Latest / Hardware Startups with Fexingo: Devices, Robotics, and Manufacturing Tech Companies / Why Hardware Startups Are Turning to Crowdfunding for Validation
Transcript
- Lucas: So there's this stat I keep coming back to — according to a 2025 report from the Crowdfunding Center, hardware projects on Kickstarter and Indiegogo have about a 37 percent success rate overall. But for projects that raise over fifty thousand dollars, that number jumps to nearly 70 percent. And what's interesting is that most of those founders don't treat the campaign as a funding event — they treat it as a validation exercise. Luna: Validation for whom, exactly? For themselves, for future investors, or for both? Lucas: Both. And I think that's the shift we're seeing. Ten years ago, crowdfunding was often the last resort — you couldn't get a bank loan, you couldn't get a VC meeting, so you went to the crowd. Now, more hardware startups are launching campaigns before they even approach angel investors or seed funds. They want to show that real people — not just friends and family — are willing to put down money for a product that doesn't exist yet. Luna: And that changes the narrative when you walk into a VC meeting. Instead of saying 'we think there's demand,' you can say 'we have three thousand pre-orders and a 12 percent conversion rate from our landing page.' Lucas: Exactly. And that's a much stronger signal than any survey or focus group. Let's use a concrete example — the Flow Hive. That's the beehive that lets you harvest honey without disturbing the bees. In 2015, they launched on Indiegogo with a goal of seventy thousand dollars. They ended up raising over twelve million. Twelve million dollars from people who had never seen a production unit. That's not just funding — that's a massive demand signal. Luna: And they used that to build a real business. They're still around, still shipping hives. But what about the flip side — the campaigns that raise a lot but then struggle to fulfill? The Pebble Watch raised over ten million on Kickstarter in 2012, but by the time Fitbit acquired them in 2016, they had shipped only about one percent of the watches they'd promised. The validation was real — the demand was there — but the execution fell apart. Lucas: That's the key distinction. Crowdfunding validates demand for the product concept, but it doesn't validate your ability to manufacture at scale. And that's what a lot of first-time hardware founders miss. They see the money coming in and think 'we've made it,' but really, the hard work is just beginning. Luna: So if crowdfunding is about validation, what metrics should a founder actually care about? Not just the total raised, but the signals that matter to investors later? Lucas: Great question. I talked to a partner at a Bay Area seed fund last month who said they look at three things from a crowdfunding campaign. First — conversion rate from visitor to backer. If you're driving traffic from your own channels and converting above 5 percent, that's a strong indicator of product-market fit. Second — the percentage of backers who are strangers, not friends and family. If more than 80 percent of your backers have no prior relationship to you, that's real organic demand. And third — the engagement in the comments section. Are people asking thoughtful questions about specs and delivery timelines? That shows a sophisticated early adopter base. Luna: And those are the kinds of signals that a VC can't fake. So the campaign becomes a sort of public beta test for the business model. Lucas: Right. And it also gives you a customer list that you own — not a rented audience from an ad platform. When you have those email addresses, those survey responses, those backer update open rates, you can go to an investor and say 'we have a community that's already bought in.' That's worth more than any pitch deck slide about total addressable market. Luna: I wonder though — does the crowdfunding route bias toward certain kinds of hardware? I mean, a connected device or a gadget is easy to market. But what about industrial robotics or B2B manufacturing tools? Can you crowdfund a robot arm? Lucas: It's harder, but not impossible. There are examples — like the Dobot robotic arm, which raised over half a million on Kickstarter in 2015. But B2B hardware often works better on Indiegogo's InDemand or through a private beta. The key is to find the right platform and the right community. If you're building a sensor for industrial IoT, you're not going to market it the same way as a smart water bottle. Luna: So the platform choice matters too. Kickstarter is still the most brand-recognized, but Indiegogo offers flexible funding — you keep whatever you raise even if you miss your goal. And there are newer platforms like Crowd Supply that focus specifically on hardware, with more of a pre-order model. Lucas: Exactly. And Crowd Supply, in particular, positions itself as a 'hardware-focused launchpad.' They vet projects more rigorously and offer fulfillment support. That's a big deal because fulfillment is where most hardware campaigns die. We've seen campaigns raise millions and then collapse under the weight of shipping costs, customs, and