Voices: 15 steps to starting your own electronic-kit business is an interesting article. This engineer started her own successful electronics-kit business. Limor Fried has made Adafruit Industries into a successful electronics-kit business. You can too. Based on her own experience, she offers 15 practical steps for engineers who dream of starting their own kit business.
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Tomi Engdahl says:
Postmortem of a Venture-backed Startup
Lessons Learned from the rise and fall of @Sonar
https://medium.com/p/72c6f8bec7df
For those unfamiliar, Sonar Media Inc. was a mobile app created to help make the world a friendlier place. Our mobile app buzzed in your pocket when friends were near and ushered in a new wave of “Ambient Social Networking” companies.
And yet, we failed.
We did lots of thing right and lots of things wrong at Sonar.
The Search For Product/Market Fit
“Make something people want.” —Paul Graham
Listening to your users: False positives
“I would use your product if only you had X feature” is a dangerous signal to follow. Users do their best to anticipate what they want before they’ve seen it but, like entrepreneurs, they are often wrong.
Listening to your users: False negatives
Removing friction from existing user behaviors (e.g. checkins) almost always has a higher ROI than building castles in the sky (e.g. hypothesizing about your API). Find all the dead ends/local maxima in your current products before building new ones!
Growth vs. Engagement
Growth is the only thing that matters if you are building a social network. Period. Engagement is great but you aren’t even going to get the meeting unless your top-line numbers reach a certain threshold
Things I Wish I Spent Less Time On
“Focus is saying no to 1,000 good ideas.” — Steve Jobs
Events
Events are for research, business development, and hiring; NOT for getting to 10,000,000 downloads.
Brands & Agencies
Be polite, but postpone brand and agency “intros” until you’ve built your own audience. If you build it, they will come (and pay).
Side projects
You do not have 20% time. Identify your top three priorities. Throw away numbers two and three.
Competition
Be steady at the wheel. The only way one startup can kill another startup is by getting into the other’s head and leading them off a cliff.
Selling the company
Companies don’t get sold, they get bought. The best way to get bought is to build something of value.
Misalignment
As John Burroughs said, “A man can fail many times, but he isn’t a failure until he begins to blame somebody else.” Avoid bad relationships like the plague
It’s All About People
“The essence of competitiveness is liberated when we make people believe that what they think and do is important – and then get out of their way while they do it.” — Jack Welch
Be practical about team building
In the beginning, established people probably won’t work with you.
Culture as your cofounder
Think of culture as a cofounder that is present when you are not.
Tomi Engdahl says:
Some thoughts on startup crowdfunding
http://cdixon.org/2013/09/29/some-thoughts-on-startup-crowdfunding/
Like a lot of people, I’m excited about crowdfunding, and specifically the crowdfunding of startups now that’s it’s legal in the US. Based on my own experience investing in startups, here are some thoughts and issues that come to mind regarding startup crowdfunding.
1. Startup financings tend toward the extremes of being very oversubscribed or very undersubscribed. If you graphed out investor interest, it would look like a “U”. This is primarily the result of signaling – once a few investors commit (especially high quality ones), other investors pile on. If investors don’t commit, other investors start to wonder what’s wrong. So when you consider startup crowdfunding, it’s important to distinguish the oversubscribed cases from the undersubscribed cases.
2. Historically, startup investing returns have tended to obey power laws (Peter Thiel has a good discussion of this phenomenon here). The vast majority of the returns came from the breakout hits. And if you go back and look at the early financings of breakout hits, a lot of them were hotly contested and oversubscribed.
3. Crowdfunding works best when the backers have special knowledge about the project that leads them to fund things that otherwise would have been overlooked or undervalued by traditional investors. This happens, for example, in the Kickstarter video games category, where most of the backers are game enthusiasts.
4. When you look at the biggest crowdfunding markets – publicly traded stocks on NYSE, NASDAQ, etc – you find that
a) In general, non-professional investors lose money when they try to pick individual stocks.
b) There is a constant cat-and-mouse game between regulators and sketchy market participants
5. Most successful seed investors will say that it is mostly about investing in great people, and it is very hard to evaluate people even after multiple in-person meetings.
