Raising Over $50m With Crowdfunding Sites Kickstarter & IndieGoGo with Mark Pecota

Uncategorized Jun 12, 2020
 

In this episode, we sit down with Mark Pecota, CEO of Launchboom.

Mark and his team at Launchboom have raised over $50m with a wide range of crowdfunding campaigns on sites such as Kickstarter and IndieGoGo. Mark has now distilled the most valuable lessons from that journey down into his new book ‘Crowdfunded’. 

In this interview, we discuss topics such as:

  • Why use a crowdfunding strategy
  • What products work best with the crowdfunding model
  • How crowdfunding conversion rates TRUMP eCommerce

And so much more. 

To learn more about what Launchboom do, and to get your copy of Mark’s latest book, head to https://www.launchboom.com/

If you’d like to explore any further training, then feel free to check out our range of free courses here: https://www.impactunltd.com/training

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Ben Donovan 
Welcome to the show today, guys. I'm here with Mark from LaunchBoom. Mark, great to have you on the show.

Mark Pecota 
Thank you for having me, excited to be here.

Ben Donovan 
No, it's good to go all the way in San Diego, right sunny San Diego.

Mark Pecota 
Yeah, it's not too sunny today. But it's one of the probably five days of the year that we have cars.

Ben Donovan 
I was just going to say, please don't complain about the weather. I'm from the UK, you can't do that. All right. I'd love to ask a little icebreaker question just to get the audience sort of warmed up and get to know you a little bit more. My favorite at the moment is this idea about time travel. So if you could go forwards or backwards anytime in history or the future, where would you go to and why?

Mark Pecota 
So the first that comes up is like, probably the 70s, the 1970s like has been a huge part of my life. I've always been so interested to see what it would be like to go back to the 70s when like Rock and even the Hippie movement, and all that was going on the festival scene. It seemed to have quite a, like infectious energy back then. So it would be cool to experience that.

Ben Donovan 
Pretty much everyone says they'd go back. I'm like, I'd love to go forwards and see how the world's gonna go. I think everybody thinks that the world's not gonna last long enough to go to the future. 

Mark Pecota 
It's funny you say that. I think my mind went a little pessimistic. Maybe just because of what's going on right now. I'm generally an optimistic person. But for some reason, thinking about going too far in the future worries me a little bit.

Ben Donovan 
Bit of a crazy world at the moment. Well, like I say, it's great to have you on the show. And I know you know, everyone listening is going to get so much out of stuff today. You've just booked lots of exciting stuff happening. Before we get into the sort of the meat of it, why don't you tell us a little bit about what you do - the origin story of LaunchBoom, how you started what you're doing, give us a bit of back history so we can have some context.

Mark Pecota 
So I'll start with what we're doing now and I'll go back. So LaunchBoom - we're a marketing agency. We work with entrepreneurs and business owners to help them launch their physical consumer products using Kickstarter and Indiegogo, which are known as reward-based crowdfunding websites. So how it got started, I'll go back to college. So college, I came down here in San Diego to go to college, I went to San Diego State. I actually didn't really have much direction, even in college, of what I want to do. Well, my direction that I thought I wanted to do was music. I'd grown up playing guitar, I then got into electronic music, I was producing DJing. There's actually one night at a club, it was like my junior year, so my third year in college, and I remember looking up at the stage and looking at the DJ, and I couldn't visualize myself, like doing that. And that was the first time that I really, like felt that and it became clear to me that wasn't what I wanted to do, and which in some respects was worrisome because I was going into my final year in college, but in other ways, it was liberating. It's like "Alright, now what am I gonna do?" 

And I've always been really interested in entrepreneurship. I even viewed music as a form of entrepreneurship, like creating and doing something on my own. So I got really involved in San Diego state's entrepreneurship community and digital marketing was huge. In my senior year, I got introduced to someone that worked at this digital marketing agency called eBoost Consulting here in San Diego, did an internship program. I did it, it was incredibly intensive. Not only did it help me get to know digital marketing in a much more deep way but it also introduced me to my current business partners, Thomas Dorian and Mike Revie, that was the best part about it. So out of college is actually the like a month before we were about to graduate, Tom actually came to Mike and I and said, "Hey, I want to start up a digital marketing agency." You know, we're like, starry-eyed college kids like, yeah, let's let's do it. But the one rule is let's try to get one client before we actually graduate. And if we can, we'll do this. Somehow, we got a lead for some law firm, Tom and I went in there and pitched to them a marketing package of redoing things on their website, doing some video production. And they bid for $5,000. So now we're in business, I still have that contract somewhere in my closet over here, the first one that we got. So that started our first business, which was called Label Creative. 

