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Will Your Hardware Startup Make Money?

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Re: Will Your Hardware Startup Make Money?

#51
post #42

I did a hardware startup earlier this year ( http://gameref.io ) and tried to fund it via Kickstarter. I need to write a post-mortem one of these days, but even after significant media coverage (including PC Gamer, Vice, Polygon, etc.): - http://www.pcgamer.com/introducing-gameref-the-anti-cheat-ha... - http://www.redbull.com/en/esports/stories/1331720277392/game... - http://www.pcgamesn.com/gameref-is-a-prototype-an…

How much were you trying to get funded? And who was your target audience? Congrats on getting as far as you did though. I'm sure you learned a lot. As the Buddhist saying goes: nothing is ever wasted.

Thank you for your kind words! You probably don't realize it, but they actually mean a lot to me :)

My goal was $200k. Some people criticized it for being too high, but I think it was actually a pretty conservative estimate. Oh well, c'est la vie.

Re: Will Your Hardware Startup Make Money?

#52

I'm having trouble with this article and I hope someone from HN will help clarify for me: why was an initial run of 5000 units selected? This seemingly arbitrary number seems too important in HW development to be relegated to a single non-explanatory bullet point. If my understanding is correct, product dev teams seem to aspire to an initial 500 - 2000 units for that initial run as the symbolic point of reaching this…

Producing 500 or 2000 units would virtually require the same time, so you may as well get a standard batch size and improve your margins.

Re: Will Your Hardware Startup Make Money?

#53
post #26

Earlier quoted context omitted.

I know the EE space well in SF Bay Area (source - I was an internal recruiter for a hardware based startup). EE generally sits between 70-90k (but have seen people demand $120k), whereas software developers (especially mobile) is more like 90-120k (and for top talent sits around $150-200k). Depending on the financial health (i.e. funding) of the company, the full cost of an employee can range from 1.25x-1.80x their b…

But if your an EE and a software dev can you get 75 + 100 or $175K ? :-) One of the best advice my Dad ever gave me when I was thinking about majors in college was that you could program computers with an EE or a CS degree but without an EE degree they probably wouldn't let you build/design them. The math and physics were, to my taste, more difficult but I got tremendous satisfaction in being able to understand a com…

You don't need a degree for common sense.

My parent spout a lot of the same nonsense. Just who exactly are these "they" gatekeepers the Boomers keep referring to? Pretty sure "they" are the same keepers of great wisdom such as "Housing prices will always rise", and "Work hard, you'll get a pension and gold watch," sorts of people. Not intentionally wrong, but definitely behind the times.

Want to make a computer? WE don't need "them" to gatekeep their own bullshit anymore. Everthing, including fabs has been virtualized and is available online. Funding, PCB design and layout, soft-hard your FPGA ASIC designs, etc, etc, etc. Make your tradeoffs same as the rest of us, but don't think for a second that you must have "them" to make that computer.

I know it's not really that easy (my parents spout the same nonsense all the time, but I love them nonetheless), but try to surround yourself with enablers not gatekeepers. And be able to quickly differentiate between the timeless and the boomer knowledge.

Re: Will Your Hardware Startup Make Money?

#54

I'm having trouble with this article and I hope someone from HN will help clarify for me: why was an initial run of 5000 units selected? This seemingly arbitrary number seems too important in HW development to be relegated to a single non-explanatory bullet point. If my understanding is correct, product dev teams seem to aspire to an initial 500 - 2000 units for that initial run as the symbolic point of reaching this…

Producing 500 or 2000 units would virtually require the same time, so you may as well get a standard batch size and improve your margins.

There's a big difference between 2000 and 5000 unit initial runs... why 5000?

Re: Will Your Hardware Startup Make Money?

#55
post #18

You'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:…

[deleted]

Re: Will Your Hardware Startup Make Money?

#56

This is a great article and the estimates are decent for what it is. The ultimate point is absolutely right: you will not make money on your first production run. But there are three big warnings that should be in BLINK tags under the headline: (1) This is a decent estimate for a completely commodity product (Bluetooth headphones). No iOS/Android app development, no content development, very little custom firmware or…

What's your estimate for item 3?

i think OP was suggesting you look at GoPro / Fitbit's filing documentation with the government, which publicly discloses these numbers.

i'll look for them and update this comment if i find them

----------

> We have recently begun to spend significant amounts on advertising and other marketing campaigns to acquire new users, which may not be successful or cost-effective.