6. One way to look at startup crowdfunding is as the first step in a process that includes additional steps that prevent adverse selection, sketchy behavior etc. For example, a startup I know raised money recently from a single lead investor and then found additional investors via a crowdfunding site. They ended up rejecting many of the interested investors but found a few useful investors that they otherwise wouldn’t have found. In this model crowdfunding looks more like LinkedIn for investors
Tomi says:
Why Kickstarter projects are always delayed
http://hackaday.com/2013/10/04/why-kickstarter-projects-are-always-delayed/
Most Hackaday readers may remember the Spark Core, an Arduino-compatible, Wi-Fi enabled, cloud-powered development platform. Its Kickstarter campaign funding goal was 10k, but it ended up getting more than half a million. The founder and CEO of Spark [Zach Supalla] recently published an article explaining why Kickstarter projects are always delayed as the Spark core project currently is 7 weeks behind schedule.
[Zach] starts off by mentioning that most founders are optimistic, making them want to embark in this kind of adventure in the first place. In most presentation videos the prototypes shown are usually rougher than they appear, allowing the presenters to skip over the unfinished bits. Moreover, the transition from prototype to “manufacturable product ” also adds unexpected delays. For example, if a product has a plastic casing it is very easy to 3D print the prototype but much harder to setup a plastic injection system. Last, sourcing the components may get tricky as in the case of Spark core the quantities were quite important.
Tomi says:
Why Kickstarter projects are always delayed
http://z.svbtle.com/why-kickstarter-projects-are-always-delayed
My team’s project, the Spark Core, just announced our second delay, putting us a total of 7 weeks behind schedule. We keep track of our project status here.
We’ve learned an extraordinary amount since our campaign launched on May 2. We’ve had many breakthroughs, and we’ve made some mistakes along the way too. As we approach delivery, I wanted to take the time to share some of what we’ve learned and help answer the oft-asked question: why does every Kickstarter project seem to get delayed?
Creatives and entrepreneurs come up with an idea; they throw together a prototype, film a short video about it, and put it online to share with the masses and see if other folks are excited enough to contribute to bringing this idea to life. Contributions are exchanged for “rewards”, which in many cases equate to a pre-order of a new product, which are provided with an “estimated delivery date”.
Most projects (particularly hardware) are delayed by weeks, months, or sometimes more than a year. Delays tend to correlate with the complexity of the product, the level of overfunding, and the constraints on the team (e.g. are they doing this full time, is it a team or an individual, do they have other sources of funding, etc.). Sometimes the project creators run out of money and disappear, running from an angry mob of backers who believed in them once, and now want a refund.
I believe that in the end, most hardware project creators are waylaid by the same obstacles.
Founders are optimistic; that’s why we got into this in the first place
It doesn’t matter how many people tell you “Take the time you think it will take to manufacture your product, and double it.” It never sticks. Why? Because we’re optimists. Founders think we’re abnormal; we’re the exception to the rule.
Kickstarter prototypes tend to be rougher than you think
Video is a forgiving medium, as it’s easy to show the things that work and gloss over the things that don’t. Also, for many products, creating a beautiful cosmetic model can be very easy; you can get a high-quality SLA 3D printed model for ~$150, carefully apply a coat of spray paint, and you’re done.
For the Spark Core, the hardware was theoretically close to finished.
Making a prototype “manufacturable” is tricky business
There’s a massive field of work around something called Design for Manufacturability, or DFM. At a high level, this means designing products to be easy to manufacture, with two potential outcomes: decreased manufacturing cost, and increased yield.
Yield (the percentage of products that come off the manufacturing line that are fully functional) is a tricky business, and factors into your costs. If 10% of your products fail on the manufacturing line, then your manufacturer has to charge you 10% extra for the functional units to cover the cost of the “scrap”. As your product becomes more complex, the failures compound and become both more common and more expensive.
DFM isn’t necessarily rocket science, but it tends to tap into a different skill set and a different type of experience than most project creators have.
Tooling for injection molded plastic sucks
Tooling, in the context of manufacturing, is the set of tools that must be built custom for your product. When you make something on a 3D printer, there’s no tooling; every different shape comes out of the same box, without modification. But when you move into injection molded plastic, your whole world changes.
The hardness of the mold makes it last for a while, so you might get 100,000 or 1,000,000 parts out of a mold before it starts to deform. But its hardness makes it very difficult to create in the first place because carving out a very hard metal is slow, precision work. And both “slow” and “precision” really mean expensive.
Tooling for an everyday product with a plastic enclosure might cost between $10,000 and $100,000.
once you create a tool, you’re locked in.
