Compliance for Shark Tank and Kickstarter Innovators


Innovation is the cornerstone of American business.

This post was originally published as “Innovators: Compliance for Kickstarter” on June 5, 2015.

Hulu recently put the entire series of Shark Tank up and I’ve been binge watching.

Side note, Kevin O’Leary is my favorite shark because he’s so focused and determined to achieve his goals. I can appreciate that approach! I have a dream to have a product business that would make Kevin O’Leary offer a non-royalty/close to valuation deal.

One of the things the Sharks bring up regularly with small entrepreneurs making claims is “have you tested that?” Whether it’s diet products, medical devices, or products with potential liability concerns, the Sharks didn’t want to take a risk on a product where the presenter couldn’t address their concerns about compliance.

So, if you’re a young entrepreneur trying to start a product business and using KickStarter or Indigogo, or some other method of launching your product, how do you handle compliance?

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Let's visualize this from the start...

So, you’re on Kickstarter, you’ve come up with a really neat idea, and you want to start production now that you’ve gotten funding.

You’ve found a good lawyer, you’ve got your CPA, you’ve found a Customs broker, and you’re ready to start production!

But how do you decide which producer should mass produce your product? Do you have the funds to go to China?

You choose then what suppliers you want to talk to, and the first thing they ask you is what your specifications are, and what regulations you want them to comply with. How are you supposed to know?

This is the point at which you need to engage a testing lab, a product safety lawyer, or a product compliance consultant (such as Cascadia).

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Some examples of products where you would want support from a product compliance consultant:

  • 3D fabric printer (Flammable Fabrics Act, fiber labeling)
  • A reinvented bike helmet (CPSIA)
  • Biodegradable bag (FTC claims verification for the term “biodegradable”)
  • Electric knife alternative (FDA food contact substances)
  • Doll with natural hair (CPSIA, FHSA)
  • Large pillow (state stuffing law labeling)

3D fabric printer

For an interesting innovative product like this, you would want to ensure that you comply with FTC regulations (Federal Trade Commission), as well as the many state regulations requiring labeling on fabrics if you plan to add any filling.

A reinvented bike helmet

The CPSC (Consumer Product Safety Commission) manages regulations as set by Congress in the Consumer Product Safety Improvement Act (CPSIA). Along with many children’s products, the CPSC requires safety regulations for certain types of personal protective equipment (PPE), such as bicycle helmets.

Biodegradable bag

Performance claims are regulated by the FTC in general, but there are also many local regulations and requirements about what biodegradable labels mean and to what standard your product has to be tested to achieve the “biodegradable” claim.

Electric knife alternative

While there are no mandatory electrical safety regulations in the US, there are many voluntary standards that are not just a good idea to follow, they could possibly invalidate your product liability insurance in the case of a lawsuit/claim if you don’t have them. There is also the possibility of an OSHA (Occupational Safety & Health Association) violation if something lights on fire, etc.

Further, the FDA (Food & Drug Administration) regulates all surfaces that come into contact with food. These are called “indirect food additives” because they can be absorbed into the food, and then make the food unhealthy or potentially dangerous to human health.

A hoverboard that caused a fire in Tennessee due to faulty wiring in the lithium ion battery. The homeowners sued Amazon for $30 million - keep in mind, sellers indemnify Amazon in the T&C's, so the case against Amazon is usually thrown out, in favor of suing the manufacturer or importer, not the retailer.

Doll with natural hair

The CPSC is most famously occupied with enforcing regulations on children’s products, particularly toys. Dolls would be generally considered toys,  if they are targeted towards children (defined as under the age of 14).

However, if this is a collectible doll with natural hair with fine quality accessories and more, it may actually be considered an adult collectible. To do this, the packaging and labeling, both physically and online, needs to include a clear 14+ label on the front face, and in the age grading section of your Amazon listing.

Large pillow

A large pillow will have much the same requirements as any fabric based product – the FTC regulations fiber claims, of course.

But the more interesting regulations for stuffed or upholstered articles is at the state level. The approach that I’ve taken in the past is to register with California (you should register with your state if you’re in one of the 20+ states that regulate filling) with BEARHFTI (Bureau of Electronic and Appliance Repair, Home Furnishings, and Thermal Insulation).

Other liability concerns

In addition to the mandatory requirements, there are many products that can result in potential safety claims which may not have mandatory standards, but have voluntary industry standards that are typically followed in the industry.

You may also want to vet the suppliers before making your choice, and inspecting the shipments before you take ownership to ensure that you are truly getting the product you were expecting to mass produce.

Is your product safe and legal?

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About the Author
Rachel Johnson Greer is a global business strategist who specializes in helping entrepreneurs increase their internet product sales, curate their brand image online and avoid catastrophic legal threats. After getting her MBA in international business at Seattle University, she spent nearly a decade at Amazon working in product development. Since then, Rachel has founded companies that reached both multi-six figure and multi-seven figure growth in under three years.

As a business coach, she supports clients in everything from international product expansion to 4x-ing their sales through online retailers. Rachel is frequently sought out by the media and has appeared on the Today Show, CNBC, Business Insider, The Wall Street Journal and Bloomberg. When she’s not working with clients, she’s scaring friends at parties with stories about the most problematic online products she’s found in their homes. She lives in Seattle, Washington.

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