Last Monday, we published a story about a small, but fast-growing, San Francisco company that got its start on Kickstarter, and then returned to the crowdfunding site — again, and again, and again, and again. Peak Design went live in early 2011 with a clip to secure a camera to belt or strap that at the time became Kickstarter's second-biggest campaign, and it has launched each of its new products since to bigger and more appreciative crowds. Most recently, Peak Design's Everyday Messenger Bag, raised nearly $5 million from over 17,000 backers.
It was a dramatic finish — and like all good dramas, it was carefully plotted. A casual observer might chalk up Kickstarter success to the innovation behind the idea, or the charisma of the creator, or even simple serendipity. But these only get you so far — unless maybe you possess all three — and lately a whole cottage industry of consultants has emerged to help creators successfully launch a campaign, market it, and then fulfill orders once it's over.
By the start of the bag campaign, in July, Peak Design had pretty well honed its own Kickstarter playbook. The company timed the campaign to its manufacturing schedule so that it could fulfill orders soon after it ended. They set the initial goal, $100,000,very low — "If we had gotten anything under a million dollars we would have been disappointed," says David Anhalt, Peak Design's financial chief — in order to both manage expectations and ensure they could meet it easily. They filmed a breathtaking video, for which the company bought a drone — "We probably would have bought it anyway," Anhalt admits — and then another when they crashed the first.
Peak Design's Peter Dering. (Credit: Eric Millette For Forbes)
The provisional nature of a campaign creates its own urgency, but Peak Design amplifies that by launching other products midway through — in this case, a clip for carrying lenses and a new strap — available only through Kickstarter. "They get our backers really excited," says Adam Saraceno, the company's marketer. "They give us another opportunity or topic for us to talk to them about, another story to tell." But Peak Design also hired marketers to feed this frenzy of participatory consumerism, and paid commissions to lead-finders. They purchased a software service called BackerKit to help fulfill the mountain of resulting orders.
None of this is cheap. The company spent about a week of production time, and upwards of $10,000, on the video; every shot required the efforts of at least two employees. "I would say that everybody on the team is spending 75 percent of their time doing something related to that Kickstarter campaign" during those two months, says Saraceno. That, Anhalt says, is simply the cost of sales, "just like the other channels have sunk costs. Relatively speaking, Kickstarter is a fairly low-cost sales channel for us, all things considered." (Peak Design sells merchandise on Kickstarter at about a 20 percent discount, right around the company's average unit revenue through its other channels.)
Saraceno insists that Peak Design's Kickstarter backers are its most loyal customers — they "are more engaged, willing to listen longer and convert at a much higher rate." For example, three percent of visitors to the Everyday Messenger campaign page on Kickstarter page ultimately contributed (spending, on average, $285) — more the twice the conversion rate of the company's own website. (As for listening longer, Saraceno says that about 33 percent of people who started watching that Kickstarter video finished it four minutes later, again just over twice the share who made it through on YouTube.)
And while the company hasn't attempted to calculate the lifetime value of the average Kickstarter backer, much less compare it to the website shoppers, Saraceno says past backers are well-poised to buy again. "Once somebody's become a backer on Kickstarter, we have a very direct conduit to communicate with them," he says. "Even after a product's campaign is over we can still post updates, and those updates are more widely read than some of our other social media posts." About a quarter of bag backers participated in one of Peak Design's four previous forays.
But the elaborate choreography that goes into a crowdfunding campaign doesn't just send a message to customers. "For us, Kickstarter or any other platform is a lovely view into how they want to run a business," says Carter Weiss, a partner at the venture firm Silas Capital. "What choices they make, the design. The messaging. How much money they blow on the project." Market validation is only one proof of concept that can emerge from a crowdfunding campaign, says Weiss, echoing a common refrain among V.C.s: "We bet on the jockey, not the horse."
Peak Design founder Peter Dering spoke at length to Forbes contributor Mark Fidelman about how Peak Design raises money on Kickstarter. Watch the conversation here.