> We have recently begun to spend significant amounts on advertising and other marketing campaigns, such as television, cinema, print advertising, and social media, as well as increased promotional activities, to acquire new users and we expect our marketing expenses to increase in the future as we continue to spend significant amounts to acquire new users and increase awareness of our products and services. In 2014 and for the three months ended March 31, 2015, advertising expenses were $71.9 million and $21.1 million, respectively, representing approximately 10% and 6% of our revenue, respectively. While we seek to structure our advertising campaigns in the manner that we believe is most likely to encourage people to use our products and services, we may fail to identify advertising opportunities that satisfy our anticipated return on advertising spend as we scale our investments in marketing, accurately predict user acquisition, or fully understand or estimate the conditions and behaviors that drive user behavior. If for any reason any of our advertising campaigns prove less successful than anticipated in attracting new users, we may not be able to recover our advertising spend, and our rate of user acquisition may fail to meet market expectations, either of which could have an adverse effect on our business. There can be no assurance that our advertising and other marketing efforts will result in increased sales of our products and services.

ALSO

> Revenue increased $474.3 million, or 175%, from $271.1 million for 2013 to $745.4 million for 2014. A substantial majority of the increase was due to an increase in the number of devices sold from 4.5 million in 2013 to 10.9 million in 2014, including $151.9 million from new products that we began selling in 2014. U.S. revenue, based on ship-to destinations, increased $356.5 million, or 173%, from $206.1 million for 2013 to $562.6 million for 2014 and international revenue, based on ship-to destinations, increased by $117.9 million, or 181%, from $65.0 million for 2013 to $182.9 million for 2014.

So ballpark 11 million units sold in 2014, and 71.9 million dollars in advertising in 2014

That's $6.59 worst case customer acquisition cost (assuming no repeat customers)

http://www.sec.gov/Archives/edgar/data/1447599/0001193125151...

Re: Will Your Hardware Startup Make Money?

#57
post #26

Finding a talented EE for 75K/year seems like an impossible endeavor (if I read this correctly)

I know the EE space well in SF Bay Area (source - I was an internal recruiter for a hardware based startup). EE generally sits between 70-90k (but have seen people demand $120k), whereas software developers (especially mobile) is more like 90-120k (and for top talent sits around $150-200k). Depending on the financial health (i.e. funding) of the company, the full cost of an employee can range from 1.25x-1.80x their b…

so mobile developers are in more demand right now than full-stack in SF? ( that is what it sounded like to me)

Re: Will Your Hardware Startup Make Money?

#58
post #42

I did a hardware startup earlier this year ( http://gameref.io ) and tried to fund it via Kickstarter. I need to write a post-mortem one of these days, but even after significant media coverage (including PC Gamer, Vice, Polygon, etc.): - http://www.pcgamer.com/introducing-gameref-the-anti-cheat-ha... - http://www.redbull.com/en/esports/stories/1331720277392/game... - http://www.pcgamesn.com/gameref-is-a-prototype-an…

Curious what the endgame looks like for hardware startups that fail? One of the things that appeals to me about software startups is that if they don't work out, I've learned a lot of valuable technical skills that there's a market for. I can easily do some consulting or get a job with a fast-growing company to replenish the bank account, and then try again if I have another idea.

Is there the same transferability with hardware startups? Do other companies love to hire failed hardware entrepreneurs the way they usually like to hire failed software entrepreneurs, or do you just write off the money and time spent on the startup as a dream forgotten?

Re: Will Your Hardware Startup Make Money?

#59
Is he using COGS in the right sense? I think he means CIF, cost/insurance/freight. My company produces products in Europe and Japan and we use the term 'landed CIF' to include all the costs associated with mfg, freight, and duties before it hits our US warehouse.

COGS for us is how much is sold through a distributor to an end user.

Re: Will Your Hardware Startup Make Money?

#60
post #37
post #18

You'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:…

I tried to launch a hardware start-up on Kickstarter earlier this year ( http://www.pcgamer.com/introducing-gameref-the-anti-cheat-ha... ). Unfortunately, it didn't get funded. I might just suck at PR, but I don't think The Sensel Morph is really representative of your run-of-the-mill funding experience.

These guys raised $650k for their keyboard last month:

https://www.kickstarter.com/projects/keyboardio/the-model-01...

I think a lot of these guys try to build a following before they launch.

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