Us entrepreneurs really like to iterate. Iterations make things better. And tooling kind of kills that for you, because it makes iterating effectively impossible
Lead-times on components may often surprise you
When you go out to source components for your product, you’re generally trying to find sources with low prices and high availability, meaning that they’ve either got a bunch in stock or they can get it pretty quickly. The problem is that these two factors are in diametric opposition; the cheapest source is the factory, but their lead times can be 12-16 weeks because they have to, you know, make it. In contrast, distributors will hold inventory of the components and therefore get them to you much faster, but holding inventory is expensive, so their prices are higher; the greater the inventory they must hold to meet your needs, the larger price premium you’ll pay.
Inevitably many products have one or two components that fall into the general category of unobtainium, i.e. impossible to find, and that often causes delays.
How to fix this? Try to avoid any components that Digi-Key doesn’t keep ridiculously large inventories of. You probably won’t be doing your sourcing from Digi-Key, but their inventory levels tend to be a good measure of how common a part is, and therefore how widely available it is.
A good way to get an early read on a component’s availability is to search for it on Taobao, China’s eBay-meets-Amazon-meets-DigiKey-meets-every-other-e-commerce-website.
Supply chain partners tend to share your optimism
It can be difficult to convince a factory to work with you when you’re a start-up. Factories tend to make their money on volume, which start-ups generally can’t offer. So if a factory is willing to work with you, it’s probably because they’re excited about what you’re doing and they hope that you’ll grow quickly, and that they’ll get to come along for the ride.
they probably don’t realize that you’ve never done this before.
The scope tends to broaden, especially with very successful projects
What happens when you set a $10,000 goal for your Kickstarter campaign — assuming that you could actually deliver the product for $10,000 — and you collect over a half million dollars?
You hire people, which speeds you up. And you do more, which slows you down.
Many project creators look at Kickstarter not as the goal, but as the beginning of a long journey.
Being transparent with your backers can be nerve-racking
This doesn’t really explain why projects get delayed, but it does explain why when delays happen, founders tend to communicate less, and backers start to get angry.
It’s scary to be expected to report out to thousands of people on a monthly basis.
It’s a slippery slope, though. Everyone starts out super open and transparent. But the first time you miss an update, or when the delays and/or the uncertainty about your timeline become unbearable, the tone changes.
So what’s the solution here? Well, I don’t really know.
For most founders, the product comes first.
There’s a saying, you can have schedule, price, or quality: pick only two. The two that Founders tend to pick – particularly on Kickstarter – are price/quality, over schedule. It’s a different ball-game when you deal with retail, where there is a real contractual monetary penalty if you deliver late.
Founders are like first-time parents. I don’t know if you’ve had children, but the first child always gets too much attention
The second baby inevitably gets the hand-me-downs of the first, and by the time you’re on the third or fourth you’ve got the process down
Products are very much similar to this – founders dote over their very first product, only to find later on that half the stuff they labored over the customers didn’t even notice or appreciate.
Tomi Engdahl says:
Design Quality and Customer Delight as Sustainable Advantages
http://daringfireball.net/2013/10/design_quality_as_a_sustainable_advantage
“The business buyer, famously, does not care about the user experience. They are not the user, and so items that change how a product feels or that eliminate small annoyances simply don’t make it into their rational decision making process.”
“The attribute most valued by consumers, assuming a product is at least in the general vicinity of a need, is ease-of-use. It’s not the only one — again, doing a job-that-needs-done is most important — but all things being equal, consumers prefer a superior user experience.”
In a sense, there are two rational Apple bear arguments. The first is that it doesn’t matter whether Apple can create superior products and experiences — the low-end competitors will eventually reach a “good enough” point that will disrupt Apple’s business.
I think Thompson has made a good argument in this piece that such logic does not pertain to consumer markets, especially ones where fashion, style, and design are important attributes. Cell phones have always been about fashion and design.
How do you quantify delight?
The second Apple bear argument comes from those who think Apple has already lost its design and experience advantage — that devices from Samsung, Amazon, Google and whoever else have already equalled or surpassed Apple’s, and at lower prices to boot.
So, as I see it, the first group of Apple bears is wrong about whether design quality can create a sustainable advantage in the phone and tablet markets. The second group is wrong about whether Apple’s products even are superior in design to those of its competitors. These are very different arguments, and largely at odds with each other.
