How to prevent crowdfunding from destroying the hardware revolution - SolidCon - May 22, 2014

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In this presentation, Dragon Innovation will provide an overview on how to prevent crowdfunding from destroying the hardware revolution. This presentation was given at SolidCon in May 2014. Topics will include:

- Dragon Innovation Introduction
- Product Development: The Old Way & The New Way
- Make Sure You Don't Sell Something You Can't Build

Share the presentation here: http://bit.ly/Prevent-Crowdfunding-Destroying-Hardware-Revolution

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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How to prevent crowdfunding from destroying the hardware revolution - SolidCon - May 22, 2014

  1. 1. HOW TO PREVENT CROWDFUNDING FROM DESTROYING THE HARDWARE REVOLUTION SOLIDCON 2014 DRAGON INNOVATION, INC. MAY 22, 2014 SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM 1Thursday, May 22, 14
  2. 2. Quick Survey 2 2Thursday, May 22, 14
  3. 3. MIT RoboTuna 3 3Thursday, May 22, 14
  4. 4. Disney Dino 4 4Thursday, May 22, 14
  5. 5. Product Development The Old Way: Build then Sell 5 5Thursday, May 22, 14
  6. 6. My Real Baby 6 6Thursday, May 22, 14
  7. 7. Woohoo!!! 7 7Thursday, May 22, 14
  8. 8. Agenda 8 Arrgh! 8Thursday, May 22, 14
  9. 9. Agenda 9 9Thursday, May 22, 14
  10. 10. DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009 10Thursday, May 22, 14
  11. 11. HARDWARE IS EXPLODING Unprecedented periods of growth come with lots of chaos. 11Thursday, May 22, 14
  12. 12. 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 12Thursday, May 22, 14
  13. 13. PROTOTYPING HAS NEVER BEEN EASIER • 3D Printing • Arduino, Raspberry Pi, Beagle Bone, Edison • TechShop • GrabCAD, Upverter, GitHub • SparkFund, Adafruit • Easier Access to Capital 13Thursday, May 22, 14
  14. 14. HARDWARE INNOVATION NOW COMES FROM THE LITTLE GUY 14Thursday, May 22, 14
  15. 15. Product Development The New Way: Sell then Build 15 15Thursday, May 22, 14
  16. 16. 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 16Thursday, May 22, 14
  17. 17. 17 BE CAREFUL YOU DON’T SELL SOMETHING YOU CAN’T BUILD 17Thursday, May 22, 14
  18. 18. Idea Crowdfund Manufacture PERCEIVED PRODUCT TIMELINE Prototype D E F G H I J K L M N O P Q A B C D E F G H I J K L M N O P Q R S T U V W X Y Z R S T U V W X YA B C 18Thursday, May 22, 14
  19. 19. Idea DeliverCrowdfund Manufacture MORE REALISTIC PRODUCT TIMELINE Proto CF Prep X Y ZK L M N O P Q R S T U V WI JF G HC D EA B 19Thursday, May 22, 14
  20. 20. Manufacturing is Complex 20Thursday, May 22, 14
  21. 21. Why 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) 21Thursday, May 22, 14
  22. 22. 22 •NRE for Prototype to DFM •COGS •Tooling Costs •Manufacturing Costs •Pre-Sale Price •Transaction Costs Calculate An Accurate Funding Threshold 22Thursday, May 22, 14
  23. 23. COGS Drivers 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). 23Thursday, May 22, 14
  24. 24. Controlling Costs 1.Deconstruct  the  BOM. 2.Separate  special  components. 3.Transparency 4.Compare  to  standards. 5.NegoAate  Inclusions 24Thursday, May 22, 14
  25. 25. 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 25Thursday, May 22, 14
  26. 26. • 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 Costs 26Thursday, May 22, 14
  27. 27. HK Resin Prices (USD/Ton) Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp (you will need to create a login) 27Thursday, May 22, 14
  28. 28. 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 Molding 28Thursday, May 22, 14
  29. 29. 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 29Thursday, May 22, 14
  30. 30. Typical PRC CM Margins (Profit, Scrap, Overhead) PCBA 6–8% Toys 12% Consumer 15% Medical >40% 30Thursday, May 22, 14
  31. 31. 31 •Volume Dependent (5k units Threshold) •Domestic CM (USA) •Overseas CM (China) Manufacturing Strategy 31Thursday, May 22, 14
  32. 32. 32 32Thursday, May 22, 14
  33. 33. Agenda 33 Dragon Innovation scott@dragoninnovation.com @dragoninnovate http://www.slideshare.net/dragoninnovation 33Thursday, May 22, 14

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