Pebble Smartwatch : The Serial Crowdfunded Superstar
Pebble is one of the most successful crowdfunded startups. Its Kickstarter campaign provided a host of benefits other than funding. It is for this reason that Pebble returned to Kickstarter for its sequel product, Pebble Time.
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.”
Student comments on Pebble Smartwatch : The Serial Crowdfunded Superstar
The Pebble is definitely interesting, and it seems to be doing okay. I like the idea, and the community will definitely keep it up as a niche market in case Apple or Samsung takes over the market.
The main difficulty right now in the watch market is that few people wear watches. Even on grad school campuses where you expect to see professionals who are already highly invested in electronics in general and Apple products in particular I never see people sporting smart watches. The first time I saw a smart watch in “the wild” was yesterday, and it was an Apple. This is a small data set, but the wearable market is still quite small and inactive. The launch of the Apple Watch was supposed to launch the market in the same way the iPhone took smartphones beyond the BlackBerry, but that apparently did not happen.
If the Pebble is to succeed, it needs to maintain its excitement and build on it. It is one of the few smart watches anyone knows about and, unlike the Apple Watch, is not locked into an ecosystem. Perhaps it can find it in an innovative suggestion from one of its users, or it can find one itself. As long as it can keep up a stable, locked-in base, it should be around for some time. It can stay as a niche product (as Apple still is in the computer segment), or start from a niche and build from it (like Facebook). There is a way forward, and as long as it manages its userbase well the Pebble watches should be around for some time to come.
Thank you for your reply. As you rightly point out, this approach is not scalable, but it can be extremely effective for niche categories. Moreover, Pebble benefitted from the fact that there were no established players in the category at that time. I think, that in such a scenario, Pebble’s approach is a very low cost way of testing the market and generating orders.
The hardware device is vetted by the crowd, but I wonder if the software on the Pebble is vetted in the same way. I believe developers have to create slightly different apps for the Pebble (perhaps they can reuse most of the code, but the update/hot fix process is completely separate), which just means there’s more effort for a company to maintain it’s IOS, Android, and Pebble app. I don’t own a Pebble watch but my hypothesis is that the IOS version of the Fitbit app is far superior (not including the fact that it has color). This can deter consumer behavior on the margin especially as the wearables devices all converge towards sameness and offer the same features.
You raise an excellent point. I think Pebble also realizes that it cannot successfully compete with Apple & Samsung on their territory and this realization drives its approach towards hardware/software and managing its developers community. Apps are simple to develop and easily ported to either iOS or Android. The resources to developers are geared towards the small indie developers, and the expected applications are very easy on the resources. Pebble has also invested a substantial sum of money to attract developers to its platform.
I think that as long as Pebble plays in this niche, it can dominate this segment. The crucial thing is to not compete with Apple/Samsung in their territory.
A great post; Pebble Smartwatch is an excellent example that illustrates how powerful / effective crowdfunding can be in creating, marketing, and selling a new product segment. As you correctly mentioned, Pebble Smartwatch’s Kickstarter campaign helped it not only to get enough capital for device production but also to build loyal fan base and to initiate an unique marketing campaign. One concern I have on Pebble Smartwatch’s crowdsourcing based business model is its sustainability. Its deep-pocketed competitors such as Apple and Fitbit will launch an upgraded version of their wearable devices in every year and I am not sure the Pebble’s business model maintains its competitiveness in such shortened product cycle.
Your concern is very valid. I think that Pebble should be very careful to play to its own strengths and not to its competition’s strengths.
Features like a huge battery life, a very easy to navigate interface, its strong emotional connect with the customers and developers are things that define Pebble. Due to its Kickstarter community roots, consumers have a different sort of connection with Pebble than the traditional corporation like Apple or Samsung.
Pebble should be very careful about adding features that do not end up diluting its core brand.