There is a third school of Apple bears, whose philosophy is perhaps best and almost certainly most-frequently espoused by Henry Blodget. This school holds, more or less, that while design quality may allow for a sustainable advantage in some fields, it does not for software platforms. That once one software platform achieves a large majority market share, developers will inevitably flock to that platform, no matter if it’s technically and/or aesthetically inferior, based on market share alone.
Put another way, this third strain of Apple bear subscribes to the theory that iOS is the new Mac, Android is the new Windows, and Apple is about to see the 1990s all over again.
What I see with the Mac is a platform whose darkest hours were not the result of minority market share, but rather coincided with a loss of design and technological leadership over its competition.
Their hardware was un-sexy, slow, and confusingly marketed. Their OS was technically deficient (remember “cooperative multitasking”?) and just plain looked old next to Windows 95. In short, Apple’s design had faltered across the board.
The recovery of the Mac platform had a reverse correlation to the Mac’s market share. The single decision that came closest to bankrupting Apple was the decision to license Mac OS to hardware cloners — a decision that was all about attempting to increase market share for the sake of increasing market share. What the Mac’s success, throughout its entire history, does correlate to is the degree which its design qualities — hardware and software, engineering and aesthetics — were deemed superior to that of its commodity competition by consumers at the high end of the market.
Lastly, the “network effects” drum that Blodget has been banging for years is certainly a real and important factor. But modern computers — PCs, phones, tablets, all of them — are effectively just clients on one universal platform: the Internet. In the ’90s, as the Mac and Apple waned, compatibility meant connecting to Exchange servers, and reading and writing Microsoft Word, Excel, and PowerPoint files. Today, compatibility is a rarely uttered word. Twitter, Facebook, email, and at a lower level, HTTP are available to all platforms.
Tomi Engdahl says:
From prototype to production: How Dragon Innovation’s “Kickstarter for hardware” aims to change consumer tech
http://pandodaily.com/2013/10/18/from-prototype-to-production-how-dragon-innovations-kickstarter-for-hardware-aims-to-change-consumer-tech/
Scott Miller’s early days in the hardware world were a tinkerer’s dream. In the mid-90s, he worked on MIT’s first “robofish,” a robot that swam like a tuna. Then Disney Inc. decided, briefly, that it was really into robots, so it hired him and 12 colleagues to operate an independent startup office out of Boston.
It was at iRobot that Miller fell in love with walking into a store and seeing the thing he built on the shelves.
After a stint in China, he became known as one of those “fixers” that venture capitalists would call when their hardware portfolio company needed help. In recent years, his services have been in higher demand than ever. Perhaps you’ve heard, we’re in a hardware revolution.
Or renaissance. Or revival. Whatever you want to call it, hardware is cool again, to entrepreneurs, to investors, to the press.
Ironically, the movement has been fueled by Kickstarter, a site that wants little to do with the buying and selling of gadgets. Miller has watched the movement grow as a consultant.
This Fall, Miller jumped into the mix in with his own answer to Kickstarter, launching a hardware-specific crowdfunding platform called Dragon Innovation.
Until recently, hardware had been out of vogue in the startup world for almost 15 years. It’s capital-intensive, and, as Marc Andreessen recently pointed out, “there are so many ways hardware can blow up in a non-recoverable way.” The cost of launching a software startup, on the other hand, has shrunk to around $5,000.
So large corporations picked up the slack during that time — the hardware innovation has lived under the roofs of companies like H-P, Samsung, Apple, Compaq and Cisco. But as these cycles go, large stalwart companies get complacent, and scrappy young innovators see an opportunity to build something disruptive and cool. Robots. Drones. 3D printing. Wearables. Hardware has come roaring back as a category in the past two years.
At first, venture capitalists balked. Then Pebble happened.
Suddenly VC’s were begging to invest in Pebble. According to legend, Migocovsky would start each investor meeting by opening their Kickstarter page on a laptop. At the end, he’d refresh the page, showing hundreds of thousands of dollars in new pledges that had come in during the hour-long meeting.
Pebble handily raised $15 million in venture capital on the back of the Kickstarter campaign, which itself netted it $10.2 million.
The crowdfunding had proved there was serious demand for Pebble’s product. But the hard part wasn’t raising the money. Now they had to turn their prototype into a working product, and they had to ship thousands of them. That involves figuring out a whole host of problems that the founders of, say, a photosharing app, never have to deal with. Materials. Costs, China. Packaging. Shipping.
