Cedar Anderson’s quiet bush shed has been home to many dismantled appliances, spare parts and new contraptions over the years, but it’s also the unlikely birthplace of one of the world’s largest-ever crowdfunded start-ups. For this humble inventor who grew up on a community farm outside Byron Bay, starting a multi-million dollar business had never entered his mind. Yet as a passionate environmentalist and former paragliding instructor, Cedar’s lifelong interest in beekeeping made him wonder: could there be an easier way to extract honey from beehives, so the bees wouldn’t be stressed?
Cedar joined forces with his like-minded dad, Stuart, and together they spent 10 years examining bee hives and tinkering in their shed. Many iterations, prototypes, and patents later, and the ‘Flow Hive’ was born. To fund production, the Andersons turned to crowdfunding with the hope of raising US$70,000 to buy a new tool that would enable production. “We were looking at fairly smalltime manufacturing. I would have been completely amazed if we had made it to a million dollars,” says Cedar. What happened next made headlines across the world. When the Flow Hive launched on US crowdfunding platform Indiegogo in April 2015, the target goal was reached in minutes. Within a day, they had raised more than US$2 million. By the time the campaign ended eight weeks later, the Andersons had secured 24,000 orders worth over US$12.2 million – the most successful crowdfunding campaign ever completed outside the US.
“It was such an intense time for us, working around the clock,” says Cedar. “It was also a bit daunting – we had just created a monster of a start-up business and now we had to fulfil the obligations to all the amazing people that supported us.” Reality hit – how would they fulfil all of these Flow Hive orders from more than 140 countries with no manufacturing or delivery facility? Diverting from their original plan of manufacturing in China, the Andersons found local Australian manufacturers and began shipping six months later.
“We did have a pre-production model up and running but we didn’t have the capacity to produce what we needed. The next step was to upscale what we had done,” explains Cedar.
In order to fulfil thousands of orders, the Andersons have employed more than 20 staff, with hundreds more working at factories in Australia and the US – which proved to be a new challenge for Cedar. “I’ve been pretty much a solo or duo worker with my dad, tinkering away, and now there is just so much going on — so many staff to talk to and communicate with and organise. That’s challenging.”
Overnight million-dollar successes aside, a surprise for many crowdfunders is the ‘hidden’ cost of a campaign. Canberra-based founder of Erroyl watches, Wes Knight, launched a crowdfunding campaign on Kickstarter in December 2014 that netted almost AU$41,000 after an original target of AU$15,000. He admits the company had to comprehensively review costs after their initial success.
“We underestimated costs of shipping and the fees charged by Kickstarter and bank transactional fees.” Fees at the two largest crowdfunding platforms, Kickstarter and Indiegogo, range from 7-10 per cent of total funds raised, including payment processing fees. And then there’s the emotional cost. US-based Lindsey Laurain, whose business Ezpz used Kickstarter to Successfully crowdfund the first large-scale production run of its signature product the ‘Happy Mat’, a silicone placemat and plate for children, warns that crowdfunders should realise just how much hard work is involved when a campaign is successful.
“I have learned to keep my head down and deal with the surprises, plus the highs and lows that come along with the unpredictable nature of startups,” she says. Flow Hive’s Cedar talks of feeling stress for the first time, and having to work as a manager in a physical office as opposed to his preferred role: designer in a bush shed.
“It’s been 10 months since I’ve been able to do design work because I’ve been too busy running around trying to manage this organisation,” he says.
Another pitfall of instant and very visible online crowdfunding success is seeing counterfeit products appear online. This is exactly what happened to Ezpz’s Lindsey, who has seen versions of her Happy Mat pop up on online marketplaces such as China’s Alibaba.
“I am fairly confident that unethical manufacturers watch crowdfunding platforms for successful products to copy,” she says. “A lot of these manufacturers already have equipment and resources, so it’s relatively easy for them to replicate strong products and ideas. We are choosing to take the high road and continue with our mission.”
Even copies of Flow Hive appeared on the market within months of Cedar’s crowdfunding campaign.
“The imitations are unlikely to work,” he says. “But we didn’t think it would happen quite so soon. What they’re doing is completely illegal, so we’ve been pointing it out to the platforms.”
As well as dealing with imitators, the Andersons have had to cope with unexpected attention and the huge volume of emails they’ve received since their campaign finished – sometimes as many as 1000 per day.
“We’ve got a dozen people working full-time just writing back to the emails that come in,” says Cedar. “And all of these people are really important to us because they’re our customers, they’re our future. They’re the people that supported this project so it’s important we get back to them and it’s important they get good answers. That’s quite a challenge, and in some ways that was unforeseen by me.”
According to Wes, communicating effectively with investors is the single most important element during and after any crowdfunding campaign. “Engaging with your backers, taking on their suggestions and ideas, answering questions and addressing concerns are all essential to a successful campaign,” he says.
For Lindsey, that constant communication with backers has even created a community of passionate Ezpz brand advocates.
“Kickstarters, our early adopters, are the best product testers and sounding boards, and they generate a ton of word of mouth for the business,” she says.
“Our backers received the Happy Mat before it was available to the general public, which gave us a ready-made focus group – all before we sold our first mat on ezpzfun.com.”
Despite all the unseen challenges of a campaign that far exceeds its goals, a successful crowdfunding campaign undoubtedly provides a huge boost for start-ups. Erroyl’s Wes believes crowdfunding exposed his business to an audience it never would have otherwise captured or engaged with online. Erroyl has now shipped its watches to more than 40 countries, established a stockist in Singapore
and released its second collection in late November. Since its campaign ended just over a year ago, Ezpz has launched in 15 countries and pulled in close to US$1.5 million. Happy Mats are stocked in Nordstrom department stores across the US as well as in more than 300 boutiques.
In Australia at Flow Hive HQ, orders and media interest show no sign of slowing down either, with semi-trailer loads of the revolutionary bee hive dispatched every day. Cedar Anderson says one of the most rewarding parts of his company’s success is seeing how family and friends have rallied behind it.
“I’ve been surprised that so many people have stepped up and just done amazing work and stood behind the project, often working crazy hours to keep things going. I’m lucky to have such skilled and supportive friends and family.”