Financing a prototype of your product can be challenging for smaller businesses. Of 53 percent of small business owners who applied for business funding or credit between 2011 and 2015, one in five were turned down, Nav’s Small Business American Dream Gap Report found. One in four applied more than once, and of these, 45 percent were turned down more than once. In this economic environment, crowdfunding can be a viable financing method. Here are a few tips to help you apply crowdfunding effectively.
File a Provisional Patent Application
Attorney Kendall Almerico recommends protecting your intellectual property before crowdfunding. If you’re not yet ready or able to file for a patent, the next best protection is to file a provisional patent application. This allows you to claim “patent pending” status for up to a year without having to go through the work and expense of filing an actual patent.
A provisional patent application will not provide the same protection as a patent. However, it will preserve your rights during the development phase in case you do go ahead and file a patent, providing documentation to demonstrate that you were working on the idea during the pre-patent period.
To file a provisional patent application, you need text and drawings that describe how to make and use your invention. You may wish to consult a patent attorney first.
Minimize Your Expenses
You will find it easier to raise enough money for your crowdfunding campaign if you first minimize the costs of producing your prototype and product. One way to reduce costs is using a 3-D printing service for rapid prototyping of your design. 3-D printing can significantly cut costs of both prototyping and production. For instance, Ford was able to cut the costs of a new mold for a prototype engine from hundreds of thousands of dollars to $4,000, while cutting production time from six months to four days. Ford took advantage of the savings to build multiple versions of its prototype and test them all, rapidly accelerating product development.
Carefully selecting your materials and suppliers can further cut your prototyping and production costs. Manufacturers sometimes make the mistake of choosing materials that are more durable than their product’s intended use truly requires, which can swell production costs. Review your materials to make sure you’re using the most cost-efficient materials available without cutting quality.
Choosing the right supplier can also help cut your costs. For instance, o-ring supplier Apple Rubber offers clients quotes and samples for customized o-rings made from any material in thousands of sizes and provides expert information on the pros and cons of using different materials for different applications. Working with such a knowledgeable supplier can save you valuable hours and dollars when testing which materials are best-suited for your design.
Incentivize Your Investors
For a successful crowdfunding campaign, your project will need promotional copy that motivates prospective investors. The surest way to attract investors is by appealing to financial incentives. Some crowdfunding sites such as CrowdPatent will file a provisional patent application for you and connect your project with potential financiers for your patent and your product in exchange for the rights to your invention and a share of your profits.
You can also appeal to non-financial incentives. Some crowdfunding investors are motivated by a shared passion or a desire to contribute to the development of a useful consumer application. Offering to give away samples of your completed product to top investors can add a tangible incentive.
Scale Your Launch
Testing your product on a small scale before you launch can help you ensure consumer demand and avoid wasted advertising and logistics costs. Legendary inventor Ron Popeil recommends test-marketing products on family, friends and co-workers to get some initial feedback. You might also test-market by giving free samples to businesses in your target industry, which can simultaneously help you generate word-of-mouth publicity.
Once you’re satisfied that your product has market appeal, be prepared to scale up. Research multiple suppliers to identify the most cost-efficient sources for your materials. You should also research logistics options to cut your storage and shipping costs. For instance, UPS now combines 3-D printing and shipping services to help businesses cut both production and logistics costs.
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