
Rejected By VCs, Pebble Watch Raises $3.8M on Kickstarter - dwynings
http://go.bloomberg.com/tech-deals/2012-04-17-rejected-by-vcs-pebble-watch-raises-3-8m-on-kickstarter/
======
matdwyer
Good, I'm glad they were rejected - If they weren't, I wouldn't have known
about them, nor would I have purchased one.

This way they get their money in the form of guaranteed, up-front orders, and
I get a cool new product "before" anyone else. I feel exclusive and I'll have
the hot new gadget to show off.

It's a win-win, and I hope more companies opt for this route - it is true
market validation.

(On a related topic, September can't come soon enough. I want mine now)

~~~
furyofantares
Is Kickstarter a platform for funding cool projects or a store?

~~~
unavoidable
Why can't it be both? It acts a bridge between an unmet demand and an unmet
supply: there are consumers thinking, "I wonder if X has been invented? I
would pay money for that." And there are designers thinking, "I wonder if
anyone would buy X if I made it?"

It's conceptually a great match. The hard part was making it credible enough
to gain trust. That's Kickstarter's biggest strength.

~~~
furyofantares
I think it can be and sort of is both right now, yeah. And I'm loving it, but
it also makes sense for people to have different expectations from a store
than from a project they are backing.

When I give a store money, they owe me a product. When I back a project, they
owe me their effort.

So it's a bit weird to me when the language being used is mostly store
language rather than funding language. I don't think anybody has purchased a
Pebble yet.

------
shadowmint
You know when you see something, and everyone who touches it makes a mountain
of money, and everytime it happens, the $ values just go upwards, and it seems
too good to be true?

It is.

That's called a bubble.

...and it'll burst as soon as there's a high profile kick starter ($million+)
that fails and delivers nothing to the people who think they've pre-ordered
something.

I like kick starter, and I appreciate what they're doing, but this isn't going
to end well.

It's all very well to let people to setup their funding projects go, yeah, I
can ship as many t-shirts as people signup for $20! Easy! ...but the reality
is, shipping 50k t-shirts for $20 each isn't as easy as people expect.

This is really the problem: People are notoriously bad at making estimates for
cost, time, size of projects.

Good luck to Pebble I say, I hope this works out for them. I hope we see this
stuff all settle down and turn into a new awesome funding model and not into
scammer hell~

~~~
unimpressive
>This is really the problem: People are notoriously bad at making estimates
for cost, time, size of projects.

Relevant:

[http://www.kickstarter.com/projects/starcommand/star-
command...](http://www.kickstarter.com/projects/starcommand/star-command-sci-
fi-meets-gamedev-story-for-ios-an/posts/208395)

(Also, I like your example of the 50K 20$ T-shirts. Demonstrates the problem
perfectly if you just think about it for a second.)

~~~
GFischer
4000 dollars in attorneys and CPAs? Ouch. The U.S. sure is expensive that way.
It's nice of them to breakdown the costs.

The poster also looks really nice, but I didn't know such art would cost U$
2.000 (I know some talented guys here in Uruguay that don't make as much in a
month. They should try competing for those commisions).

PD: the game looks really awesome :) I didn't know about it, but now I'm
looking forward to it.

PD2: That much money would hire me for a year, but I wouldn't be able to make
Star Command on my own in a year obviously.

PD3: I'm looking forward to an X-Com remake someday...

------
jyothi
The last line in that article is a killer

 _In his pitch to potential new hires, he tells them to check Pebble’s
Kickstarter page at the beginning of the phone interview to see a live tally
of investments.

“After we stopped talking,” he said, “I told them to refresh.”_

When I viewed kickstarter page it went from 28,369 to 28,493 backers in less
than 30 minutes with atleast $20K added in those 30 minutes. This is
incredible.

edit: I think it was probably more money - $50K in 30 min. Did not note the
old $ number - just an estimate

------
hammock
Kickstarter strikes me as Etsy (for unbuilt products) crossed with all those
"5K Run/Walk For XYZ" fundraising sites.

I'm skeptical it in a way that I can't put my finger on, still Kickstarter has
a secret sauce that makes the people they need to host deals on it actually
want to host deals on it (was eBay the same way, I can't remember). Did they
ever think four years ago that they'd be running deals of this size?

edit: apparently amazon doesn't hold any of the cash, i stand corrected. and
yes of course 100MM is not much compared to the probably 10B in cash
equivalents AMZN has ..

