Will Your Hardware Startup Make Money?

I'm an EE (work at a funded hardware startup) and I know a lot of other EEs working in the Bay Area. None of them make less than $100K. If you're an EE at 70K to 90K, you can make a lot more than that.

  I might just suck at PR

I don't think it's that. It looks like you did a good job of getting media coverage.

You just picked a really hard product to make successful.

The problem is J. Random Gamer has no reason to buy it, unless enough of his gaming buddies have it that he gets shut out of games if he doesn't have it. If he's the only person in the game who has it, or even if half the people in the game have it, the cheaters are still in the game and he's spent $125 without any benefit. And that's assuming the games support it - if no games support it properly, there's even less point.

There's a chapter about this sort of thing in Thomas Schelling's Micromotives and Macrobehaviour, if you're interested. Not cheaters in pc gaming (the book was written in 1978) but the game theory around similar situations.

One option is to make the product known to people who run the competitions, then wait for a major cheating scandal and lobby them to make it compulsory - but obviously that would only give you pro sales, not the much higher volume consumer sales. It might be possible to arrange a bunch of great servers where the device is mandatory, so early adopters get some benefits.

In the longer term I'd also suggest some sort of IP licensing, where something compatible with your product is built right into gaming mice. That way users have one less thing to cart around, and companies who know how to make and distribute hardware can take care of that for you. And you'll have a much easier time getting it made mandatory if it's "$1 in every gaming mouse from a variety of competing manufacturers" rather than $125 with a single source :)

For an initial production run there are a lot of fixed setup costs. Just from my gut feel 5000 units is just barely off the NRE (non recurring engineering cost) 'knee'. (And the manufacturing learning cost knee) Less than 5000 units the NRE costs start to dominate your out the door manufacturing price. So at 2000 units that might be 50% to 80% higher per unit than at 5000 units.

Also people often forget about your suppliers management, accounting, and sales overhead. That means that they will have minimum orders below which they don't make enough money justify the overhead of shepherding your product through their shop. For Chinese suppliers 5000 units appears to be typical because lower volumes are typically on-shored. On shoring is going to increase your costs by probably 30%.

You might ask the other question, why not 10,000 or 20,000 units? Answer is that starts to be a huge chunk of money for something that isn't proven.

So ans: 5000 because less the NRE kills you. And you'll have to on shore production. And no more than that because otherwise your initial production costs becomes the dominant part of the investment risk.

I half-expected a single word article with the word "no".

Acquisition costs are an interesting discussion in themselves. GoPro will have a big number partially because they are marketing-heavy. If you're not (yet) aspiring to be a world-beater, there are plenty of scrappy ways to acquire customers.

Kickstarter, obviously, is a big one. Never mind what people say about needing your own audience - yes, but you gotta start somewhere, and if you've got the message, Kickstarter's got the soapbox.

Another is simply being media-saavy. The press has to write about something, so don't forget that they need you, too. But you have to learn how to pitch stories.