What Peloton’s 2013 Kickstarter can teach founders about fundraising – Business Insider
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- Before Peloton became a household name with a cult-like following, it used Kickstarter to finance the early stages of its bike manufacturing. In less than a month, the company raised $307,332 from 297 backers.
- Now, the company is celebrating its first profitable quarter, with revenue jumping 172% year over year to $607 million, according to the company’s shareholder letter.
- Business Insider broke down why Peloton’s Kickstarter campaign worked, what opportunity the company missed, and what entrepreneurs should consider when crafting their own.
- Visit Business Insider’s homepage for more stories.
Before Peloton became a household name with a cult-like following, it took the same avenue many startups pursue to raise money: A Kickstarter campaign.
In June 2013, Peloton posted on the crowdfunding site that it was seeking $250,000 to finance the creation of its bike. In less than a month, 297 backers pledged $307,332, according to Kickstarter.
Now, the company is celebrating its first profitable quarter, with revenue jumping 172% year over year to $607 million, according to the company’s shareholder letter.
Meanwhile, many entrepreneurs and businesses are turning to crowdfunding platforms like Kickstarter, Kiva, Indiegogo, and StartEngine in light of the pandemic. The platforms provide an opportunity to raise capital and loans and build a strong consumer base.
Business Insider broke down why Peloton’s Kickstarter campaign worked, what opportunity the company missed, and what entrepreneurs should consider when crafting their own.
Quality video and photos showcase your product
One of the most compelling aspects of Peloton’s Kickstarter campaign is its visuals. The photos and video have a high production value, but they are also used as a compliment to the written descriptions.
Each paragraph dives into specific details of the bike — such as its micro-adjustable seat that lets users position it where it’s comfortable — while the imagery shows what it would look like in the home. This combination gives readers a clear idea of how the bike will function and how it will fit into a customer’s life.
Tell your story
One of the most important aspects of crowdfunding is explaining what problem you’re trying to solve. Peloton’s Kickstarter explains that the creators were disappointed by the lack of technology in the fitness world and sought to make both hardware and software, like Apple, to solve the issue.
Answering those basic questions at the start of any campaign is a great way to introduce potential investors and customers to your product. It also creates a need for your invention instead of letting it exist in a vacuum.
A missed opportunity to showcase the team’s experience
While Peloton showed pictures of its staff in its Kickstarter campaign, it missed an opportunity to explain who the early employees were and their professional experience. Including details on on the founding team can build a relationship with potential investors and customers, said Kelly Malone, the founder of craft and woodworking class PGH Workshop. She used Kiva to raise $6,000 in 7 hours to support her business through the pandemic.
“Be open to telling your story and what you’re about so people can see who you are as a person,” Malone told Business Insider’s Jennifer Ortakales. “Open up to customers so they can feel excited about who you are and want to support your business.”
When Parker, the founder of elder care startup Papa, pitched investors for his $18 million Series B round, he included a slide about where his team worked previously.
The slide showed investors the relevant experience his team has in the healthcare industry and points to prominent startups where they worked in the past. He believes that tactic gives investors insight into the business’s future success.
Offer investment tiers with incentives
Many successful Kickstarter campaigns offer multiple investment options, ranging from high-priced to lower-budget pledges. Peloton followed a similar model: a $10,000 pledge would get an investor the bike, accessories, a trip to New York City to meet the team and teach or take a class in the studio. Meanwhile, for $10, an investor could reserve a username that would appear on-screen to Peloton riders.
Offering these different tiers allow a wide range of people to participate in the campaign. Additionally, adding gifts like Peloton-branded clothes or water bottles builds excitement and fan engagement in the very early stages of the company’s life.
Explain how you’ll use the money
Explaining to investors and potential customers how you’ll use the funding is key to a successful campaign. You’ll hear that question from judges on Shark Tank when entrepreneurs pitch the celebrity investors. Many founders include that information in a pitch deck to professional investors.
Peloton’s campaign clearly outlined that it would use the $250,000 to build the machine manufacturing process needed to make the bikes. It would also allocate some funding for pre-purchasing steel, aluminum, plastic, and microchips for future bikes.
It also explained that previous funding from angel investors supported the company’s launch and that Peloton had enough runway to support employee salaries and the indoor cycling studio.
Highlight progress and collect data
One of the best features of Kickstarter is that users can see the success of a campaign as it progresses, which may encourage others to participate. Two days after Peloton launched its campaign, the company reached 57% of its goal.
Shark Tank judge Kevin O’Leary said that sales and growth are key for successful crowdfunding campaigns during an August webinar with Howard Marks, CEO of equity crowdfunding platform StartEngine. O’Leary joined the platform as a strategic advisor this year.
The sales data and rate of investment shows future investors there’s demand for the product. Meanwhile the platform lets companies mine customers for early feedback and insight.
Build customer trust and strong relationships
During Peloton’s campaign, many people asked about the bike’s noise levels when riding. The team recorded a video of someone riding it in a test studio so customers could gauge whether it may be too loud for their home. That engagement not only built trust among consumers but showed that Peloton is listening and reacting to potential users.
“I think the new normal for companies… is to know their investor, to have a direct relationship with their own constituents,” O’Leary said.
Peloton continued that strategy and it’s helped make the startup a cult brand today.