Scott E Vest on Indie GoGo? Isn't the crowd funding platform used for start-ups seeking seed money? Scott Jordan, founder of Scott E Vest doesn't think so and he's using Indie GoGo to get back to where he started with his business. I spoke with Scott the day before his Indie GoGo campaign went live to get some insights as to why an established business would use crowdfunding.
“I want to use Indie GoGo as an awareness campaign,” he said. “The Genesis of the idea is we're looking to expose our brand to more customers. That's part of the reason why we went on Shark Tank, in this case it's to raise awareness and sell product. Most people raising funds on Kickstarter and Indie GoGo need money to make the product – I want the customer. There's no risk in getting product with us, which is not necessarily so with other crowdfunded businesses.”
The dark side of crowdfunding is when a business raises money, hits their target, and doesn't fulfill orders to customers. An established business, like Scott E Vest, has the ability to fulfill orders and probably has a lot more to lose if they don't. As Jordan says, “We recognize the success of other companies – a drinking hoodie raised 600K, Pebble raised $20 million – crowdfunding works to find the money, but we're reversing the crowdfunding platform. We're using it to find the crowd.”
Scott E Vest Started with Crowdfunding
“The Scott E Vest Indie GoGo campaign is consistent with what we've done historically. We pre – sold other previous lines before they were made. In 2001, when I started Scott E Vest, I only had a sample – no factory, no inventory, nothing. I took orders on a pre – sale basis and figured it out.”
With apologies to Al Gore, although Mr. Jordan didn't “invent” crowdfunding, he utilized the basic principles of the crowdfunding platform, before there was a platform. He's certainly not the first business to sell product on a pre-sale basis either, Sears was doing the same thing in the 1800's with their catalogues. What has changed with the advent of crowdfunding is the ready availability of the mechanism. Now, anyone with an idea the crowd likes can theoretically get a product made.
“It creates more interest,” says Jordan, “and it ties success to market demand. It's a disruptive platform that hasn't been fully utilized. What we're seeking to do by using it as a branding mechanism will fundamentally change the current model. As an established business, it's a no-brainer. Allowing us 4 months lead time lets us know how much we product need to make. Why not ask consumer if they'd like to commit to buying the product ahead of time and pass on some savings to them?”
There aren't many established brands using crowdfunding as a pre-order mechanism, but other Shark Tank entrepreneurs have done it – before they had a brand. Shelton Wilder essentially launched her Kickstarter campaign for the Shemie the night her episode aired and pre-sold her product all the way to the campaign's goal. Gary Gagnon – a season three entrepreneur like Mr. Jordan – used Kickstarter as a pre-sale mechanism for ReKixx Sneakers. The difference between those businesses and Scott E Vest is they weren't established brands.
Crowdfunding and Branding
“There aren't many other brands currently using crowdfunding as a pre-order mechanism,” says Scott. “In the future, if campaigns like ours are successful, larger brands would be foolish not to see the benefit. People need to make the distinction between crowdfunding and pre-order. Which is it? The answer is both, but crowdfunding definitely IS a pre-order mechanism. Pebble proved an established brand and a ‘real company' can sell on a pre-sale basis. They raised $20 million. We're not looking for those kind of numbers, but if we don't do at least $600K, it will be disappointing.”
“If more brands start using the crowd to pre-sell, it can turn economy on its head. Look at Apple. They send new phones to consumers directly from a fulfillment center in China. They make what they've already sold and ship it. They can do it because they have scale. If this is successful, Scott E Vest will get the same scale, but on a smaller scale. Pre-selling enables you to recognize the benefit of scale regardless of size – which is good in ALL cases. It's a logical way of selling product. The crowd needs to see the benefit, and that benefit is passing on savings to the customer.”
“The real question is why do people fund on Indie GoGo: do they want a deal, do they like the video? How do you translate that? Indie GoGo recognizes the benefits. I wanted to do a crowdfunding campaign for quite a while and Indie GoGo made no secret of the fact they wanted our business. The story for them is it can transform the way people market their products and make them a platform for pre-selling eCommerce. If it's successful, we'll do it again. If others adopt the model, Indie GoGo could be bigger than EBay.”
The Scott E Vest Indie GoGo campaign goes live on June 24, 2015. The stated goal is modest $30K and as of the writing of this post, it's been live around three hours. They've pre-sold nearly $5K worth of the Pocket Fleece Jackets at $150 a pop, so making the $30K goal seems realistic. Can Scott E Vest get to Jordan's ‘real' goal of $600K? if it does, crowdfunding may never be the same again.