Funding the product development process can definitely be a tricky endeavor.
Product Development Funding Mistakes
To improve your shot at success, avoid these three common development mistakes.
1. Failing to do research prior to applying for a bank loan
There are multiple lending opportunities available for potential entrepreneurs, and a loan can be an excellent way to get your idea off the ground. But first, do your research prior to applying for a loan. Understand which loans meet your needs, and which ones don’t, and make sure you fully understand the qualifying criteria. There is no use wasting time and energy applying for a loan you won’t qualify for.
2. Applying to every single Angel Group you can find online
Angel funding can be an excellent way to get your product manufactured and out onto store shelves. However, it is important to solicit angel funding strategically. In other words, don’t just apply to any and every Angel Group you come across after doing a quick Google search. Most Angel Groups have pretty stringent funding guidelines. For instance, they might specialize in funding products within certain industries, or with investors from certain locations.
The application process can be arduous and time-consuming, so there is no point in applying to an Angel Group that funds Cincinnati-based entrepreneurs for product development in the biotechnology industry if you are a Los Angeles-based entrepreneur trying to develop a new kind of beach cooler. If you are considering going the angel-funding route, be sure to only apply to groups whose criteria align with your profile.
3. Using crowdsourcing as a first step
Crowdsourcing platforms such as Kickstarter are definitely a great resource when it comes to funding product development. However, when you are trying to pull together funds for product development, it’s never a good idea to turn to crowdsourcing right off the bat. Do not attempt to crowdsource all funds needed for the development process. Instead, crowdsourcing should always be used to fill holes in your funding needs.
When you’re just starting out in the product development process, you are most likely in the idea phase, don’t have a clear business plan, have not performed audience research, and probably don’t have a prototype. This could spell out disaster when it comes to crowdsourcing. Remember, donors are much more likely to throw money your way when you are well advanced in the development process. They may want to see videos that showcase your product, a clear budget, and a comprehensive understanding about who your target audience is. Save crowdsourcing for last, and use it to close any holes in your budget. Furthermore, the less money you ask for, the more likely you’ll have success. It is much easier to raise a few thousand dollars than it is to raise $50,000 to cover all expenses associated with the product development process.
Pivot International is a product design, development, and manufacturing firm with strengths in software development, electrical engineering, mechanical engineering, and industrial design. If you are interested in engineering a new product or updating an existing product, contact us at 1-877-206-5001 or request your free consultation today.