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How will you accept payment? Most processors will freeze your fund if they find out you are taking preorders and not shipping out actually products.
What is the difference between crowdfunding and preorders? I think it would be a mistake not to crowdfund or use preorders unless you have significant venture backing and a sticky, viral consumer product where you can somewhat accurately forecast demand, or you anticipate selling out at high margins. Don't waste your money building a product that potentially no one wants. Your crowdfunders are often the best feedback…
But you have given us something to think about.
Just take pre orders for your product in tiers make initial customers and scalpers pay a premium.
If you arent in a position to completely refund everyone, don't do it. If you need the funds to afford the manufacturing, take smaller deposits instead and use that money to negotiate a line of credit with a bank.
The idea behind taking preorders is to convince VCs that we have a market. They can get on TikTok and read the comments asking for our products, but I don't think that's going to convince them. Hence the need to have pre-orders.
Any idea how many pre-orders is enough to validate a new hardware product? The MSRP is $200.
If you arent in a position to completely refund everyone, don't do it. If you need the funds to afford the manufacturing, take smaller deposits instead and use that money to negotiate a line of credit with a bank.
I agree. If we take preorders, we will make sure we can refund them completely if we don't deliver. The idea behind taking preorders is to convince VCs that we have a market. They can get on TikTok and read the comments asking for our products, but I don't think that's going to convince them. Hence the need to have pre-orders. Any idea how many pre-orders is enough to validate a new hardware product? The MSRP is $200…
It convinced VCs of absolutely nothing. So I just went ahead and served those customers with a backup plan that the web services behind it could be run by the customers themselves if I folded.
To be honest, it didn't exactly work but I'm still going.
The product costing $200 isn't enough information to give an answer on proving the market. VCs don't necessarily put any value on a basic question of simpler product transactions. They want "eco-systems" and "crowd dynamics" and potential unicorns. You'd be better off with normal financing if you have demand for enough widgets to make a viable business, plus the bonus of not having to give up any equity to some disinterested finance bro.
There's nothing inherently unethical about taking preorders. Tesla's controversial business practices aside, pretty much every car manufacturer takes preorders, not to mentions books, games, etc. Where preorders get unethical is where people start selling things that don't exist or they can't reasonably deliver on, or when companies don't have sufficient financing to produce the good without the preorder sales (since…
Our MVP worked fine. In fact we were reviewed by the BBC last year. It's our new version that isn't ready yet. Our chip supplier has asked us to order 6 months ahead. We do have the BOM and the hardware files at this point. We are at the point of getting our prototype boards manufactured. But the state of the world is definitely a challenge.
We would like to take preorders for two reasons: firstly to convince VCs that there is a market, and secondly to gauge how many chips we need to order.
Thank you for helping me think this through. I am beginning to see some upsides to crowdfunding even though I am turned off by how manipulated it has become (with paid backers, etc.)
Earlier quoted context omitted.
I agree. If we take preorders, we will make sure we can refund them completely if we don't deliver. The idea behind taking preorders is to convince VCs that we have a market. They can get on TikTok and read the comments asking for our products, but I don't think that's going to convince them. Hence the need to have pre-orders. Any idea how many pre-orders is enough to validate a new hardware product? The MSRP is $200…
Back when my startup started out, we took 10 orders although the product was B2B and the average order size was around $5000. It convinced VCs of absolutely nothing. So I just went ahead and served those customers with a backup plan that the web services behind it could be run by the customers themselves if I folded. To be honest, it didn't exactly work but I'm still going. The product costing $200 isn't enough infor…
Our TAM is $12 Billion, expected to reach $32 billion by 2025. It is a large, fast-growing market. We can definitely be a unicorn. But I have to dwell some more on the question of ecosystems and crowd dynamics.
Earlier quoted context omitted.
Back when my startup started out, we took 10 orders although the product was B2B and the average order size was around $5000. It convinced VCs of absolutely nothing. So I just went ahead and served those customers with a backup plan that the web services behind it could be run by the customers themselves if I folded. To be honest, it didn't exactly work but I'm still going. The product costing $200 isn't enough infor…
Glad to hear you are still going! Our TAM is $12 Billion, expected to reach $32 billion by 2025. It is a large, fast-growing market. We can definitely be a unicorn. But I have to dwell some more on the question of ecosystems and crowd dynamics.
I like to use the (now failed) Logitech Harmony Remote. The remotes were good, not the best, but good. The real value was the massive database of equipment that the users put together. Logitech ended up with a massive, crowd sourced database of infrared remote commands that made the remotes much more compelling for the users who came later.
My widgets aren't special in any particular way (except maybe the firmware). Even if somebody grabbed the firmware, the real value is in the database of stuff that the devices are gathering, because individually it's worthless but at scale it's incredibly powerful.