You're reading: ​Ukrainian hardware startups face and overcome the perils of crowdfunding

The phenomenon of crowdfunding, which means people pre-ordering a product at a stage when its creators only have a prototype or even just an idea, has been around for a while but has become particularly popular over the last five years. What started mostly in the U.S. has spread first to Western Europe and, gradually, to the east, including Ukraine.

For hardware startups, entering markets through crowdfunding campaigns is often a no-brainer. It looks like a perfect strategy, as you can raise awareness of your product among early adopters and at the same time get some money for the first production batch without giving up equity.

Although not every crowdfunding campaign is successful from the first attempt, that’s not a reason to give up. Learning this the hard way, two Ukrainian hardware startups — Branto and Hideez, — recently launched campaigns on the Indiegogo platform after failing to hit their goals on another website, Kickstarter.

What’s on offer

The two Ukrainian startups launched their campaigns on Indiegogo in mid-July, with Branto aiming at $50,000 and Hideez at $35,000. Both opted for the “flexible funding” option, which means that they will get the money raised even if the goal is not achieved.

Dnipropetrovsk-based Branto offers the backers (which is crowdfunding slang for the people pledging money) a feature-rich smart home hub with a 360° camera. Among the use cases of the gadget priced at $279 for the first 150 backers are remote presence applications, control of smart appliances and audio streaming. It even has an infrared transmitter to control the A/C or TV.

The other product, Safeband by Hideez, is a $69 smart bracelet that works along with small Bluetooth-enabled tags to provide additional security for privacy-concerned users and those working with sensitive and confidential data.

“Safeband is like an e-passport that authenticates the user and then grants them access to all their accounts, passwords and services. You can unlock devices with the bracelet, then they will lock automatically when the Safeband (and the user) is not around anymore,” explained Oleg Naumenko, chief visionary officer at Hideez.

Although headquartered in Kansas, Hideez has an all-Ukrainian team based out of Ukraine, China and the U.S. Its founders used to work together at Pocketbook USA but then sold the company and entered the new venture.

Setting the goals

Both Hideez and Branto have significantly lowered the target amount they want to attract with their campaigns. The initial ambition for Safeband was to raise $100,000, while Branto set a moonshot Kickstarter goal of $500,000.

“To hit that goal, we would’ve had to invest significant amounts of money in advertising to attract the audience. We had the tools for that but then decided that the buzz (we had generated) in the U.S. was enough for us,” said Branto CEO and co-founder Max Yosef Mets.

It’s not that important for Branto how many units will be produced in the first batch, Mets explained, as the main goal for now is to get real users’ feedback.

Hideez, on the other hand, decided to lower the goal because they’ve already completed some of the tasks they wanted to raise the money for, including setting up production lines and getting the first factory-made prototypes.

Change the platform, refine the product

An interesting observation that both Naumenko and Mets have mentioned is that both products got significantly improved between the campaigns.

“The main breakthrough is the eye scanning,” said Naumenko. “Now we can scan the iris with a paired smartphone’s front camera to authenticate the user and unlock the bracelet.”

The new way of authentication may be even more secure than taking fingerprints, as the iris is being scanned for five seconds, so that hackers won’t be able to put a static photo in front of the camera.

For Branto, the changes are also easily noticeable.

“We’ve installed a new CPU, video unit, changed some mechanical parts and the material of the case, as well as improved the audio and video quality,” Mets said.

As for changing the platform, it turns out that failing on one platform makes you very welcome on the other.

“People from Indiegogo contacted us after the Kickstarter campaign and invited to re-launch it there,” Mets recalled. “The moderators there are very attentive, they gave us recommendations on how to fashion the page and promote it.”

Lessons learned

For Branto, the main take from the first campaign is quite obvious.

“We’ll never set a goal at $500,000 again,” Mets said. “To attract enough backers for this goal, you need to have quite a lot of money to spend on advertising. Internal traffic isn’t enough in this case.”

Hideez can also add a few impressions.

“The main lesson is to not place too much confidence in American (marketing) agencies,” said Naumenko. “You need to grow your contact base among potential backers and journalists yourself, no one will do that for you. (…) This time, we’ve also contracted an agency but we’re working on the main tasks ourselves.”

Another thing Hideez is now aware of is that a campaign launched around Christmas has little chances to be successful.

This time, however, things seem to be better for both startups. At the time of writing, Branto has already hit its $50,000 goal, while Hideez still has eight days to attract more backers.

Freelance writer
Andrii Degeler can be reached at
[email protected].The Kyiv Post’s IT coverage is sponsored by AVentures Capital, Ciklum, FISON and SoftServe.