To be honest, there really wasn't anything too special about what we were doing. We're just like any other creative agency. We're doing video production. branding work, website design mostly. And we're working with all different types of clients. Because really, we're trying to keep the lights on, we're trying to make it work in any way that we could. The problems with that, though, is it's very hard to systematise and scale the company. So we read this book called "Built to Sell" and it tells a fictional story of an agency owner that has been grinding, grinding, grinding, and then he's married, he has a kid, believe he has kids in the book, it doesn't matter. He's been grinding for years, he decides that he wants to sell it. He goes to his friend that sold a couple companies and his friend tells him that his company is basically worthless. And he's like, "What? You know, I've had all these clients, I do like millions of dollars of revenue." He's like, "Yeah, but you do essentially what we're doing. You do all different types of work; it's not scalable; it's not unique; no one's going to want to buy this and you're like a key part of this business." 

So I felt like I was reading my future in this book. And so we went back to this time of reflection, you know, "Let's try to build something that is much more scalable, something that is much more productized, something that is even more in line with a vision that excites us". Because we couldn't even see a vision for a label created that was exciting. One of the benefits of working on all these different types of projects and not really having any direction at label creative was that we got the chance to work on a crowdfunding campaign. We actually got a chance to work on three. 

The first one was called EcoQube and it did 78,000 on Kickstarter. We did not a ton of work on that one, I'll be honest with you. We were kind of along for the ride. You know, we helped with the video production, but really just mainly, like took it as an opportunity to learn; client sauce, do that and then said "Hey, I want to launch this product." and Indiegogo was called one hour break. It was just like stress relief Kava Kava spray, we did 101 or 102,000 on Indiegogo. That was amazing. And then the first client, EcoQube, came back with their second version of the product, there was new and improved called EcoQube C. And we launched on Kickstarter and did 375,000 and we were much more involved in that one. That was where we started to understand the idea of the pre-launch, which I can talk about later, like building a community before you launch. And we really saw the power of crowdfunding. So now we're sitting here and we're like, Okay, this is something that is unique. It's like a niche where we can go in; we can help entrepreneurs launch products or crowdfunding, which is a really interesting thing. It is systematized, we followed a system like A to Z to get this result at the end. And it is repeatable as well, meaning like we saw our first client that did it, came back with their second campaign. So now we’re getting repeat business coming in here. 

And so long story short, once we had that realization, it took us about a month to be like, “Alright, we're gonna go full bore into a new company, which we called LaunchBoom”. So that was at the end of 2015. And since that time, we've just been scaling, scaling it, learning. And I'm really happy to say that we've risen over $50 million for our clients through these platforms, and got to work with literally hundreds of entrepreneurs to help them with their products. And it's been very fulfilling, but we got a long way to go.

Ben Donovan
Yeah, absolutely a super inspiring story. And, you know, like you say, you're still on that journey, lots of exciting things happening. Then, the books just came out right, “Crowdfunded”?

Mark Pecota 
Yeah. It was quite the journey writing it and then also putting it out has been incredibly rewarding as well.

Ben Donovan 
Yeah, as I've mentioned before we hit record, you know, I've read the book and it was quite a pleasurable experience to read it, learn so much, and not get this massive pitch at the end. It was a book that genuinely is full of really, really helpful content. It's not light and fluffy, it's a super, super book. I can understand it took a while and you should definitely be proud of it. But yes, it can definitely help a lot of people.

Mark Pecota 
Thank you. Now, I appreciate you saying that.

Ben Donovan 
Definitely. We can be good to sort of dive into a little bit of what's in the book, just to give people a bit of a flavor, but just also help the listeners to really understand how this idea of crowdfunding works. I'm sure pretty much everyone that's listening will have heard of Kickstarter or Indiegogo. But you know, and I thought I had some good knowledge about it. Because as I said to you, we've been looking at a project that we actually want to crowdfund for the next sort of three to six months. And I thought I knew about crowdfunding and then I read the book and there are so many intricate details, it's a definitely big topic and so we could just sort of pull some things apart in our interview today. I just have one question before we do though, what's been your most successful campaign?