Still, Kickstarter’s impact on hardware innovation is undeniable. Crowdfunding allows companies to validate their product-market fit and price point, as well as get some cash up front and a little earned marketing to boot. “Kickstarter inverted the paradigm,” Miller says. “Now you can sell before you build.”
The selling is the easy part. The building? Not so much.
China “fixers” like PCH and Riverwood Solutions have been around for years, but they don’t share the names of their Chinese factories with their clients because it would cut out their middleman status.
Dragon hopes to solve that conflict by remaining completely transparent. The site takes no kickbacks, so its companies can work with any factory out of the 100-plus factories which Dragon has relationships with.
One big challenge is to figure out the exact right amount of funding to raise for each company. The deadliest situation is for a company to get successfully funded, but with not enough money to deliver its products. First-time hardware founders rarely know every single thing they need to take into account for their costs.
His goal is to have the best success rate for crowdfunding campaigns with an equally-as-strong track-record of delivering products on time.
“They gave us an insane budget,” he recalls, which he used to purchase top-of-the-line equipment and build impractical but very cool things like a 12-foot long walking dinosaur. “It was like Stompy except it worked,” he says.
Tomi Engdahl says:
When a great product hits the funding crunch
http://andrewchen.co/2013/11/05/when-a-great-product-hits-the-funding-crunch/#
Building a great product is not enough
Funding goalposts continue to move
Monetization won’t save you if it’s not combined with growth
A modern startup’s costs are all people costs
“Milestone awareness” and clear product roadmaps
Good luck, guys
Tomi Engdahl says:
Risks and challenges
We’ve identified a number of risks and challenges that have the potential to disrupt the project. We have broken these down into 3 separate categories:
PARTS SUPPLY AND LOGISTICS
Maintaining a steady, consistent supply of parts is a key aspect to the success of any hardware business.
MANUFACTURING
Making a one off prototype and a product for mass manufacture are two very different things, often requiring opposing skill sets. We have studied a number of successful and unsuccessful companies to try to learn as much as we can about what makes and breaks them. One example of a common problem we intend to avoid is in scaling up production. Typically companies find suppliers and a manufacturer based on the number of units they intend to ship. This is the most cost effective way of doing things.
COMPANY GROWTH
It’s a good problem to have, but a problem nonetheless. Growing pains are often the result of trying to grow a company’s capabilities too fast and making silly mistakes along the way. Some all too common examples of this are hiring too quickly, hiring the wrong people, getting lost in the product, and loosing touch with our backers/community.
Source: http://www.kickstarter.com/projects/cartesianco/the-ex1-rapid-3d-printing-of-circuit-boards
Tomi Engdahl says:
Ask Hackaday: (How) should we control Kickstarter campaigns?
http://hackaday.com/2013/11/14/ask-hackaday-how-should-we-control-kickstarter-campaigns/
Kickstarter campaigns helped bring new and innovative products to the market during these last years. However there often are failures that can happen at several stages. We’d like to hear your opinion about them and discover what you think could be done to foresee/prevent these kinds of bad experiences that damage the trust between individuals and funding platforms.
Post-funding failures
There are a few project teams that give up a few months after receiving the fund
Pre-funding failures
What is happening even more often on kickstarter is (usually successful) campaigns being canceled by the website itself after a few people rang the alarm bell. This may be due to an unfeasible project idea, a fake demonstration video/photos or even an attempt to resell an existing item under a new name.
Kickstarter fraudsters
Scams can also happen on the backers’ side. Recently, a Kickstarter backer named “Encik Farhan” attempted to rip off many Kickstarter projects. A ‘credit card chargeback’ technique was used, were the backer would contribute to the campaign, receive his perk and later cancel his credit card transaction using diverse reasons. The money would later be taken from the campaign funding by the payment processor.
What can be done?
Tomi Engdahl says:
With $79 million Series D round, Quirky is New York’s most underrated (yet well-funded) startup
http://pandodaily.com/2013/11/13/with-79-million-series-d-round-quirky-is-new-yorks-most-underrated-yet-well-funded-startup/
Quirky might be the most underrated startup in New York. The crowdfunding hardware company’s CEO Ben Kaufman says he purposely keeps a low profile in the New York tech scene.
