Image source @ Visual China
Text | Hugo Cross Border, author | Li Sirong
Overseas crowdfunding is gradually entering the vision of Chinese brands going overseas across borders.
On April 6, Anker launched a new 3D printer, the AnkerMake M5, on the overseas crowdfunding platform Kickstarter. Within an hour of its release, the product raised $1 million. As of April 26, the product had received 10,225 grants and $6.65 million in funding over a 20-day period.
Not only Anker, in the context of the overall trend of cross-border products towards high-quality operation, in recent years, more and more overseas enterprises with innovative products have paid attention to the channel of overseas crowdfunding, and launched brands overseas through crowdfunding marketing, such as GPS handhelds, Sirui lenses, Bluetti energy storage power supplies, etc. Why does overseas crowdfunding attract many companies to enter the market? What are the characteristics of overseas crowdfunding and what products are suitable? What factors generally depend on the success or failure of crowdfunding? Is overseas crowdfunding an excellent boost to promote brands to go global?
01 Crowdfunding to the sea, four considerations
Overseas crowdfunding originated in ArtistShare, founded in 2003, which is dedicated to raising funds for musicians and artists to support them in their creative activities. Funders can receive music CDs, posters, handmade and other returns after the completion of the project. In 2005, American jazz composer Maria Schneider won the 47th Annual Grammy Award for Best Jazz Band Album for Concert in the Garden, the first Grammy album in history to be released offline, with the help of ArtistShare funders.
With the continuous development of the crowdfunding business model, it has gradually formed four types: reward crowdfunding, donation crowdfunding, debt crowdfunding, and equity crowdfunding. Among them, rewarded crowdfunding is more used by companies or individuals who want to launch new products, and products are no longer limited to the art field.
Founded in 2009, Kickstarter is currently one of the largest crowdfunding platforms in the world. It only allows promoters to reciprocate funders with derivatives of the project, and is also representative of a reward-based crowdfunding platform. The Kickstarter project is rigorously vetted, and products must be world premieres and must not have been sold on any online or offline channels. It has a fixed crowdfunding model "All or Nothing", which means that if the crowdfunding does not reach the target amount, the crowdfunding is returned in full.
Indiegogo, another high-profile crowdfunding platform founded in 2008, is also dedicated to mining a variety of innovative projects, but the rules of the platform are relatively loose and are regarded as a more "open" platform. Its project products can not be global debuts, and the platform provides two kinds of crowdfunding models, fixed and flexible, and if the amount of fundraising does not meet the target, it can also obtain the funds raised.
Kickstarter and Indiegogo are the main choices for Chinese companies to crowdfund overseas, but it should be noted that projects applied for by Chinese companies on these two platforms need to be initiated by companies registered in Hong Kong or the United States.
According to Heather Swift Hunt, Director of Hardware & Design at Kickstarter, a total of 959 projects from China on kickstarter's platform will be raised in 2021, raising a total of $95 million, with an average crowdfunding amount of about $99,000 per project. Indiegogo officially entered Shenzhen, China in 2018, and its head of business in China, Gu Mingjun, also told Hugo Cross Border that more than 40% of Indiegogo's projects of more than $300,000 come from China.
Image source: Hugo cross-border
In addition to Kickstarter and Indiegogo, some crowdfunding platforms for market segments such as Japan and South Korea, South America, and Southeast Asia also have projects from China. In 2019, the DELTA series of mobile energy storage products launched by Shenzhen company EcoFlow became the highest fundraising project of Makuake, a Japanese crowdfunding platform at that time, with a score of 280 million yen. In 2020, the EcoFlow RIVER series once again set a new record with a fundraising amount of more than 500 million yen.
Chinese companies choose overseas crowdfunding, mostly based on four considerations.
First, another channel of reaching potential consumers. The core users of the crowdfunding platform have strong consumption ability and certain influence. Kickstarter and Indiegogo's core users are consumers in the United States with annual revenues of more than $100,000, who are willing to share and have a certain KOC (Key Opinion Consumer) attribute. A successful crowdfunding can help companies quickly build a user base, build brand and awareness.
Second, new sources of funding and market testing methods. When the crowdfunding is launched, only need to provide a prototype, and enterprises can inspect the product without the pressure of mass production and obtain user feedback. If the user feedback is good, the company can produce and deliver after getting the crowdfunding, and the stop loss can be stopped in time when the user feedback is not good.
Third, channel providers, agents and even investors will pay attention to the successful project products of crowdfunding. Channel providers and agents will take the initiative to contact enterprises to obtain agency rights, which is conducive to enterprises to quickly open overseas offline markets. After the crowdfunding, EcoFlow also attracted the attention of investors, and in 2021, it received more than $100 million in financing led by Sequoia Capital, ranking among the unicorns with a valuation of $1 billion.