Mark Pecota 
The most successful right now is something called Vava 4k Projector. So what it is, it's a short-throw laser projector meaning that you can put it very close to the wall. So I think it's around like seven or eight inches to the wall. And then it projects a 4k. I think it's a 150-inch screen on the wall which is pretty amazing and the price point was more affordable than the competition. So that one did a little over two million. In some of the stats, they're also really amazing. I'm going to need to remember some of these but the really crazy return on ad spend was something like 14x return on ad spend that we had on that. So every dollar, we got $14 out, largely due to it being a very, very interesting product. I think we marketed it well. But also it had a higher price point which was a little bit risky going on crowdfunding, it's over $1,000 for the product. But the fact that all the pieces that we put in, the audience was great, the messaging was great, and then it was also a great product, we were able to drive traffic very affordably.

Ben Donovan 
That's really good. And another encouraging sign you know, that like some of your biggest successes have happened most recently. You know, that's always a good sign in a growing company, not just living on past successes. A lot of our audience would be physical product brand owners or aspiring to be. And so as you mentioned before, this is perfectly suited to launching physical products. So, talk to us a little bit about who it might be for, like what kind of brand owner, what kind of physical products? Is there a certain type of product you can launch on crowdfunding? Talk to us a bit about that.

Mark Pecota 
So crowdfunding, first off there are no rules in terms of walking, there are rules about what can be crowdfunded. But for the most part, like it doesn't have to be a physical product, that's what I mean. You can crowdfund on Kickstarter - the app you're trying to create like a magazine or a film or all these different things. So I just want to throw that out there first, that crowdfunding, in general, is not specific to physical consumer goods. It's largely driven by physical consumer goods. Despite what may be Kickstarter thinks or wants the platform to be for which again, that's great that they want to cater to all these different categories and it is still an awesome platform. But most of the funding on these platforms are physical consumer products. If you're just looking at Kickstarter and Indiegogo, which are the top crowdfunding sites, forward based crowdfunding - tech type products, so it's pretty self-explanatory. The tech products are very large there. And then products that are in the design category, almost like product design. So it can be something that doesn't have electronics in it, but it's something innovative and is like solving a very big need. 

So just as an example of this, something that wouldn't fit into the whole tech space, but isn't more product design space that we launched a product called Bakblade, which is a do it yourself back shaver for men. So a lot of people will be like well that's kind of you know, weird thing. But you know we ended up doing over a million dollars through crowdfunding with this thing because it's solving a big problem for a large number of people where they can't shave their own back and they are self-conscious about it. But even with those things, like even if there are no electronics in the product, we do like to say that it does have a tech element to it. Typically the things that do well, you know, as per example, it's like he has this patented shaved technology like dry glide technology, which then allows it not to like nick your back, you know, like when you go on it. There's a lot of clothing brands, which I know is what you're interested in launching. There's a lot of clothing companies at launch like we launched like a sock, a no show sock. That one did like in the low six figures, but I got over 100,000. But it was like, you couldn't rip it. It was called the Titan sock and the thread was literally like you could pick up a kettlebell like, a 15-pound kettlebell, with the thread. So there's typically some type of tech element that makes it a little bit different and above what is out there.

Ben Donovan 
And so if someone has like an existing physical product brand, you don't have to launch a business of this right? You can have an existing line of products and then launch another product with this?

Mark Pecota 
Absolutely. Yeah, we're seeing that more and more, where there's interest from large brands, like medium-sized brands, or just people that already exist. And they're now using crowdfunding to launch their next product. The way that I view our strategy is that we have a cyclical model where it's like we're testing products in the market, actually, before you go to crowdfunding. So we're like trying to find products that are going to work. And we have a system for that. And once we find the ones that are going to work, then we launch them through crowdfunding. And then we take them on to eCommerce or Amazon, all these different things and scale them up. And then you just repeat the process. It's like, okay, now let's find the next product idea and then go launch and then scale. So the reason why I brought that up, it's because a company can already be scaling their company over here, they've lost products, but now you can just go back into the cycle and test and launch and scale.