~~~
alanfalcon
Etsy specifically prohibits mass production. They make it next to impossible
to ever make Kickstarter type money on their website. I suppose that it helps
maintain a certain culture overall, but it really sours me on the site as a
whole that it pushes away anyone who has any dream of finding real financial
success in that world.

~~~
ktizo
I don't think etsy is there for that, there are lots of people making random
tatt by hand and trying to sell it, not because they can't mass manufacture,
but because they like making stuff by hand. Is essentially 21st century folk
art and craft, much of it is rubbish, but never mind, 90% of everything is
rubbish ;)

------
jpdoctor
> _Few investors were interested in betting on a hardware startup, or dealing
> with the headaches that often come with manufacturing goods._

The statement above doesn't capture how much of a (relatively) recent
development it is that hardware is not considered worthy of funding.

For perspective: 12 years ago A rounds were running $15-20M for hardware
startups. B's were $30-40M.

------
sparknlaunch12
I don't really get Kickstarter. Backers essentially are paying the startup
company for a product (or early prototype). Sure the company gets some money
upfront, but they eventually have to deliver on the product? And what else
does the backer get, apart from the product? Equity? No. How much money will
Pebble be left with after this process?

~~~
InclinedPlane
What's not to get? There doesn't have to be anything more complex at play
beyond a simple profit margin.

Backers trade money for something they want _that they can't create
themselves_ or get anywhere else, which means they are justified in paying a
premium. Project owners get to realize their vision, bootstrap a production
process, and potentially hold onto profit if they so desire.

There's a reason that this:
[http://26.media.tumblr.com/tumblr_m1wvyad1np1rrallbo2_500.jp...](http://26.media.tumblr.com/tumblr_m1wvyad1np1rrallbo2_500.jpg)
is a meme, and kickstarter is precisely the sort of platform designed to
translate those "shut up and take my money" dollars into profit on the one
hand and realized products on the other.

~~~
sparknlaunch12
? The backers get the product or prototype. The company gets some money.
KickStarter gets paid a commission.

So this its not an equity swap, it is a shop front. The benefit for startups
is up front cash and a pool of early adopters?

What alternatives are available?

~~~
InclinedPlane
It's neither. Not every investment has to be in exchange for equity.

Here, check this out: [http://www.kickstarter.com/projects/1804944614/the-
sutro-mis...](http://www.kickstarter.com/projects/1804944614/the-sutro-
mission-bicycle-designed-for-city-riding)

Look at the number of backers at the $6 reward level, at that level all you
get is a postcard, the equivalent of a pat on the back or a firm handshake.
Yet 29 people pledged that amount or chose that reward level. Also, look at
the total backers vs. the sum of all the backers at each reward level, you get
a difference of 30 people (170 vs. 140). 30 people who either kicked in a mere
dollar or two or who chose not to receive a reward. That's at least $200 in
funding with almost no return to the backers, a full 2% of the overall funding
goal. And the 2 higher levels of rewards are similar, a $20 poster, a $30
t-shirt. There's another thousand dollars, 10% of their goal level, just with
that.

Why?

The answer is that economics turns out to be a lot more complex than we've
been led to believe. The ideal of the efficient and ruthless economic model
human being, Utilitus Maximus, is a myth. Economics meshes with culture and
society and they play off of and interact with each other. Here we have about
a hundred folks who are willing to collectively chip in $1200 for a project
that they believe in. Is this charity? Not in any conventional sense, there
are no sick or hungry children here, just bicycles. But people are willing to
support projects which bring about slight changes to the world, even if it's
just introducing a new product, which advance their ideals or enthusiasms. And
that's a very substantial indirect benefit even if there is no direct benefit.
Ultimately transforming the world around you into the world you want to live
in can be the best and most effective use of your money.

More than anything I think that's the flame which fuels the growing popularity
of kickstarter.

The benefit for project owners, who are not always startups, is validation of
the marketability of their concept, a pool of early adopters, up front cash of
course, but also a more intimate connection between makers and enthusiasts. A
while ago the singer Jonathan Coulton did an experiment where he forced
himself to come up with a new song every week, which he debuted on his blog.
Afterward he collected the best songs together and released an album.
Similarly, a few years ago Markus Persson, aka "Notch", created an early
prototype of an innovative PC game and he decided to put it out there into the
hands of folks all over the internet and charge a relatively small fee for
preorders of the full game when it would become available. As he iteratively
developed the game, Minecraft, in full public view eventually it hit a point
of critical mass and gained a huge amount of interest, and with it a large
volume of pre-orders. He made so much revenue via pre-orders that he was able
to found a game studio, hire several other developers, and even begin
development of other games, before Minecraft even officially launched. To me
that sort of heavily customer focused bootstrapping process seems very much of
a kind with kickstarter. It's very much an extension of the new modes of
business that are possible today due to the internet, due to social media, due
to the ease of doing business without any middlemen other than the bank and
UPS.

Granted, even on a simplistic level kickstarter still makes economic sense
(makers take a profit, backers receive products of significant utility), but
the higher order effects are interesting too.

There are alternatives out there, most of them are fairly similar. Soon there
will be alternatives that support equity based investments. To my mind the
biggest alternative is just to do it yourself. For some projects it doesn't
make sense, but for a lot of projects it can be easy to incrementally
bootstrap your way up the revenue/product development chain.

~~~
tibbon
I love this post of yours.

90% of the Kickstarter projects I back because I like increasing the amount of
awesome in the universe (which also explains my involvement with the Awesome
Foundation - awesomefoundation.org). Only 10% of them are because I want to
"buy" the product. I generally expect that I'll actually get nothing when I
contribute to a Kickstarter.

I simply want to reward others for having initiative, drive and interesting
ideas and abilities.

------
ph0rque
So, their pre-orders are the size of a modest A-round, and they have 30 days
to go... impressive!

