The cardboard bicycle project’s Indiegogo campaign is clearly struggling. As of Friday, July 5, the project had raised US$29,124 of its $2 million goal. Cardboard Technologies has gotten plenty of blowback from its community of fans that it priced the bike too aggressively at US$250–as we pointed out when the campaign launched. A cardboard bike at less than $100 is interesting to a lot of people. But one priced above $200 feels like price gouging.
Three days ago, Izhar Gafni and his team decided to reduce the price of the bicycle from US$250 to US$95 (+ US$40 shipping). It does not appear to have moved the needle much on the fundraising efforts, as they were around $25,000 when they made the decision. But, to be fair, we should give it time to gain traction. After all, it is a holiday weekend in the United States.
On the surface, this development seems like negative news for Cardboard Technologies. After all, it may have squandered some of the goodwill they had built up during a PR blitz in the past year, which often quoted a $20 price point for the bike. But there is another way to look at it as well. By getting the product in front of consumers at this early stage, it has very definitive market research that says a “skimming” strategy of high initial prices for the bike is not appropriate for this product given its backstory. Cardboard also now knows much better how to frame the bike’s value proposition to consumers. Now that the initial hype around the product has worn off, the Indiegogo campaign gives them a more sober look at what they will face in the market.
The cardboard bike campaign represents the best and worst of the newest fundraising strategy known as crowdfunding. Thanks to their campaign, Elmish and Gafni learned quickly that a $290 version of the bike—even if only temporary—would not fly with consumers. Crowdfunding the project enabled the creators to analyze their pricing mistake before investing thousands of dollars into mass production. Of course, publicizing their strategy and taking money from consumers before their product hit the market opened them up to criticism. A consumer-base expecting a $20 product may feel betrayed, or skeptical that Cardboard Technologies will be able to deliver when the time comes….. By lowering the price of their product, Cardboard Technologies is hoping to change course before it’s too late.
A recent email I received from Cardboard Technologies team reads, in part, “We remain committed to raising the funds necessary to establish our first production facility; therefore Cardboard Technologies will assume responsibility for raising all additional funds necessary via equity investment.” Now all the stakeholders can gauge market potential for the product much more clearly. In essence, the Indiegogo campaign has helped to “de-risk” the equity shareholders’ investment. Whether or not the campaign raises $2mm, in one regard it has already succeeded.
UPDATE! July 15, 2013 – Cardboard Technologies announced this morning that it is ending its Indiegogo campaign. An email to their supporters reads:
We embarked on our crowdfunding campaign with the aim of incorporating you, our supporters, in the cardboard revolution and in helping us to raise the funds needed to build our first factory. We learned that, without a production facility in place, we were not able to provide you with a truly affordable bike within a reasonable period of time. We have therefore partnered with equity investors to build our first production facility.
Cardboard found out a lot about what the market wanted out of its product: there is interest, but only if the bike is inexpensive and it can be delivered in a reasonable amount of time.