Think of prototypes as a form of trial and error. After conceptualizing your product on paper or in a digital program the next step is to develop a working prototype. At this time it isn’t necessary to flesh out the aesthetics; instead, be more concerned with its functions and usability. Unfortunately for many inventors that is easier said than done.
Creating a product isn’t cheap. A variety of factors and unfortunate situations can lead to delays in the development timeline and increase to product cost by several thousand dollars. For most individuals this is hard money to come by; as such, they rely on raising money utilizing other methods.
Methods to Secure Funding
There are a handful of options when funding prototype production of your idea. While diving in may have worked during your brainstorming session, your monetary efforts need to be more calculated. Consider all options that are available and make a pros and cons list for each one. Not all options will be appropriate for you or for your invention; some options require more than a solid concept to secure funding. Here are four of the top ways inventors can go about securing funding to build their prototype.
The top pro and con for this method is the same: You are solely responsible for funding the effort. It’s a pro because you do not need to worry about reporting to anyone with a working prototype, consider repayment options, or discuss interest rates. You make decisions on how, where, and when the money is spent. The downside is that you are taking a gamble that your product will work enough to be successful on the marketing, making back your investment and then some.
Individuals who choose this route can get the money from a variety of options, including savings, profit from a secondary business, stocks, or equity. Because of the nature of designing a product—continual market feedback that can require multiple versions of a prototype—the funds can be used quickly. Relying on the bootstrapping method means that once the savings are used, that is it; there is no one to turn to and ask for more funds. If your prototyping efforts require several thousand dollars or you are unwilling to risk losing money, bootstrapping is not the option for you.
IndieGoGo and Kickstarter are two options to seek out funding online from your target market, or people interested in your product. Hundreds of products have found success on these platforms with many quickly surpassing their target goal. Crowdfunding is especially great for consumer products because of the immediate interaction with the target market; after all, they are the ones funding the project because they believe in it and wish to be part of it. You receive immediate feedback on your updates from people who are invested in your product.
The potential downsides vary. Each crowdfunding platform has its own stipulations and fees, so research your options to determine which one is for you. Some platforms require you to raise the full amount or walk away with nothing; others allow you to collect whatever was raised. Another potential downside is maintaining a strict timeline as most of the successful projects promise a date for the product to ship to them. This method requires consistent updates, new videos, and successes/failures regarding the product development. Keep in mind the time it takes to create a high-quality prototype (or explanatory video) that will standout among competitors and sell the idea to potential customers.
These individuals tend to be wealthy and business-minded, looking for a high return on their investment. If you really sell your idea you could potentially acquire an investment of several thousand dollars. When seeking out these types of investors it is necessary to provide a solid concept and digital renderings of the product to sell the idea to them. The best option is to present them with a working demo or prototype, so you may have to pay out your own money initially.
Like crowdfunding, angel investors will require frequent updates. You need to inform them of successes and drawbacks along the way. They will also be the first to see an updated prototype or final product. Because you are creating this product with their money, they usually get a say in the product’s development should they choose. From providing critical feedback to offering suggestions on the product, your angel investors will be hands on, so you must be willing to input their ideas.
Unlike bootstrapping, you are seeking out a loan from a bank or from an individual instead of relying on funding or equity you currently possess. For some entrepreneurs this may be more difficult to acquire depending on their credit history and other requirements from the loan provider.
Like bootstrapping, the inventor is taking the risk that their product will be profitable and make enough money to pay back the loan and then some. If not, the burden is on the inventor to pay back the loan, with interest, from their pocket. If the inventor requires more money than a loan can provide or is unwilling to take this financial risk they should consider another avenue to securing the money.
Using the Money Wisely
Let’s assume that you were able to raise some—but not all—of your goal. You have more money than you started but you realize it will not be enough to do exactly what you wanted. Now is the time to take a look at your plan. Where can you cut costs without cutting quality? Can you utilize tools to assist you in your prototype development or marketing efforts and save money in the process? Even if you did raise your anticipated goal, you should still evaluate your plan and determine if you are spending every bit of money wisely; after all, anything can happen during development and you may find yourself needing more money. And what happens if you overrun your delivery time estimate? Be sure to have enough additional funding to cover the extra runway to launch the product if—or when—you surpass the deadline.
Consider the Lean Prototyping Method
This method is best known as failing early/quickly but failing cheap. Lean prototyping focuses on the idea of building many prototypes cheaply to discover issues quickly in an effort to turnaround the product more quickly. Although some define prototyping as an example of how it works and how it looks, remember that lean prototyping is only concerned with how the product works.
In software applications, a lean prototype can be created with relatively cheap mockup drawings before wire framing it digitally and creating a proof of concept application interface.
Collect Early Feedback From Users
Feedback needs to be collected as often and as early as possible since it can mean the difference between success and failure. Once you launch a BETA version of your product, it is imperative that you have a method to collect user feedback as early as possible and understand how your application is being used via actionable metrics. Automating feedback collection and giving users a very easy way to share their feedback with you is crucial since users might not always have the incentive or time to go out of their ways to provide you with feedback. If your product crashes every time they try a function, they might just give up on that function (or your whole product) without you even knowing why.
Although tempting, unless you have unlimited developer resources, it is definitely out of scope for you to build your own automated feedback collection system; doing so can easily derail you from focusing on your product features. Instead you should rely on robust tools or services that are specialized for this task. Integrating a ready-built SDK such as Usage Intelligence will get you automated in-app feedback collection and runtime intelligence with just one hour of development. Running such tools makes it much less risky and cheaper than trying to build your own because such tools can be used for free (or a low monthly fee) whilst your product user-base is still small. If your product is successful, such service can easily grow with you, providing you with more advanced features when required.
Adding New Features to Existing Products
Remember that prototyping is not restricted to a whole product. You can easily create a prototype for a new feature in an existing product. Because it is a smaller scale and you already have the core of the product working, you should spend significantly less and deploy the new feature faster compared to an entirely new product. If you already use a product like Usage Intelligence you can use it to measure user engagement with the new feature by collecting metrics around usage and popularity as you would the whole application.
Raising money is one challenge of prototyping; using that money wisely is another. Before setting up a profile and soliciting investors, take time to do your research. Create a development timeline and budget. Allot time and money for unexpected situations. Try and make your budget as small and efficient as possible. Then, when it is time to seek out investors, you can up your goal by a few thousand and ensure that you’ll be in the clear.
|Hannah writes on behalf of the design and manufacturing gurus at Pivot International. Reach her via Twitter @hannahmnava or connect on LinkedIn.|