Eric Migicovsky came up with the idea for a smartwatch while cycling down to his classes at the Delft University of Technology in Netherlands. Biking required keeping both hands on the handlebar and ignoring the constant buzzing and chirping of the mobile phone. Thus the idea was germinated in Eric’s mind and his first company Allerta, which made smartwatches compatible with Blackberries, was born.
In 2011, Eric submitted his smartwatch prototypes and business plan to Y Combinator which provided angel funding and critical technology contacts. However, VC funding proved elusive, as investors were shy to invest in consumer hardware startups that could end up competing with the gorillas like Apple, Sony & Samsung. In desperation, Eric turned to Kickstarter and demonstrated his prototypes and vision for the product, with a goal to raise $100,000.
Within 28 hours of being on Kickstarter, Pebble had raised more than $1 million from people who were willing to plunk down $115 to pre-order the watch. By mid-May, Pebble had snagged a total of $10.27 million from 68,929 people, making it the most crowdfunded start-up ever in dollar terms, according to Kickstarter and other investors. (1)
Eric and his team delivered on the massive success of the Kickstarter campaign by successfully shipping the first model of Pebble to its customers. The surprising sequel to this story is that Eric returned to Kickstarter to get funding for its next iteration of Pebble. The success of the first model meant that Pebble was no longer an unknown startup and therefore it was now not short of traditional VC funding. This made made the choice even more surprising at first glance. However, Pebble realized that its community brought in a lot more than just funding for its projects. The key benefits that the community brought to the table are:
- Receive feedback on its proposed design from its community of developers and customers
- Test its hypotheses around the project
- Lock-in its customer base & confirmed orders
- Work on developing its business model with a positive cash flow
- Serve as a direct line of engagement with its customers
This business model is in complete contrast to companies like Apple, which work on surprising and delighting its customers, but it definitely makes a lot of sense for smaller companies with a much smaller risk appetite and scope for failure.
Pebble is not alone in providing a Kickstarter encore, according to the Kickstarter website, 12% of all creators – 21,000 of them – have launched more than one project, and taken in 21% of all the cash, a total of $280m. And practice makes perfect: creators who launch a second project after succeeding the first time have a success rate of 73%, compared with the overall success rate of 39%. (2)
Pebble meanwhile has worked actively to keep its consumers and developers engaged. Pebble has a unique relationship with its developers, often polling the crowd for new ideas and incorporating them into its flagship products. The company’s office is full of tinkerers constantly trying new things with development boards, whether that’s converting xckd comics into a format that can be read on the watch or making an animated watchface out of the intro to Super Mario Bros. Vonshak notes that it was outside developers that first demonstrated that Pebble’s basic hardware could support complex animations, which the company in turn incorporated throughout the new operating system.(3)
In the words of Eric, “Crowdfunding platforms like Kickstarter helped take our idea, make it real, and build a community around it. Social platforms like Twitter, Reddit, and Facebook help keep us in touch with a global audience, tell our story, and build a two-way dialogue with our users. At the end of the day, Pebble is a company born of the Internet. Much of what we’ve done to both start up and grow our company branches out from how the web lets us connect with each other.”