customer support. Luna: Which brings us back to the Pebble problem. The validation was real — the demand was massive — but the operational complexity of producing and shipping hundreds of thousands of units across multiple variants was overwhelming. So how do you use crowdfunding for validation without falling into that trap? Lucas: You limit your campaign. Don't try to raise ten million dollars on day one. Instead, set a realistic goal that covers the cost of a small production run — maybe a thousand units. Use that run to work out your manufacturing process, your supply chain, your shipping logistics. Then, if everything goes smoothly, you can do a second campaign or move to traditional funding for scale. That's the 'validate small, scale later' approach. Luna: That also reduces the risk of overpromising. If you're only promising a thousand units, you can deliver on time and build trust. Then when you come back for round two, you have a track record. Lucas: And that track record is gold. There's a startup called Litter-Robot — they make self-cleaning litter boxes. They started with a small Kickstarter in 2011, raised about forty thousand dollars. They used that to validate the concept, then built the company over the next decade, and now they're doing over a hundred million in annual revenue. They didn't try to raise millions on the first campaign. They proved the product, then grew. Luna: It's a classic bootstrapper mentality. And speaking of bootstrapping — you know, this kind of conversation, where we dig into the real mechanics of building a hardware business, it's exactly the kind of thing that makes me appreciate what we do here. If you're finding these episodes useful for what you're building or running, especially if you're in the trenches with a hardware startup yourself, consider supporting the show. It's what keeps us ad-free and focused on the details that matter. You can do that at buy me a coffee dot com slash fexingo. Lucas: Yeah, and it genuinely helps us keep the conversation going without any outside noise. So thank you to anyone who chips in. Now, back to validation — one thing I want to dig into is the cost of a failed campaign. If you launch a crowdfunding campaign and don't hit your goal, or you hit it but can't fulfill, does that poison the well with future investors? Luna: It can. I've talked to VCs who say they've seen startups that had a failed campaign and then came to them for funding. And the first question is always 'why did it fail?' If the answer is 'we didn't have enough of a following' or 'our video wasn't good enough,' that's one thing. But if it's 'the market didn't want the product' — that's a red flag. Lucas: Right. So you have to go into a campaign with a clear hypothesis. 'If we can't get a hundred pre-orders in thirty days, then the product isn't ready.' And you have to be willing to walk away. That's the real value of crowdfunding — it's a low-cost way to kill a bad idea before you sink a million dollars into tooling. Luna: That's a hard pill to swallow for a founder who's been working on something for a year. But it's better to know now than after you've taken outside investment. Lucas: Absolutely. And there's a secondary benefit — even a failed campaign can provide data. You can see which features people asked about, which reward tiers got the most traction, which marketing channels worked best. That data is valuable for the next attempt, or for a pivot. Luna: So what about the investor side? If you're an angel or a VC looking at a hardware startup that has run a successful crowdfunding campaign, how do you evaluate that signal? Is it always positive? Lucas: No, not always. There are campaigns that are effectively paid for by the founders themselves, or by a small group of friends. You can spot those because the backer count is low but the average pledge is very high. That's a red flag. Also, if the campaign was heavily reliant on paid ads — like, they spent fifty thousand dollars on Facebook ads to raise a hundred thousand — that's not organic validation. That's just buying revenue. Luna: So the signal is strongest when the backers are organic, the conversion rate is high, and the comments reflect real engagement. That's the kind of campaign that makes an investor sit up and take notice. Lucas: Exactly. And that's why more and more hardware startups are treating crowdfunding as a strategic milestone, not a desperate hail mary. It's a way to build a community, prove demand, and de-risk the business before you ever ask a VC for money. And for investors, it's a way to see which founders can actually execute on a promise. Because if you can't run a successful Kickstarter campaign, how are you going to run a global supply chain? Luna: Or manage a factory in Shenzhen. So the bar is rising. And I think that's a good thing. It means the hardware startups that survive the crowdfunding gauntlet are the ones that are really ready for prime time. Lucas: I agree. The ones that fail early and cheaply save everyone a lot of pain. And the ones that succeed get a running start that no amount of venture capital could buy. That's the real story here — crowdfunding isn't just about money. It's about momentum.