By that argument, the company might be underrated. But to be sure, Quirky is not underfunded. Prior to today, Quirky had raised $91.3 million in venture funding in its three short years of existence.
Today the company adds even more cash to its coffers. The company just raised an eye-popping $79 million Series D round of financing, $30 million of which comes from GE Ventures.
GE is a strategic investor; the capital comes with the explicit plan to co-develop and launch 30 new connected device products, which will be co-branded “Wink: Instantly Connected.”
With that much capital in the bank, Quirky has a lot of work to do. Compared with its massive pile of VC money, the company’s revenue is small: Last year Quirky did $18 million in revenue.
But Quirky is increasing sales quickly. Kaufman says the company plans to triple that revenue figure this year — equating to $54 million — and do “well over” $100 million in sales next year.
The company has developed 130 mass market consumer products with its crowdsourced design platform. The most famous is Pivot Power, which Kaufman says makes up less than a quarter of Quirky’s revenue. “Even things like rubber bands with a hook on them wind up selling tens of thousands of units,” he says.
“Our hypothesis was that the connected home space was taking off,” Comstock says. “We had a hunch … and saw them starting to scale up. We had a hunch they could help us in the connected home space and we were very intrigued about the community dynamic (of Quirky).”
Tomi Engdahl says:
http://www.quirky.com/
Tomi Engdahl says:
Quirky and GE Partner to Conquer the Internet of Things
http://www.wired.com/design/2013/11/how-ge-and-quirky-want-to-smarten-up-your-home/
Our homes are full of gadgets that do some very cool things. Problem is, they do those cool things all by themselves with no consideration for the other gadgets that are doing equally interesting things around them. This is perfectly fine, but imagine, if you will, a home where your refrigerator communicates with your egg tray and your egg tray communicates with your phone, all in order to make your life easier. This is one grand vision for the Internet of Things, tech’s favorite new fixation, and it’s a reality that’s actually not too far off. All we need is more connected gadgets and a platform to connect them to.
Enter Wink. The new platform from crowdsourced invention startup Quirky is looking to become the go-to app for your ever-increasing collection of connected items. Launched earlier this year with tech behemoth General Electric, Wink is essentially a way to control all of the internet-connected devices you own.
Think of it as the command center for your new Internet of Things lifestyle. “If we can give consumers a single app that makes sure all of their connected things work with all of their other connected things, we think that’s really powerful,” says Ben Kaufman, Quirky’s founder and CEO. “With GE’s scale and Quirky’s speed, we have the ability to connect a lot of things super quickly.”
The Pivot Power Genius is a flexible power cord whose outlets can be controlled from a mobile device ($79.99).
GE has granted Quirky access to thousands of patents from its library with the hope that the nimble start up will be able to churn out new, innovative products faster than the lumbering corporation could even dream of doing. This, says Comstock, is one of the main reasons GE wanted to partner with Quirky in the first place. “We were intrigued by the community dynamic and the speed by which the team was able to get great products to market,” she says.
Quirky is known for its rapid-fire prototype-to-retail process, which draws on the creativity of its 600,000 community members. If you’re not familiar with Quirky, this is how it works: Anyone who signs up can submit a idea, or kernel of an idea, for consideration.
From there the community votes on its favorites, Quirky’s evaluation team chooses the most promising, and the top inventions go on to be developed by the company’s team of designers and engineers. Those top products get shuffled through the Quirky design, refinement and branding process, and in mere months, a brand new, polished product is ready for retail.
Quirky has essentially been given a key to the electronics company’s knowledge base
Tomi Engdahl says:
How Not To Be the Next Bloodhound Technologies BY John Warrillow
http://www.inc.com/john-warrillow/how-not-to-be-the-next-bloodhound-technologies.html
Bloodhound sold for $82.5 million — and the original founders got $36,000. Six things you need to ask yourself before you take venture investment.
The story of Bloodhound Technologies provides an ugly reminder of the dangers of taking venture capital money.
As The New York Times reported this week, Joseph A. Carsanaro started Bloodhound back in the mid 1990’s. The company offered a fraud monitoring software for health care claims. Mr. Carsanaro raised $5 million through two rounds of venture capital financing in 1999 and 2000. The venture capitalists got preferred shares with dividend rights. When the company ran into trouble, the founders were booted and the venture capitalists took over.
The venture capitalists then went on to raise seven more rounds of financing. In 2011, Bloodhound was sold for $82.5 million, but the original founders got a total of just $36,000. One co-founder apparently got a check for all of $99. Not surprisingly, they’re suing.