Fourth, create new market demand. Most of the crowdfunding products are new and exotic, and successful projects can become the vane of the entire industry for nearly a year. And most of the consumer market for such products needs to be cultivated, crowdfunding can do market popularization faster than traditional e-commerce, and crowdfunding hot products can also have a better consumption base in the market.
02 Product innovation, platform icebreaker
In 2021, EcoFlow launched delta pro, the highest-capacity mobile power supply product on the market, which claims that "one charge can meet the emergency electricity needs of ordinary families for about one week". The product raised $12.18 million, making it the most fund-raising technology product on the Kickstarter platform.
In second place is the $4.74 million 3D printer ELEGOO Jupiter, which focuses on large-scale 3D printing, and the project party is also from Shenzhen. The third place is YesWelder's multi-process welding machine for home DIY, a company born in Wenzhou, Zhejiang Province, that brought industrial-grade machines to the home and successfully raised $3.56 million.
In addition, in 2021, there are also many eye-catching brand projects from China on other crowdfunding platforms, such as PETKIT self-cleaning cat litter box on the Indiegogo platform, Fiido folding electric bicycle, Odin game handheld and so on. Product innovation and differentiation are the basis for the success of these crowdfunding projects, and also the biggest difference between crowdfunding platforms and traditional e-commerce platforms.
"Crowdfunding platforms have thresholds and have high requirements for product innovation. Due to the objective limitations of the technology update iteration cycle, in general, the popularity of a specific product on the crowdfunding platform is not more than two years. For example, electric bicycles have begun to be popular on the market from 2020 to now, and there are many alternative products that can be chosen, which is a crowdfunding tail project. Merchant Zhang Tao told Hugo cross-border.
Zhang Tao has been engaged in the cross-border e-commerce industry for 5 years, and in the past two years, he has also achieved a good profit margin by selling goods through crowdfunding platforms. On Kickstarter and Indiegogo for the European and American markets, Makuake in Japan, and Wadiz in South Korea, Zhang Tao's company has profitable projects.
Different from the brand side, Zhang Tao's company itself is not responsible for R & D and production, but chooses to dig factories with innovative projects in the industrial chain, and does overseas crowdfunding with the factory, and the crowdfunding platform is more regarded as a sales channel.
"The key is to choose products and then make judgments based on specific market conditions." For example, Japan is very suitable for the elderly economy, lazy economy products, while the overall size of the Japanese market is not large, the price can be higher, the profit can be a little more. Generally speaking, a project has 500 to 1,000 funders, one earns a few hundred yuan, and a project can achieve a profit of 100,000 to 200,000 yuan. If there is a blockbuster, such as 4,000 that can be sold, it can make a profit of nearly one million yuan. ”
The popular products crowdfunded in the European and American markets in the past two years mainly belong to eight categories: office efficiency, fitness, health and weight loss, household appliances, pet peripherals, outdoor products, leisure decompression, charging, privacy and security. This year's courtyard intelligent products are also a new direction.
Other categories also have breakthrough projects, but the requirements for product innovation will be higher. For example, shoes and cosmetics products for daily consumer goods are often not suitable for crowdfunding, unless such products can have functional breakthroughs, such as waterproof shoes using special materials, ultra-thin and warm hiking clothes, etc.
Innovation is the backdrop of a crowdfunding platform and the first element that attracts funders. Transformative products are always the center of the crowdfunding platform, and micro-innovative and cost-effective products often have the opportunity to break through on the platform in the middle and late stages of the product life cycle. Once the product has completed the market adoption process, crowdfunding will no longer be the best channel for product launch.
The Choubox smart cat litter box, which is still in the crowdfunding period, is similar to the PETKIT self-cleaning cat litter box that successfully raised $1.12 million (2447 funders) in 2021, but the price has dropped to $399 compared to the $599 PETKIT. As of April 26, Choubox had raised about $660,000 (2,062 funders).
03 Professional gameplay, high cost
Another important factor that determines the success or failure of a crowdfunding project is the ability of the team to operate.
"Blueetti, a previous energy storage power supply brand that raised $6.73 million, has a very strong overseas marketer, but in fact, more than 90% of the projects with a crowdfunding amount of more than one million US dollars are done by service providers." Gu Mingjun revealed, "Because the ability and channel resources of crowdfunding packaging products are considered to be comprehensive marketing capabilities, basically all marketing promotion methods will be used, and the gameplay is very professional." ”
The whole process of crowdfunding marketing includes project evaluation (market research, target user determination, etc.), project warm-up (pre-advertising delivery, EDM content operation, PR contact communication, etc.), production of page materials (copywriting pictures and videos, etc.), continuous user interaction and project promotion after the project is launched. If the enterprise does not have rich overseas marketing experience before, it is difficult to control the whole process.
