New EU VAT rules on digital goods to go live on 1 January could be too much of an administrative burden for start-ups and may be counterintuitive to creating a Single European Market for digital goods and services.
Dublin: 18.12.2014 02.22PM
Former software engineer and sports therapist John McGuire with his product GameGolf
Across the world people are beginning to invent new products ranging from games consoles to watches and thermostats, raise finance by asking the public to support their endeavours on crowd-funding sites like Kickstarter, Fundit and IndieGoGo, and are bringing their inventions to market in a totally crowd-sourced way. Are we witnessing the onset of a new industrial revolution?
You could say the late Apple CEO Steve Jobs and his industrial design sidekick Sir Jony Ive made product design fashionable again, starting with the iMac in the late Nineties and the onset of the iPhone in 2007.
But the current trend to invent (or re-invent) hardware, raise money and bring a product to market via the internet owes a lot to a series of happy coincidences that have more to do with the maturation of e-commerce and the ideas of writers like Thomas Friedman who in his book The World is Flat believes the world is becoming a level playing field in terms of competition and commerce.
I first became aware of IndieGoGo when I spoke to a 10 year-old-boy at a CoderDojo in Dublin who used the site to raise the money to buy a new MacBook Air to enable him to write his first video game. He raised the money by promising the donors a free copy of the game. It worked and he now owns a MacBook Air.
In Ireland crowd funding online has been growing in popularity as a way to finance projects. Business to Arts formed Fundit.ie in March 2011 and so far more than 1m worth of pledges coming from all over the world have funded 350 film, art and science projects. This week another crowd-funding venture with a twist called Linked Finance was launched in Ireland, which provides businesses that it has vetted access to cash flow for projects from a large pool of potential lenders.
In many ways, sites like IndieGoGo and Kickstarter are being seen as credible ways for entrepreneurs to bring their products to market and in the US, business schools are aiming to include the invention and bringing products to market this way in the curriculum.
In one of the highest-profile examples to date, the creators of a new wristwatch called the Pebble E-Paper Watch initially set out to raise US$100,000 but raised US$10m from 70,0000 backers on Kickstarter in January, enabling them to begin mass-market production of the device.
The creators of another new piece of hardware – a new Android-powered games console called Ouya – set out to raise US$950,000 to bring it to market but ended up raising US$8.6m on Kickstarter last month. With 68,000 orders to be fulfilled, the new console will go on sale in June on Amazon and in GameStop, Target and BestBuy stores.
Recently, Irishman John McGuire, a former software engineer and sports therapist, took to IndieGoGo to raise the US$125,000 he needs to bring his first product to market – GameGolf, a wearable device that comes with 18 tags that attach to golf clubs and which combine GPS, sensors and analytics to improve a golfer’s game.
McGuire is quite well along in his endeavour, counting the support and advice of some of Silicon Valley and the sporting world’s finest. These include early Facebook employee Chamath Paliphaitya, Yahoo! founder Jerry Yang, former Palm CEO Ed Colligan, golfer Graeme McDowell, designer Yves Béhar, Jawbone CEO Hosain Rahman, Seagate Technology, ACT Ventures, Enterprise Equity, Crosslink Partners, Moroda Ventures and professional surfer Kelly Slater.
McGuire, at time of writing, had raised US$80,000 on IndieGoGo with less than 29 days to deadline.
The product, designed by celebrated designer Yves Béhar, which McGuire describes as a kind of Nike+ for golfers, tracks the most important statistics from your golf game, including club-by-club performance, fairway accuracy, greens in regulation and putting.
Once the product goes to market, McGuire aims to see it feature in some of the most prominent sporting and technology stores around the world. “The reason we are doing it via IndieGoGo is because about two years ago I read a book called Wikinomics by Don Tapscott and Anthony Williams, which was all about opening up your R&D and always trying to use the crowd to speed up the process.
“I decided that for us to be really successful what we wanted to do was build up a team, or a tribe, of supporters, who are early customers who will pre-order the device at the ground level and their feedback and support will help to define the product over the next year to two years.
“By leveraging the support, buy-in and feedback of the crowd, we believe that is a good way to ensure success.”
As demonstrated by Pebble and Ouya, if Game Golf is similarly successful, it may become the kind of funding model where credibility is assured through a form of crowd wisdom.
“We’ve set an external goal of US$125,000 but I personally have a different goal. The most important thing, especially with the partners we have, is bringing golfers to this platform as early as possible,” McGuire explained.
But not all crowdfunding campaigns go to plan. One company I spoke to recently, a Minneapolis company called Spark which created a little device that you can affix to a lamp or lightbulb and allows you to control your lights over the internet via a smartphone, set out to raise US$250,000 on Kickstarter.
However, when the campaign closed in December only US$125,588 was raised from 1,600 backers.
Undeterred, Spark CEO Zach Supalla is soldiering on. He says the campaign was a learning experience, attracted useful feedback, raised publicity and opened doors at retailers like Target and Best Buy. Supalla is currently in China on an accelerator programme called HAXL8R, which includes mentors such as RTÉ Dragons’ Den investor Sean O’Sullivan and Atari founder Nolan Bushnell. He will wind up in Silicon Valley in April to pitch his product to some of the world’s top venture capitalists.
Supalla is unperturbed by his Kickstarter experience. “Even an unsuccessful Kickstarter project can be a major boon to a hardware start-up because it provides an opportunity for customer feedback and visibility very early in the development process.”
A version of this article appeared in The Sunday Times on 10 March