Jon McKay and his team of entrepreneurs from Olin College of Engineering had spent the summer perfecting a new microcontroller called the Tessel. It was time to start selling their invention and raising money.
They considered listing the Tessel on Kickstarter — a popular crowdfunding website where fledgling companies offer the first batches of products in exchange for financial backing — but instead chose to market the tiny gadget on a new site called Dragon Innovation.
The decision to go with a newcomer launched just last month, over a more established competitor, came down to Dragon’s ability to do more than just raise cash. It can also help manufacture the Tessel, a device that is able to control anything from a small motor to the temperature of a home brewery.
Dragon works with hardware start-ups — companies making physical technology products — to establish reliable manufacturing plans before they launch fund-raising campaigns. The goal is to avoid embarrassing delays that are common on Kickstarter and other crowdfunding sites, like Indiegogo.
“Dragon Innovation has a ton of experience working with factories abroad, and they could help us figure out a really accurate [fund-raising] goal, so we’d know that we could deliver and deliver on time,” McKay said.
Dragon founder Scott Miller believes more hardware start-ups will make the same call when they consider the obstacles they must clear to turn a prototype into mass quantities of reliable finished products, and be able to ship them on time.
Leaders of new business ventures often lack experience coordinating supply, assembly, and shipping on a large scale, which can make crowdfunding success a double-edged sword. More than 75 percent of companies that meet or exceed their fund-raising goals fail to meet delivery deadlines, according to a Wharton School study of nearly 50,000 Kickstarter projects published in August by the Journal of Business Venturing.
“The challenge with hardware is there’s a lot of unknown unknowns,” said Miller, a former vice president of Asia Pacific at iRobot Corp. “You don’t even know what to be afraid of. Entrepreneurs are always superoptimistic, which is why they make great entrepreneurs, but there are a lot of things that can seriously bite you if you don’t watch out for them.”
In most cases, manufacturing setbacks can be avoided through sound planning, Miller said, and he aims to position Dragon as the go-to planner for young hardware companies. Though its crowdfunding site is new, Dragon has coordinated manufacturing for about 100 start-ups since the firm launched in 2009, including many that have run campaigns on Kickstarter.
Believing he could improve the crowdfunding concept by linking it to the manufacturing consulting services Dragon already provided, Miller launched the site in beta in August and rolled it out publicly a month later.
So far, 11 companies have listed their products with Dragon, agreeing to hand over 5 percent of their fund-raising totals — a standard cut for crowdfunding services. McKay’s start-up, Technical Machine, hit its $50,000 goal in just three hours and has raised almost $200,000 for the Tessel.
Eventually, Dragon will charge an additional $5,000 for a consultation, Miller said, but is waiving the fee for now to attract business.
Dragon already has attracted $2.3 million from investors and forged partnerships with major companies like General Electric Co. and Qualcomm Atheros, which offer further guidance to entrepreneurs.
Miller’s company employs a team of 10 at its Lexington headquarters and 10 more in Asia, providing an on-the-ground presence in the places where many clients outsource production. He brought some of his iRobot colleagues — people who helped him set up manufacturing for the Roomba vacuum cleaner in China and India — with him to Dragon. Miller and said their collective experience makes the new crowdfunding site a good fit for hardware start-ups.
“We learned all this stuff firsthand, and we’re entrepreneurs, too,” he said. “We know how hard it is, and we want to see our clients succeed.”