Ben Donovan 
So talk to us about the benefits, right? Because there might be some people that want to crowdfund, sounds like a lot of work, like what are the benefits of crowdfunding as opposed to a standard launch model?

Mark Pecota 
I see the very first one is that traditional product launches for a lot of people is that you do the work in designing the product, getting the prototype, but then you actually get a lot of inventory to get ready for this launch, you know, and it's a risk, right? They're putting up money to get this product that could just be sitting there, and you don't know how much it's going to be and how much it's gonna sell. The big difference with crowdfunding is that you can launch a product with just a prototype. So I mean, just like to take my phone, let's say I'm launching this phone, it's the best new thing. And all I produce is one prototype. It actually doesn't have to be technically functional like that; you really need a visual prototype so something that looks good. And then you can go out and do all the marketing around it. You know, the photography, the video, building the campaign page, driving ads, all this stuff, just with this prototype. And then when you put the campaign up, what people are doing is that they're technically pre-ordering your product. So now you're getting all the money upfront that you can then take to go make your product and actually get the inventory to then deliver sometimes, like 6 to 12 months later, you're upfront about that in your crowdfunding campaign. So I think that it de-risks it quite a bit; that's a very large part. That's one. 

Two is that crowdfunding platforms themselves have a community of people that are looking to buy cool stuff. So a big part of it is just like going on Amazon and the strategy for getting up in the rankings there, the same thing is true for Kickstarter & Indiegogo. We're trying to get high up in the category rankings as people are looking on those for cool stuff. I mean combined, I believe, Indiegogo and Kickstarter have about like 50 to 60 million uniques a month. So it's not insane numbers like when you compare it to Amazon but you have to remember this is like a niche store, which in a lot of respects is actually really beneficial because you get these people that are like, like hyper consumers, you know, are looking for these things. I like to say that the people on crowdfunding are the early adopter innovator types, which are largely motivated by this desire to get things first. And so you're able to tap into that audience, which makes the money that you put into advertising and marketing go further because now you're fine. You're seeing that about a quarter of all the sales typically on the crowdfunding campaign come from the platforms themselves. So you get that natural organic lift if you do all the other parts right, like you build a pre-launch email list, drive traffic initially to get initial sales, the initial boost, you go up higher in the rankings, which then gives you traffic from the platforms, it kind of feeds on itself. So that would be number two. 

Number three is that we tend to see the conversion rate on crowdfunding campaigns to be higher than when we go to the eCommerce site afterwards. There's something about it being like an acute event, like something that has like a beginning and end, that really drives a lot of sales. Typically, how a crowdfunding campaign works for your listeners that may not know this is that you're going to set a funding goal, let's say like I want to raise $20,000 and I want to do it over the course of 30 days, and you can raise more than $20,000, that's your goal. So you have 30 days to do it. Now we launch and we'll use the example, the phone again. I launched day one, and I say on the first day, this thing is going to be available for 30% off. Okay, so you launch, big excitement, everyone's coming in here, they're trying to get the products at 30% off before you run out of that tier. Okay, now that one runs out, but now you've used like, hit your funding goal extremely quickly, and you tear the discounts on there, and people are going in there and they're trying to get it. They're trying to get it before all the funding runs out. You also have the added credibility and social proof of watching the campaign go up in the funding. We're like, well, this is an incredibly successful project. It's like 500% funded. Like why is everyone getting in on this? Maybe I should do and then you have added the very end like once you get to the final days of the campaign, you have like this ticking time clock of like, “hey, there's only like five days left, there's like a day left, there's now three hours left. And that all has like a major psychological effect on consumer buying behavior. That's a big one. 

The last one is that we find a lot of our clients, use the feedback from the community to actually make updates and changes to the product before they go to the manufacturer. And it happens quite often. So not only learning from what people are responding to in like advertising and the messaging that you're doing, but people actually bring up ideas or maybe have a lot of questions about something you're like, you know, like maybe we should change that one little thing about our product around that, you know what I mean? And since you haven't actually put in the word yet, you have the opportunity to make those changes. I'm not sure what percentage of our clients end up doing that, but we just had a client called Z Back, which is this like, you can extend your monitors on your laptop like going out, super popular right now, because of what's happening in the world. But anyway, they made a lot of changes to their product coming out of the Kickstarter campaign, and they still haven't delivered, they're going to be delivering in May, but they've upgraded it quite a bit. And it's all because of feedback from the Kickstarter community.

