Published on : Aug 12, 2014
Investors are generally nervous about funding a product which is unproven. Hence, this can make it difficult for hardware startup businesses. In addition, the cost of manufacturing is a risk which is why digital startups seem like a less risky deal.
However, some of these apprehensions are being eased due to crowdfrunding platforms such as Indiegogo and Kickstarter, where startups can raise the funding from the public to create prototypes or begin manufacturing their product.
Successful campaigns on sites which can answer a lot of queries that venture capitalists have, can lead to investments. According to a report released by research firm called CB insights, during the initial half of this year, around twenty-six percent out of seventy-three hardware startup businesses that received venture funding had also raised money successfully through a crowdfunding website.
This means the figures have increased by 28 percent in the year 2013 and up to 10 percent from the year previous to that. Venture capitalists think crowdfunding sites have contributed to shift the questions from whether the concept that will have a product which is fit for market to company executing and manufacturing.
Crowdfunding campaigns have allowed venture capitalists to communicate with customers, track return or/and failure rates. They also allow the fund to expand with real data. Even though, hardware setups are making moves in the market, they still need to make up for a small portion of a total venture capital funding and the number of investments initiated.
Currently, venture capitalists have invested in around 3,354 startup companies in the year 2013, and around 3.8 percent of these were involved in hardware.