Summary:

Dragon Innovation has helped startups behind the Pebble Watch and the Sphero build their products. Now it has raised $2.3 million to help other hardware companies get their ideas funded.

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Dragon Innovation, a consulting company that has helped startups like Pebble Watch and MakerBot figure out how to take their ideas and create shipping products, has raised $2.3 million to help expand its suite of services. The seed round was led by Flybridge Capital Partners and Foundry Group, with additional backing from The Box Group, Lerer Ventures and Undercurrent Ventures.

The company, which was founded in 2009 by Scott Miller, a former iRobot alum, has been helping startups understand the ins and outs of manufacturing hardware and with this funding it hopes to help them manage better crowdfunding campaigns as well. “We see the fundamental way that product development has been done is changing and is changing really rapidly,” says Miller. “And one of the biggest change agents here is crowd funding.”

It’s an area he’ll discuss in depth at our Mobilize conference October 16 and 17th in San Francisco.

Dragon Innovation's Scott Miller.

Dragon Innovation’s Scott Miller.

Miller, who is also a general partner over at the Bolt hardware accelerator, contrasts today’s ability to fund and launch products on Kickstarter or Indiegogo to his days building robots at iRobot. “We’d spend millions in stealth mode developing new products and then even more millions in advertising and marketing to convince people that it was something they wanted to buy,” Miller said. But while that worked in the case of the Roomba (vacuuming robot), it was a less productive strategy with the Scooba (wet mop robot).

With crowdfunding, feedback from the community can help entrepreneurs read the market before investing millions. Plus in the case of startups, it can also help them get enough money to build their dream and help validate the product so investors come to the table. But the people who build cool hardware aren’t always great at managing a crowdfunding campaign.

Since Dragon has already helped startups from Orbotix (Sphero) to Romotive and Pebble learn the tricks of building and manufacturing a viable hardware product (everything from your tooling to your shipping costs could trip you up), it decided to help with building the right crowdfunding campaign for a product since it’s an essential step in this shift in how product development is changing.

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Miller has identified four stages in the path from idea to retail-quality hardware:

  1. Prototyping, which is all about figuring out the right product to build and whether or not you can afford to develop it and manufacture it at scale if need be.
  2. Fundraising, which can include venture capital, investing profits from the business or crowd funding. Since crowdfunding is the most popular venue for many of these startups, this is where Dragon is focusing.
  3. Making, which is the original Dragon mission, where it acts as a guide or a go between with factories, finding the right place to build your stuff.
  4. Selling, which is an area where Dragon doesn’t have an offering yet, but will in the near future. This area focuses on getting products into the right distribution channel, be it Best Buy or QVC.

Another area that Dragon is considering is an internal fund that could invest in clients. Miller says he’s not sure if Dragon would create an index fund of all of its clients that agree or if it would be a more targeted effort. As he points out, because his company is helping clients with the manufacturing of their actual product, Dragon is in a good place to understand the ins and outs of the business — if that business is focused on producing a physical product.

As for the success of this shift in making and marketing hardware, and what it means for the companies trying to build a real product business starting with Dragon and crowd funding sites, the jury is still out. When I asked Miller if he thought success on Kickstarter closely correlated with success as a mainstream product he said, “This is such a fundamental change in product development and we’re still in the airplane and watching it land.”

(This story was updated at 7:54am PT to correct the spelling of Dragon Innovation.)

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