Ben Donovan 
I never thought about that aspect before. That's really interesting. Definitely. You mentioned that you kind of alluded to the process a little bit before and, obviously is in super high detail in the book, which I would obviously recommend anyone get, but in terms of that process to launch in rather than every single step, could you give us some of the fundamentals, the markers of success - there'll be some campaigns that go well, some that don't, what are the must-haves for a successful crowdfunding campaign?

Mark Pecota 
Let's just walk through it. I'll use the example phone. So you're like, "Hey, I'm going to launch a crowdfunding campaign like, what are you going to do first?" So, I mean, at the initial stages, we would start with a whole messaging and positioning process. And I will say, in the book, I talked about this, but also if you just look up, go to launchboom.com and go to our blog. We have a lot on this thing called the consumer-based brand equity pyramid. But essentially what you're doing is a process of putting yourself in the mind of the consumer and trying to identify how you want to talk about and position your product. And the goal of this is to come up with an initial hypothesis about how you want to position your product in the market. And good positioning is being able to explain the value of your product and then to whom, so you're also trying to come up with who I want to target. Okay, so this is a really important stage because a lot of people don't put enough time here; they don't really think about "how do I want to convey the value of my product and who is actually going to buy this thing?" And you can come up with many different things because they're all hypotheses, I think about good product positioning as a strong foundation. Okay, so we start there. 

Now we have different ways that we want to put it. You say that maybe this is like, all the storage is in the cloud or something really new, but whatever. Let's say it was and we are in the 1970s. And so I have that, now I want to go and I'm going to start to work on my funnel. So part of the strategy, I'll say the strategy and I'll go back to the deliverables. Part of the strategy is that we're trying to build an email list - a community of people before you launch. It's crucial to have a successful campaign. We're going to go out, we're going to get product photography, we're going to build up a funnel, a marketing funnel website, very simple. All we need is a landing page, the call to action on the landing page is to give their email address. The second page is essentially going to allow them to put down a reservation; this is really key part of the strategy. What that means is that people can put down a small deposit. So an actual payment, we do a $1 deposit to then reserve the product at the best discount you'll ever have for it once you go on a crowdfunding campaign. You might be saying, like, "why the hell would I have some dollar, I just got their email, what's the difference?" We thought the same thing at the beginning. It took us two years to come up with this whole system. But we found that if people put down $1, that little micro commitment, on average, is an indicator that they're 30 times more likely to buy than someone that doesn't, you're like okay, that starts to get more interesting. And it's like what can you do with that information? Well, now, when you're doing advertising, you can now optimize your advertising for the reservations, like, more purchase intent versus lead intent. So now we're just building a more qualified email list. Big companies are doing this type of stuff too, like Tesla. They're also doing it as a funding strategy because they're doing a little bit larger deposits. But anyway, the same idea rings true. 

So, you want to build your funnel, it has to have a lead component, and then the ability for someone to put down a deposit to become a reservation. Next, you're going to be building up all the rest of the assets - the biggest, the most important assets, the campaign video, and then the campaign page. Again, we have resources on that. My biggest recommendation here is don't reinvent the wheel, look at campaigns that are similar to you, to your product, and see what they're doing. Then, model what's working. So we're building up the email list and then you're going to use that email list to have what we call a LaunchBoom, that's like where we got our name. LaunchBoom means that you're going to send the email to your email list when you launch and you're going to get funded extremely quickly. We like to get funded on the first day, it has its benefits of pushing you up in the rankings, you have added credibility to an extremely fast funded campaign. If you don't get funded on the first day, you're not a failure; it's just part of the strategy that we like to employ just to make things a little bit easier. So you're using that email list and then once you get to the live campaign, most of the traffic, if you're going to go for a very large campaign is going to be coming from Facebook advertising. So if you have the budget to spend, put it there. 

Ben Donovan 
You talked about “spend” there. What would be, on average, the budget for someone that wants to launch a product on Kickstarter, Indiegogo? How much money we're talking that it's going to take to get it from conception to delivery before the actual manufacturing.