Do you want to be rich or famous?
The start-up world has gone Hollywood. A hundred years ago, businesses were run by serious men, and some women, who wore suits to work and avoided the limelight. Today, twenty-something founders show up on the covers of magazines with their Vans peeking out from under faded jeans.
It’s all led to a start-up culture of wannabe entrepreneurs who tweet about who they met at South by Southwest and how “moved” they were by the latest TED video. They dream of getting accepted into beauty pageants like TechStars. At bars they talk about raising an A round as their buddies nod and wonder where their drinks are.
Why not own 100% of a smaller pie?
A carefully built $3 million company in a sleepy high-margin niche might be able to throw off 30% profit before tax. Would you rather make a million dollars a year and answer to no one, or be the manager of a venture-backed company controlled by a investor? You may want to change the world, and a $3 million-a-year company doesn’t sound very sexy. Fair enough, but just asking the question can help clarify what you want out of an entrepreneurial life.
Tomi says:
Programming BlueTipz
http://deepfreezefishing.com/blog/category/behind-the-scenes/
People don’t usually think about the engineering that goes into the products they purchase. It turns out that what they buy is only part of all the things that are designed to make a product. For consumer electronics, there are often many jigs and parts that are used in the assembly process. This article exposes one of them; the programmer.
BlueTipz transmitters have code running on them called firmware. In our assembly process we need to get the code onto our devices, otherwise they wouldn’t do anything. While there’s another post on how we manufacture BlueTipz, we wanted to talk specifically about our programmer in a separate post, because it’s pretty complex (and dare we say awesome).
Mold Inspection Milwaukee says:
The first manifestation of nail fungus is yellow lines at the fringe of the toe
nail. Indivfiduals were not worried about it before.
Outer windows and doors are seen as the main cause of penetrating dampness.
Look at myy website :: Mold Inspection Milwaukee
Tomi Engdahl says:
CrunchBase Reveals: The Average Successful Startup Raises $41M, Exits at $242.9M
http://techcrunch.com/2013/12/14/crunchbase-reveals-the-average-successful-startup-raises-41m-exits-at-242-9m/
The CrunchBase dataset has now captured more venture exits than ever, so we decided to take a closer look at what successful startups can tell us about venture investing and the startup landscape.
We found that the average successful US startup has raised $41 million and exited at $242.9 million. We also found that there is a strong correlation between larger exits and companies that raised more money, but no such relationship between the amount of time between founding a company and being acquired or taken public.
Between the two types of exits, we found that the average successfully acquired U.S. startup has raised $29.4 million and sold for $155.5 million, for investor profits of about 7.5x (if you assume 100 percent investor ownership of the company, which is never the case). Startups that went public in an IPO raised significantly more funds, but also took substantially more venture funding, and thus more dilution.
The average IPO-bound startup raised $162 million before going public. Thanks to a few recent large IPOs, the average raised amount soared to $467.9 million, for a 2.9x investor return (of course, venture investors will never sell all their shares on the IPO date).
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Tomi Engdahl says:
Building an Open Source Nest
http://tech.slashdot.org/story/14/01/17/162237/building-an-open-source-nest
“‘All in, we spent about $70 on components to put this together (including $39 for the Spark Core); the wood and acrylic were free. We started working at 10am and finished at 3am, with 3.5 engineers involved (one went to bed early), and the only work we did in advance was order the electronic components.”
” But we are saying that you can build a $3.2 billion company, and it’s easier now than it’s ever been before.’”
A place for all things related to ye olde Spark Thermostat Hackathon
https://github.com/spark/thermostat
Tomi Engdahl says:
Develop a Blockbuster Product
http://www.designnews.com/author.asp?section_id=1365&doc_id=271086&cid=nl.dn14
What would you do if the demand for your product went from 100,000 units a day to almost nothing within a span of several months? That’s exactly what happened to Razor USA and their flagship kick scooter during the Christmas season of 2000. The market had become oversaturated and sales plummeted.
I spoke with research and design (R&D) manager Bob Hadley, who’s been with Razor since the beginning, and found out.
Razor was not content to be a “one hit wonder” or produce endless variations of the original product.
strategy came a string of successful products in various categorie
Build an efficient process that quickly turns good ideas into great products
It’s important to be able to vet out design ideas as quickly as possible. Hadley estimates that for every 100 ideas, about 10 make it to the prototype stage for validation.
