The By-product of Crowd Funding
With the last articles detailing the crowd funding phenomena, one area that may not be obvious is that the market is talking. The market over the past couple of years has spoken about wanting higher quality coffee products, especially the kind that can be used at home. And price hasn’t been an issue with some devices costing over $500. But you have to wonder: is anyone outside of the consumer listening?
Take Bonaverde for example: they had not one but three successful crowd funding campaigns that raised over $2m dollars in funding. It’s been nearly two years since the first two rounds, and approaching one year since the third (and largest) round closed. But there has been nary a mention of a similar product by any established coffee machine producer, nor another repeat by a crowd funding campaign to produce a similar machine.
On the other end of the spectrum you had ZPM Espresso, who raised over $350k in funding for the initial round, and after nearly two years completely imploded. And thus far, there hasn’t been another product like the ZPM machine that has come to market, nor even announced by a company with the means to produce said machine. And both the ZPM and Bonaverde devices are the basis, the starting point, for a good cup of coffee.
But then coming into play is the unanticipated by-product of a crowd funding campaign: testing the waters. It’s also referred to by other adjectives: market research, concept validation, test marketing.
Look at Pebble (the pre-iWatch smart watch). While they raised an initial round of funding via venture capital, ultimately they needed a larger infusion of cash and turned to crowd funding. Via Kickstarter, they raised over $10m in funding, and after some development hiccups, delivered as promised. But having established their product and their company, they still continue to launch products via crowd funding. Their third generation watch, Pebble Time, raised over $20m. If anything, Pebble just redefined product launches. Rather than go down costly development, traditional PR and marketing (including product launches) plus sales into brick-and-mortar shops, they’ve essentially eliminated a large and costly risk by going direct to consumers with their next generation product.
If the follow up Pebble campaign had failed, it would have allowed the company to reduce its risk by stopping development and manufacturing of its product. There is one difference between Pebble and the Bonaverde/ZPM products: Pebble successfully delivered on the first campaign. It gave Pebble the insight to not repeat mistakes on subsequent campaigns. And by using the campaign to launch a new product, they test-marketed their new product with low risk. And with iWatch, Pebble now has the 800-pound gorilla in their backyard.
Bringing this back to coffee and past campaigns, there have been successful validations of concepts, ranging from grinders to coffee tours (and the funding of a coffee shop on the coffee bean farm.) Outside of these campaigns, there hasn’t been quite the follow up by larger competitors, or even smaller-scale dreamers looking to turn their dreams into reality. In fact, it could be argued that the majority of coffee crowd funding campaigns aren’t presenting anything unique. Many of the campaigns are soliciting money to open coffee houses (mobile or brick and mortar) in local communities, but aren’t truly doing something that would be defined as a ‘market disruptor’ (like ZPM, Bonaverde, or even Pebble.) For example, one of the campaigns features a mobile coffee truck, with a skateboard theme. It’ll team up with two established coffee bean providers and use state-of-the-art equipment; all while playing cool skating videos while you wait for your coffee. They’ve also begun to bottle up their cold brew coffee.
The market will decide ultimately, but ventures like these are using crowd funding to raise start-up capital for a business that doesn’t truly bring something new to the market. These campaigns are all over the map in terms of their scope and financial seek. Many are successful, but aren’t market disrupters. Again, the market is speaking, but is anyone listening?
By now with ZPM and Bonaverde, you’d expect a large scale, mass market coffee maker to tap into what is essentially free market research, and begin developing a machine, whether for the mass market or higher end audience. A machine to attract new customers, while also potentially appealing to your existing customers. Companies like Cuisinart, Hamilton Beach, Mr. Coffee, and more. Yes, they make traditional coffee machines and not the more elite-style brewers like Bonavita, Bunn.
If you look at past crowd funding performance, the market has clearly spoken. But is anyone listening?
by Brian Wiklem