~~~
heelhook
And they didn't give up any equity in the process. Oh, and they validated
their idea and their product. With this they can now raise an A-round at a
very healthy valuation, but, why would they?

~~~
kondro
Well, to be honest, they already had a product ready to send into production.
This is probably why the product has been so successful.

~~~
ph0rque
This is where kickstarter is most useful in my opinion: where you have a
production-ready product, and you're not sure whether you should start at your
local machine shop, or get in touch with a factory in China to produce the
product.

~~~
commandar
I'm aware of someone working on prototyping a somewhat niche piece of consumer
electronics (a shot timer for competitive shooting). The products on the
market now are expensive and kind of suck.

He seems to have the development chops to come up with something viable, and
adding things like real data logging and bluetooth connectivity would actually
make it _better_ than anything on the market right now.

He's mentioned that he's doing it essentially as a hobbyist project, and that
things like regulatory compliance testing and funding an initial production
run would be something out of reach normally.

Kickstarter seems great for this kind of project. It lets you target an
interested audience to get the initial capital funding to produce a product
that you might not ever get off the ground beyond the personal prototype
stage.

------
reneherse
Down the road, I wonder what is the upper boundary of hardware complexity and
scale that we'll see on Kickstarter. Exciting times ahead indeed.

~~~
helen842000
I'm really interested in how they find the manufacturers to make such
aesthetically pleasing products.

I've got a product I'd love to kickstart but finding companies capable is
tough!

~~~
reneherse
Maybe what this emerging ecosystem needs is a means by which design-prototype-
manufacture-marketing teams can coalesce?

I've been dreaming about such a system for a few years now, perhaps the iron
is finally reaching striking temperature...

~~~
helen842000
Even just the first two combined would be amazing. I think what a lot of
people are looking for is a start-up style company that offers a simple way of
refining a design with industry experts and taking it to some kind of
prototype stage within a reasonable cost.

Throwing in manufacturing and marketing expertise also would see an explosion
of prospective products looking for a piece of the crowdfunding pie.

------
mayneack
Potential strategy:

1\. Acquire VC/other funds

2\. Put product on kickstarter

3\. Use initial funds to hype up and create explosive kickstarter trends

4\. Let the hype do the rest.

It's like the Palin PAC strategy.

------
harscoat
_This wasn’t just a one-day, one-hit thing; we’ve been working on it for about
four years now. Sam Altman, who is one of the partners at Y Combinator, has a
great bit of advice: Don’t die; don’t let your company die. That’s the key._
[http://www.communitech.ca/vcs-took-a-pass-on-crowdfunded-
peb...](http://www.communitech.ca/vcs-took-a-pass-on-crowdfunded-pebble-
watch/)

------
ww520
Does software project got funded by Kickstarter? It seems most projects are
hardware related (physical).

~~~
minalecs
yes. I think the fastest to a million was this video game

[http://www.kickstarter.com/projects/66710809/double-fine-
adv...](http://www.kickstarter.com/projects/66710809/double-fine-
adventure?ref=live)

------
smoody
already outdated... they are already north of $4M. :-)

------
chris123
Question regarding Kickstarter: Can it really be used for commercial projects
(or is Pebble not a commercial project?)? Because here
<http://www.kickstarter.com/help/guidelines> it says it is only for "creative
projects". I guess it is ok since the term "creative project" is not defined
other than that page saying "like making an album, a book, or a work of art."
Although later it says "Starting a business, for example, does not qualify as
a project." Just trying to understand what can be used on the platform and
what can't. Can anyone clarify?

~~~
rmc
AFAIK you can't sell stocks or shares. So you can't use Kickstarter to raise
investment money (in the traditional sense)

------
psycho
Well, hardware is really headache for VCs, so Kickstarter now seems the best
way to raise money AND promote your idea.

------
vinayan3
I really want to pre-order one. Reading the comments it seems like a gamble.
It is possible, I really hope not, they won't end up making the watch. Any
guesses how much it will cost 'retail'? In essence, I want the discount rate
I'm getting for taking a gamble on them.

------
runako
> Few investors were interested in betting on a hardware startup, or dealing
> with the headaches that often come with manufacturing goods.

I wonder how many potential smartphone/tablet companies are not being launched
due to the timidity of the VC community.

------
ImprovedSilence
I really really really hope this means they're are going to be hiring and need
another RF/wireless comms guy that can do software on the side. I so want to
build those!

------
mhartl
Thanks for posting this. I wondered why a YC company would go the Kickstarter
route instead of raising money. Now I know.

If VCs aren't worried, they aren't paying attention.

------
web_chops
The more I think of pebble and all the interest, the more feel that one of the
bigger companies making smartphones might acquire them :)

------
spahl
Does Kickstarter get a cut?

