Why this DTC brand keeps using Kickstarter to launch products long after it needs crowdfunding

In 2011, Peter Dering, an engineer and photographer who found camera straps cumbersome during physical activities like mountain climbing, came up with an alternative: the Capture Camera Clip. With it, cameras can be clipped to belts, handlebars, shoulder straps, and countless other items.

Dering quit his engineering job to form Peak Design and bring the device to life.

“All I had was an idea that I thought was the bee’s knees,” Dering told Retail Brew.

But while he’d bootstrapped funding to make 1,000 units, he lacked a plan to sell them or a funding mechanism to produce more.

So Dering turned to Kickstarter and launched a campaign where backers could pre-order from that second run of yet-to-be manufactured clips for $50 (or buy one of the 1,000 he’d produced for $100 and get it sooner.) He made his pitch in a 3-minute video.

• The campaign aimed to raise $10,000 in 75 days.
• It surpassed that total in just two days, ultimately raising $364,698 from 5,258 backers.

It was textbook Kickstarter: A bright-eyed innovator with a big idea and a tiny bank account makes an earnest pitch video and money falls from the sky, with consumers paying for products to be produced long before they’re in their early-adopter paws.

And it was the beginning of a beautiful friendship (fundship?) between Peak Design and Kickstarter. To date, the company has launched 11 products on the platform—including v2 and v3 of the camera clip, raking in a total of ~$36 million.

The way this DTC brand thinks about the crowdfunding platform has evolved since 2011, however, since Peak Design, Dering said, is “well capitalized enough” that it doesn’t necessarily need to pass the hat to fund the production of a new product.

Sure, Peak Design came to Kickstarter initially for the funding. But it stayed for the crowd.

Starter your engines: While its name suggests bringing an engine to life—not to mention being synonymous with crowdfunding in the popular imagination—Kickstarter has become less of a funding mechanism and more of a sales channel for Peak Design and other brands.

“Kickstarter has been masquerading as something other than a sales channel for a long time, but it is a sales channel–and a great one,” Dering said. “Because it also comes with a way of creating closeness between the brand and the consumer that just doesn’t exist in any other sales channel.”

Dering explained the basic mechanics of pricing and margins on Kickstarter compared to the Peak Design website.

• It discounts 19% on average on Kickstarter, meaning that if it were launching a campaign for a product with a $100 MRSP, it would set the pledge rate to pre-order the product at $81. On top of that is Kickstarter’s universal 5% commission, meaning Peak Design effectively is discounting the product to $76.
• On Peak Design’s e-commerce site, in contrast, it tries to minimize discounting, like many DTC brands. However, on average, it shaves off about 14% of an MSRP with what Dering called “hidden discounts” like affiliate commissions, meaning it’s effectively discounted to $86.

But while the margin is higher on the website, twice as many people who visit a product’s Kickstarter page purchase it than those who visit its page on Peak Design’s e-commerce site, Dering explained. That means, in retail-trade parlance, that the conversion rate is twice as good on Kickstarter.

Dering added that when backers pre-order through a Kickstarter campaign, Peak Design offers a discount and free shipping if a customer adds more products from its catalog to their cart, resulting in another 25% surge in sales.

“We leveraged the hell out of Kickstarter, and have nothing but love for it,” Dering said.

Hitting (up) the fan: Peak Design is “certainly one of our most successful creators of all time,” Heather Swift Hunt, head of design and tech at Kickstarter, told Retail Brew. “Not only because of the amount of funding that they’ve received, but how many campaigns they’ve done over so many years.”

But Swift Hunt added that Peak Design is hardly unique when it comes to returning to Kickstarter for new launches, even after they’re flush.

“We regularly have companies that are raising in the millions and the multi-millions, and they’re coming back to Kickstarter,” she said, citing the coffee-appliance maker Fellow and pizza-oven maker Ooni as two DTC companies that have both returned to Kickstarter for successful product campaigns after their first.

Since it’s “part of their skill set and part of their companies’ DNA, I think, to talk to people directly,” there’s an affinity between DTC brands and a crowdfunding campaign, Swift Hunt said.

“It’s basically like they’re launching a fan club for a product and really capturing the interest of those early adopters,” Swift Hunt said.