Preparing for Crowdfunding - MakerCon 2014 - May 13, 2014

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In this presentation, Dragon Innovation will provide an overview for how to prepare for crowdfunding. This presentation was given at MakerCon in May 2014. Topics will include:

- Product Development
- The Old Way: Build then Sell

Share the presentation here: http://bit.ly/Dragon-MakerCon-Crowdfunding

About Dragon Innovation

Dragon Innovation works with entrepreneurs to launch hardware products and scale companies. Founded by a team of hardware experts, Dragon provides a clear path from prototype through production with unmatched manufacturing expertise and trusted connections. Dragon's client roster includes Coin, MakerBot, LIFX, Scout, Romotive, Sifteo, Orbotix, FormLabs and over 100 more companies paving the road for how new technology gets made.

Connect with Dragon Innovation

Website: http://www.dragoninnovation.com
Blog: http://blog.dragoninnovation.com
Twitter: http://twitter.com/dragoninnovate
Slideshare: http://www.slideshare.net/dragoninnovation/

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Preparing for Crowdfunding - MakerCon 2014 - May 13, 2014

  1. 1. DRAGON INNOVATION, INC. ! PREPARING FOR CROWDFUNDING ! MAY 13, 2014 MAKERCON 2014 | REDWOOD CITY ! ! ! ! ! SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM
  2. 2. No Need To Take Notes bit.ly/Dragon-MakerCon-Crowdfunding
  3. 3. Product Development ! The Old Way: Build then Sell 3
  4. 4. Woohoo!!! 4
  5. 5. Agenda 5 Arrgh!
  6. 6. Product Development ! The New Way: Sell then Build 6
  7. 7. Hardware Wave Enablers • Nearly Ubiquitous High-Speed Wireless Access • Unprecedented Global Technology Innovation • Fearless and Connected Entrepreneurs & Consumers • Available Capital • Inexpensive Devices, Access & Apps • Ability to Reach Millions of New Users in Record Time KPCB DECEMBER 2012
  8. 8. PROTOTYPING HAS NEVER BEEN EASIER • 3D Printing • Arduino, Raspberry Pi, Beagle Bone • TechShop • GrabCAD, Upverter, GitHub • SparkFund, Adafruit • Easier Access to Capital
  9. 9. CROWDFUNDING IS FUEL ON THE FIRE •Raise capital upfront •Validate product / market fit •Create engaged & passionate community early •Get the attention of media and investors •Understand build volumes New transactional model is perfect for hardware
  10. 10. Delivering Is Hard Getting from prototype to delivery is a long journey with many ‘unknown unknowns ’: •COGS, tooling and manufacturing costs •Lead times •Permanence of Quality •Iteration cycles •DFMA •Factory Selection and Management •Team Scalability •Schedule & Project Management •Specialized skills (ME / EE / SW/ Q / SC / Logs)
  11. 11. POP QUIZ Question: What is the biggest challenge in manufacturing? Answer: Communication! You cannot design in a vacuum (even if you design vacuums). Strong communication and teamwork skills are critical to success. Engineering is team sport. It’s all about the people.“Us” and “Them” won’t work.
  12. 12. Communication At Work Bi-Directional Knowledge Flow Product Designed In U.S.A. Database Sent To Cm Tooling Manufactured Parts Molded Product Assembled Final Inspection & Shipping
  13. 13. 75% OF CROWDFUNDED HARDWARE PROJECTS DELIVER LATE OR NOT AT ALL ! ! PROF. ETHAN MOLLICK, UNIVERSITY OF PENNSYLVANIA / WHARTON
  14. 14. 15 BE CAREFUL YOU DON’T SELL SOMETHING YOU CAN’T BUILD
  15. 15. 16 •COGS & Tooling Estimation •DFMA •Funding Threshold Calculation •Production Strategy & Scheduling •Marketing Strategy •Connections
  16. 16. Manufacturing Management Triangle Quality Cost Schedule
  17. 17. Cost of Goods Sold (COGS) • Direct costs for goods produced. • Does NOT include Tooling. • Actual price depends on where a company takes ownership: - Ex-Factory (XF) - FOB (add overland transport to XF) - Landed (add shipping to FOB) - Inventory (add warehousing) • Price will vary by date depending on running changes, transportation costs, currency exchange, commodity costs, etc.
  18. 18. Very Simple Retail Costing Model $ Sell-Through Price (Retail Price) Sell-In Price (Wholesale Price) COGS Retailer Gross Profit Company Gross Profit COGS
  19. 19. COGS YOUR DESIGN • Material and Component Selection • Fabrication Method • Manufacturing Efficiency (First Time Yield, machine tonnage, assembly labor, number of operations, etc.) • Quality Requirements (driven by requirements / Voice of Customer) • Packout (replaceable vs. rechargeable batteries; packaging; spares, etc.) MANUFACTURING PARTNER • BOM Transparency • Profit Margin • Labor Rate • Currency • Geographic Location (shipping, tariffs, etc.) • Capability (in-house vs. outsourced) • Supply Chain (Purchasing Power, volume (piggy back), Consigned vs Purchased, etc).
