This is probably an underestimate for the product development phase. And if you want to sell to Best Buy you usually need to work with a distributor who has their own margin. Rule of thumb is 3-4x COGS to get to MSRP.
Will Your Hardware Startup Make Money?
11–20 of 86 posts
Re: Will Your Hardware Startup Make Money?
#12This article made me think of Betteridge's law of headlines
(https://en.wikipedia.org/wiki/Betteridge%27s_law_of_headline...): "Any headline that ends in a question mark can be answered by the word no."
On a serious note, it surprised me that the BOM listed the shipping materials as being about as expensive as an assembled and flashed PCB. It's interesting that a cardboard box (which feels pedestrian) costs about as much as a printed circuit board (which feels a little like magic).
Re: Will Your Hardware Startup Make Money?
#13Those salaries seem absurdly low.
Also, why is the cost of employees with overhead lower? (NB/EDIT: Pointed out below this is for 3/4 of the year, not the full year - but the rest of my point stands.) That makes zero sense. Surely they are paying payroll tax, unemployment insurance and health insurance for their employees, no?
Re: Will Your Hardware Startup Make Money?
#14Those salaries seem absurdly low. Also, why is the cost of employees with overhead lower? (NB/EDIT: Pointed out below this is for 3/4 of the year, not the full year - but the rest of my point stands.) That makes zero sense. Surely they are paying payroll tax, unemployment insurance and health insurance for their employees, no?
> Also, why is the cost of employees with overhead lower?
I think that's the cost of the employees for the 9 months (not 12) it takes them to do the required work.
Re: Will Your Hardware Startup Make Money?
#15Those salaries seem absurdly low. Also, why is the cost of employees with overhead lower? (NB/EDIT: Pointed out below this is for 3/4 of the year, not the full year - but the rest of my point stands.) That makes zero sense. Surely they are paying payroll tax, unemployment insurance and health insurance for their employees, no?
> Also, why is the cost of employees with overhead lower? I think that's the cost of the employees for the 9 months (not 12) it takes them to do the required work.
Oh right. Math. Yes. Good call.
Re: Will Your Hardware Startup Make Money?
#16An ee that can program and do some simple mechanical design can do all that engineering himself.
Maybe for a simple box, but for an injection moulded curved enclosure like the headphone example? If you didn't get that designed by someone who'd done it before you'd be taking a huge risk.
Re: Will Your Hardware Startup Make Money?
#17Finding a talented EE for 75K/year seems like an impossible endeavor (if I read this correctly)
Not in the midwest, or many other parts of the country. Check Glassdoor for rough numbers. Salaries are reasonable, cost with overhead is questionable.
Long story short on all this, if you've never made hardware before and are going to make hardware, take the risk with other peoples money... if at all.
Re: Will Your Hardware Startup Make Money?
#18You're software start-up probably won't make you money either. At least for hardware, people don't have so many free options. The barriers to entry are also higher. Someone won't be developing hardware after a 12 week online course. To me it looks like a great time to build hardware.
Kickstarter has really changed the game. These guys launched today, for example, and they'll probably be funded within 24 hours:
https://www.kickstarter.com/projects/1152958674/the-sensel-m...
Re: Will Your Hardware Startup Make Money?
#19I would add a few additional things to consider when thinking about a hardware product (via retail). First, creating additional value for your entire supply chain is extremely important, and gives you a lot of leverage. The OP mentioned this indirectly via high demand products creating walk in value, but additional value also can include selling a higher value/higher margin product, or creating a product that is highly consumable and has a high churn rate (think 5 hr energy). Ultimately the retailer is trying to maximize the $/sq ft in their store, and doing the things mentioned above will certainly help with that. Also selling a product that drives accessory purchases will give you additional leverage. Think phones that push purchases of cases and screen covers. Also think of Apple and the huge amount of floor space their products take up in a Best Buy. They can do this because of the higher value their products offer to the retailer. In addition, the higher value product you sell, the lower margin your retailers can be willing to take in order to sell the product. Ultimately, the retailer has to make more money with your product than the other products he or she could be selling in the same space to justify selling your product. This line or reasoning goes for your suppliers as well, especially if you are working with a factory that is near or at at capacity.
Re: Will Your Hardware Startup Make Money?
#20Finding a talented EE for 75K/year seems like an impossible endeavor (if I read this correctly)
Not in the midwest, or many other parts of the country. Check Glassdoor for rough numbers. Salaries are reasonable, cost with overhead is questionable. Long story short on all this, if you've never made hardware before and are going to make hardware, take the risk with other peoples money... if at all.
I'd be curious to learn how VCs value hardware startups vs software considering this and all the other risks.