Can a bike KickStarter be too successful.
In a soon to be released episode of The Cycling Business Podcast I was joined by Adam Vollmer of Faraday Bikes. One subject that came up in conversation, ironically after we had stopped recording was around some of the really successful cycling KickStarter projects, and whether too much success is necessarily a good thing. Now you may think this is something of sour grapes from 2 guys who have run KickStarterās in the low $100ā²s of thousands (with Faraday and Fat Chance respectively), rather that $1M+, but let me explain....
So far 2 projects have really stood out to me in being crazy successful, but also raising many questions about the long term viability of either project.
First up the Storm Sonders eBike on IndieGogo, currently the 2nd most successful ever on IndieGogo raising over $6M. More recently the SpeedX Leopard connected Aero Bike has smashed its target raising over $1M in the first few days, with several weeks still to go.
Lets list a few of the similarities in the 2 campaigns:
- No visible track record in the bike industry (I mean thatās obvious just by looking at the gear the SpeedX bike is in for the photo above, basic road bike styling FAIL), or big company structure behind them (I say not visible as this is not mentioned on either campaign, but I could be wrong).
- Incredibly good price / spec ration. An eBike for $500 and a connected Aero bike for $1399 both jump right out as great deals. But the flip side, knowing a little about the cost of materials, production, competitor product, both are likely selling at a very low margin indeed.
- Made in Asia. No bad thing, especially given the great spec and pricing on both. SpeedX also looks like its an Asian based company. But what does this mean for local support in the country the customer is in?
What are the risks / implications for both:
Given the lack of track record in the industry, and few details on either company structure it raises some obvious question firstly on ability to deliver. In the case of Sonders this all looks good so far. The second potentially more critical issue is long term customer support. Both are new, complex products, sold to a large amount of people... which is all good until something goes wrong and people need technical / warranty support? Who provides this? There are no dealers to fall back on.
Next up, and this might be where the sour grapes come in... but to what extent do campaigns like this harm other businesses trying to grow with a more normal margin? I think was where Adamās point resonated. Faraday, who raised less money have carefully built a great dealer network and put the support systems in place because they know an eBike is inherently complicated. Do consumers consider this when making an impulse buy on KickStarter? Probably not.. it all comes back to being seduced by a smoking hot deal!
I suspect that most KickStarter campaigns run at a loss (again something we discuss in the Podcast) when you take into account the marketing and promotional efforts needed to really drive interest in the campaign. This extra scale clearly gives these 2 projects a better chance of staying in the black. Per unit manufacturing costs should in theory go down (I say in theory but I wouldnāt mind betting in many KickStarters this is not the case). At the same time fulfilment costs, staff, infrastructure etc all go up as does the time to fulfill everything.
Would we have liked to have sold more frames through the Fat Chance KickStarter? Clearly yes, the extra revenue could have put us in a better financial position, but more frames would have added more complexity to a project that took much longer than planned to deliver, which again must be pretty common in KickStarter world. And donāt forgot all the time you are working on simply fulfilling your KickStarter obligations, itās almost impossible to work on developing the rest of your product pipeline.
In summary then I say good luck to Storm Sonders and SpeedX, I wish you well, but iām just glad our KickStarter is finally behind us and itās given a platform to get on with the real work of building a bike company.