Mark Pecota 
It's highly dependent on how much you want to raise. If you're going into the like six-figure range, typically having like at least a $15,000 budget is advisable at least. Anyway even be saying they're like 15k and all the product costs, where's all the margin if I'm only getting 100k? I will admit that having an extremely profitable campaign is really difficult. And because there's a lot of things working against you. The fact that there's a new product that you're trying to market, you also are discounting the product typically pretty substantially because it's a pre-order. You know, you have the fees taken out by the platforms themselves. But we usually most people are using it more as a marketing strategy to get the initial customers in. I'm a very big believer in customer acquisition strategy, it's typically self-liquidating, meaning they don't typically make a lot of profit on the initial acquisition of the customer, but the lifetime value of that customer is going to make it worth it. So it's much more of a long term strategy. So I feel like I'm kind of dancing around your question, but I would say at a minimum, having at least a few thousand dollar ad budget in the campaign is advisable.

Ben Donovan 
I recognize it's a very difficult question. Because you know, there could be different prototype costs and let you say reaching however many people. Would you say it's still worth doing crowdfunding if someone only wanted to raise 20,000 or 30,000? Is it still worth it?

Mark Pecota 
Absolutely, 100%. I wrote this article at the end of 2019 called "Raising a Million Dollars on Crowdfunding" isn't as important as I thought. I'll admit, even as an agency, it's like we're kind of judged based on how much we raise. Like if I said, I raised this guy 50 grand, they were like, "Oh, you guys suck" versus like, you know, even the first question you asked me was like what's the most successful campaign? Everyone's stoked about that, it's fun to talk about. But the thing is that $2 million campaign, they're doing fine, but we have clients that have done 1.6 million. There are huge problems that come with that much funding, it's not like a silver bullet that they're going to be successful or like a pebble, which is one of the largest campaigns in history, did a couple, a few months after their last one, they got acquired by Fitbit for like, nothing, a huge issue. So but then again, going back to the actual campaign I talked about, Z Back. We didn't actually work with them on their initial campaign that did around 50K, but now we're working with them on their eCommerce site, and then we're going to work with them on their next product launch. We're getting incredible returns on their eCommerce site. And they have built a great product and did a great job delivering a great experience. And like they're setting themselves up for the long term. So my whole point of this is that the initial funding, it doesn't really matter that much. I mean, even if you're trying to only get like 15, 20K or something like that, that's great. As long as you're not losing your shorts, like in terms of the money putting in, and you're able to build the product and get initial market feedback and build initial customer base, oftentimes that's enough to allow you to build a strong foundation for your product, and then continue to scale off there.

Ben Donovan 
That's really, really good. I'm obviously just conscious of time. So I just want to sort of wrap things up so you can get back to enjoying the beach in San Diego and launching more products on crowdfunding. But if there's one piece of advice that you can give to people, as they leave, as they're thinking about crowdfunding, if they want to explore it more, what was the one key thing that you would want people to take away from this?

Mark Pecota 
Well, if they're interested in learning more, I would say definitely pick up the book or read the blogs or just reach out to me, that's [email protected], always happy to help. I always tell people just start; start going down the path of what would it actually look like if you launch this. There are so many people that want to launch products. Like so many people, I think about it, I'd be cool if I did that someday, especially now. I think it's really timely that you know Coronavirus is affecting the world, the economy is shut down everywhere. If people were like, "Why the hell would you launch a product right now?" I'm like, "Why the hell not?" You know, it's like in a time that feels so out of control, take control of your life. Everyone thought everything was going great. And then all of a sudden it wasn't, it was just when the pandemic happens, I always tell people, "I feel like this is the time to lean into that. And to explore what you're curious about, and see what happens."

Ben Donovan 
Really good, inspiring. And super inspired by what you've done. I echo the recommendation to pick up the book. I'm a big fan. And like I said, I think when we're not recording, I said I had an idea of what we were going to do, and I was going to go down one route with it when we do our crowdfunding. Then I read the book, and it just flipped on its head because there are so many just different nuances that you don't realize. So it's a worthy investment.

Mark Pecota 
Definitely, let's chat about it. And I can help in any way I can with what you're going to be doing.

Ben Donovan 
I appreciate that, man. Awesome. Well, I'm sure everyone will sort of really appreciate that and reach out to you. And yes, thanks so much for coming on the show today.

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