  20. 20. Controlling Costs 1.Deconstruct  the  BOM.   2.Separate  special  components.   3.Transparency   4.Compare  to  standards.   5.NegoAate  Inclusions
  21. 21. Additional COGS Strategies •Bill  of  Material  Transparency:    Require  factories  to  provide  an   item  by  item  costed  BOM.    No  mysteries  or  hidden  formulas.   •Calculate  labor  rates.    Pop  Quiz  –  How???   •Build  a  “Standard  Cost”  database.    Price  out  cost  reducJons.   •If  Jme  permits,  develop  relaJonships  with  mulJple  vendors  to   avoid  single  source  suppliers.    Leverage  is  a  beauJful  word.   •When  manufacturing  in  volume  for  a  CE  product,  it  is  criJcal  to   understand  and  control  COGS.    Focus  here!    Because  of  the   volume,  every  penny  counts  ($10k  @  1M  units)
  22. 22. 1 19 34 14 11 1328 20 2217 21 36 30 37 10 24 18 12 23 5 25 29 15 166 8 9 7 2 35 3 4 13 26 33 31 ITEM NO. PART NUMBER DESCRIPTION QTY. 1 100132 Heatsink, Aavid 60520 1 2 PCB 1 100104 Circuit board blank 1 100015 LED, Luxeon LXHL-LW6C 1 3 GATE 1 100110 Film Gate 1 100011 Backgate 1 100024 Film Spacer 1 4 Bottom 1 100144 Bottom Plate 1 100029 Leaf Spring 2 5 Knobreel 2 100106 Cover Bush 1 100151 Dowel .125 dia 2.000 long 1 100009 Driver 1 100153 Gripring .125 dia 1 100149 Knob bush 1 100007 Clutch, one-way, Torrington RC-02 1 100152 Washer, ss .125 id, McMaster 98019A310 1 100017 Knob, plastic McMaster 7354K15 1 100045 Felt washer 1 6 Reel 2 7 condentube 1 100031 Condenser lens, small Fisher Price 1 100105 Condenser Tube 1 100154 O-ring Buna -120 1 100035 Retaining ring, internal 1.062 dia 1 100031b Condenser lens, large, Fisher-Price 2 8 100162 Spacer, condenser lens, short 1 9 100136 Spacer, condenser lens, long 1 10 100163 Spacer, projector, short 1 11 FHMS Phillips M4x20 8 12 PHMS Phillips M4x8 6 13 PHMS Phillips M4x6 5 14 PHMS Phillips M5x16 8 15 FHMS Phillips M4x12 6 16 PHMS Phillips M4x12 1 17 PHMS M4x8 6 18 100150 Endplate, Right 1 19 100160 Endplate, Left 1 20 100100 Front Plate 1 21 100138 Projector Lens Housing 1 22 100148 End Spacer 2 23 100145 Top Plate 1 24 100158 Window Edmund R39-773 1 25 100146 Handle 1 26 100161 M5 Acorn Nut 1 27 100147 Half Bridge 1 28 100012 Focus Screw McMaster 92558A170 1 29 100143 Spacer, .25 dia, .19 long 4 30 100156 Spacer, projector, long 1 31 FHMS Phillips M4x8 2 32 100150 Washer, Nylon, MSC 05401757 1 33 100159 Detent 1 34 100101 Bumper, rubber McMaster 9540K35 8 35 100039 Switch, SPST rocker Carlingswitch 1 36 100155 Projector lens, concave 1 37 100157 Projector lens, plano 1 D C B AA B C D 12345678 8 7 6 5 4 3 2 1 APPLICATION DIMENSIONS ARE IN MILLIMETERS TOLERANCES: 0,1MM ANGULAR: 0 30' MATERIAL FINISH DRAWN APPROVED DATENAME TITLE: SIZE B DWG. NO. REV SCALE 2:5 UNLESS OTHERWISE SPECIFIED: KINKAJOU DELTA 100141 DO NOT SCALE DRAWING REMOVE ALL BURRS AND SHARP EDGES allen 21july04 Anatomy of a BOM • Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead and Scrap • Overland Transportation
  23. 23. • Does it matter that it is a gear??? • Components (3) 1.Material Cost 
 = Part Weight * Resin Cost 2.Machine Overhead: 
 = Hourly Cost * Cycle Time (sec) / (3,600 sec / hr) 3.Factory Mark-up, Scrap and Overhead (%) • Total Part Cost: = (Material Cost + Overhead Cost) * (1+Factory M/U) How to Calculate Plastic
  24. 24. HK Resin Prices (USD/Ton) Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp (you will need to create a login)
  25. 25. Item Cost (USD) 280 Ton / hr $15.48 220 Ton / hr $10.96 180 Ton / hr $8.38 140 Ton / hr $7.09 100 Ton / hr $5.80 80 Ton / hr $5.16 Example PRC
  26. 26. How to Calculate EE Costs • Cost = Component * Usage • Separate high cost components over a certain threshold. Apply a lower mark-up. • Apply Factory M/U
  27. 27. Typical PRC CM Margins
 (Profit, Scrap, Overhead) PCBA 6–8% Toys 12% Consumer 15% Medical >40%
  28. 28. Other BOM Costs • Deco (Tampo, Paint, etc.) • Labor (PRC $2 – 6 / hr) • Packaging (Gift + Master)
  29. 29. Add It Up • Plastic • Purchased Parts • Electrical Components • Consigned Components • Deco • Packaging • Assembly Labor • CM Profit, Overhead and Scrap • Overland Transportation
  30. 30. Agenda 31 Q&A

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