At the same time, most of the crowdfunding platforms require overseas registered companies to act as initiators, most small and medium-sized enterprises find service providers to do agency operations, and the application for operation and maintenance of platform accounts is completed by service providers. Service provider fees generally consist of a fixed fee of 10,000 to 20,000 US dollars and a commission of about 10%.
It should be noted that the crowdfunding agent service provider industry is mixed, and once the service provider does not place an order with the enterprise after receiving the crowdfunding, the initial investment of the enterprise cannot be recovered.
"There are several cases encountered around, all of which have crowdfunded three or four million yuan, but the service provider does not give orders." Some service providers are still overseas, and it is difficult to fight lawsuits to protect their rights. In addition, the operating capabilities of service providers are also uneven, and it is recommended that merchants should seriously do back adjustment or choose platform certification service providers if they need it. Zhang Tao told Hugo cross-border.
Zhang Tao's company relies on continuous selection of high-quality products from innovative projects in many factories on the research and development end, and overseas marketing mainly relies on the company's internal team, which saves him a lot of money and enables his crowdfunding projects to have enough profit margins.
The cost of crowdfunding is mainly divided into three parts. One is 5% of the platform fee and 3% to 4% of the payment fee; the second is the cost of shooting pictures and video materials, which depends on the model and director you are looking for, generally 10,000 to 20,000 US dollars; the third is the advertising cost and a small part of the PR fee and KOL evaluation fee, which generally accounts for 10% to 20% of the total amount paid, and the increase in overseas traffic prices this year has a greater impact.
(Source: Kickstarter official website)
Kickstarter's statistics as of April 26 show that the success rate of the platform's crowdfunding projects is 39.66%. Projects over $100,000 in crowdfunding account for about 4% of successful projects, and projects over $1 million account for only about 0.3%.
"Enterprises want to make a lot of money through a single crowdfunding project, which is actually not very realistic, because the marketing cost of crowdfunding is very high, counting the cost of product production, the remaining profit will not be too much." The most advantageous place for crowdfunding is the new brand expansion, doing high visibility to provide endorsement for subsequent investment promotion or online sales, and the most suitable is for the brand of innovative enterprises to go overseas. Gu Mingjun introduced.
04 Overseas crowdfunding is just the starting point
Odin handhelds were crowdfunded on the Indiegogo platform last year for $146 for the basic version, raising $630,000 at the end of the crowdfunding in October. However, at the end of the year, the price of chips doubled, and the profit margin of the original pricing of the product was reduced by more than half. The company was unable to put into production, the delivery time was delayed twice, and user complaints poured in.
The owner of the company was a little discouraged at the time, and until the beginning of this year, he hesitated to send out the crowdfunding order at the original price. He did buy chips that had increased their price two or three times, and then sent the original price of the product to the project funder. A person familiar with the matter told Hugo Cross-Border, "But what is unexpected is that after the funders got the product, they found that the product experience was good and the price was very conscientious, so they began to desperately help them do publicity." ”
Indiegogo crowdfunding successful products will generally be sold on the platform shopping section indemand for a period of time, further converting the popularity and traffic of crowdfunding. The spontaneous sharing of Odin handheld funders on Facebook, Reddit, Resetera and other websites has attracted many buyers. As of April 26, Odin Gaming Handhelds had generated $3.19 million in sales on the indemand platform.
Image source: Indiegogo official website
Therefore, crowdfunding is really just the starting point, the method rather than the goal. The many funders who love technology and innovation on the crowdfunding platform are the core wealth of crowdfunding. They have enough patience to wait for a year and a half, only for the latest and different products, but also have enough tolerance to accompany the trial and error and growth of trustworthy new brands.
On the traditional cross-border e-commerce platform, Xinyi brands want to share a piece of the existing brand, and have few advantages. Only because its core users value cost performance more than innovation. On overseas crowdfunding platforms, as long as it is a good enough and creative product, funders will always follow.
In fact, in the field of e-commerce, Chinese brands are still a blue ocean. In the new stage of cross-border e-commerce from "low-end supply" to "high-value brand", overseas crowdfunding has created opportunities for innovative enterprises.
How to do a good job in funder community maintenance, convert seed users into brand users, and improve brand voice; how to maintain product strength after crowdfunding, enhance online and offline sales conversion through brand endorsement, and accelerate corporate financing and growth, are all worth exploring in depth by overseas enterprises.
After experiencing the survival of the fittest in terms of products and marketing, the Chinese projects that come out of the crowdfunding track in the future will lead the category trend in the international market with stronger strength, and China will be one step closer to realizing the vision of the era of globalization of brand value.
[At the request of the interviewee, Zhang Tao is a pseudonym in the article]