later. Luna: But it also creates a different obligation. Those investors are now shareholders. You have to manage that community for years, not just until the product ships. Lucas: Right. And that brings us to the hidden cost of any crowdfunding campaign: post-campaign community management. Most founders underestimate this. You need 6 to 9 months of dedicated communication — updates, surveys, shipping logistics, customer support. If you don't budget for that, you can kill your brand before you even ship. Luna: I've seen it happen. A smart lock startup raised 1.2 million on Kickstarter in 2022. Great campaign. But then they went silent for four months while they sorted manufacturing delays. Backers turned hostile. The brand never recovered. Lucas: That's the dark side. Crowdfunding is a double-edged sword. The same community that validates your idea can destroy your reputation if you mismanage expectations. So the validation isn't just about whether people pledge — it's about whether you can sustain their trust through the long, messy process of hardware production. Luna: So for a founder listening right now, what's the single most actionable piece of advice? If you're thinking of using crowdfunding for validation, what should you do first? Lucas: Build your audience before you build your campaign. I don't mean a thousand Twitter followers. I mean an email list of people who have opted in because they care about your problem space. If you can get 500 to 1,000 engaged subscribers, your campaign is already halfway to funded. And that list is the validation engine — you can test everything with them before you go public. Luna: And if you can't build that list? If you can't get 500 people to sign up for updates? Lucas: Then that's your validation answer. Don't launch the campaign. Go back to the problem. Talk to potential users. Figure out why they're not excited. Because a campaign without a pre-built audience is just an expensive way to learn what you could have learned for free. Luna: That's a tough but honest take. And it's the kind of clear-eyed perspective that makes this show valuable for people actually doing the work. Lucas: Appreciate that. And you know, if these conversations are useful for what you're building or running, listener support is what keeps this podcast ad-free and independent. If you'd like to help, you can find us at buy me a coffee dot com slash fexingo. No pressure, just a way to keep the show going. Luna: Yeah, and it really does make a difference. Every bit helps us keep bringing in founders and digging into the real numbers. So thank you to anyone who's already contributed. Lucas: Alright — back to the data. One more number I want to leave you with: according to a 2025 study by the Crowdfunding Center, hardware projects that use crowdfunding as a validation tool — meaning they run a small test campaign before the full production launch — have a 40 percent lower failure rate in the first year after shipping. That's a massive improvement. Luna: So it's not just about raising money. It's about raising the right questions early. Lucas: Exactly. And if you can answer those questions before you order 10,000 units, you've already won half the battle.