Be open to new sources of innovation, and don’t trust focus groups
Hadley says that Razor isn’t big on focus groups, which tend to provide too small a sample.
Embrace new ways to get the word out
Bloomberg BusinessWeek reports that Razor’s Crazy Cart was one of the hottest toys of the 2013 holiday season. The company believes that all the excitement stemmed from two YouTube videos that went viral in just a few days.
Adopt a long-term strategy with a focus on innovation
Razor sees big potential with its patented Crazy Cart, and plans to spend the near term keeping up with demand.
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Tomi Engdahl says:
How to Set Up an Online Business
http://betterbythemin.com/business/how-set-online-business
Here are some tips for starting up your own online business:
Having the right mindset: No matter what we do, having the right mindset is very important.
Zero-in on a niche: If you are serious about your online business, you must find a niche, at least in the beginning, as you need to focus and channel your energy into one specific field before thinking of expanding it.
Audience and competition: Without having the right knowledge about your prospective audience and competition you cannot move forward
Domain name and hosting: Once you’ve decided your niche, the next step is to find a domain name and hosting account.
Setting-up a website:Of course now you need to build your site. You can use ready made templates and platforms like WordPress, Squarespace, or Wx.
Set-up an e-mail delivery service: Newsletters are a very effective way of promoting your business and keeping in touch with your customers.
Generate traffic: you have to be careful about how you go about generating traffic and promoting your site. Online ads are only partially effective.
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Tomi Engdahl says:
51 Startup Failure Post-Mortems
No survivorship bias here. A compilation of startup failure post-mortems by founders and investors. January 20, 2014
http://www.cbinsights.com/blog/trends/startup-failure-post-mortem
On his many failed experiments, Thomas Edison once said
I have learned fifty thousand ways it cannot be done and therefore I am fifty thousand times nearer the final successful experiment.
Tomi Engdahl says:
I Took Advantage of the Crowdfunding Wave
How I generated over $2.5M on Kickstarter & Indiegogo in one year.
https://medium.com/business-startup-development-and-more/9663e3bc8ed0
In the last 18 months I leveraged the crowdfunding wave to generate over $2,500,000 in revenue.
I’ve been a founder and growth-hacker for about a dozen Kickstarter and Indiegogo campaigns. In total these campaigns have collected more than 150,000 emails, grown social media accounts to over 220,000 followers, received coverage in over 2,000 articles and raised that $2.5M I already mentioned.
I’ve done this with ZERO outside capital, and no full time employees.
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Tomi Engdahl says:
Want money? Investor legend John Doerr names his top 3 verticals
http://venturebeat.com/2013/09/11/want-money-investor-legend-john-doerr-names-his-top-3-verticals/
They are, in order, healthcare, education, and revolutionary hardware.
KPCB has created an initiative called Low-Power Everywhere.
“The game changer would be to … triple the energy density in batteries. We’ve got a venture working on that.”
Tomi Engdahl says:
Pay Caesar His Due
Sorting out the taxing dilemma of paying taxes on crowdfunding campaigns at Kickstarter and beyond
https://medium.com/the-magazine/b6481c44c3ff
I almost had a cash flow and tax disaster slam together after a recent Kickstarter campaign ended.
Rewards-based crowdfunding — à la Indiegogo, Kickstarter, and an increasing number of other sites — could collect well over half a billion dollars in 2014 for project organizers. While much attention is paid to the blockbuster campaigns that rake in hundreds of thousands to millions of dollars, the majority of revenue comes from projects that collect from hundreds to low tens of thousands of dollars.
Many of the folks who run these campaigns may never have brought in business revenue before, or at least not on the scale of what the project raises. This means they may not have previously consulted an accountant and may have little or no idea about the issues involved.
Tomi Engdahl says:
Here are some tips how to run Kickstarter campaign:
Linda Liukas
My children’s book on technology raised 100k within 24 hours – here’s how
http://lindaliukas.tumblr.com/post/77372344314/my-childrens-book-on-technology-raised-100k-within-24
I’ve since received a lot of questions on how I planned the campaign, what marketing I did and what I think are the cornerstones of a successful crowdfunding campaign. Here are 7 + 1 things I learned from Hello Ruby.
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Tomi Engdahl says:
On Instagram, a Bazaar Where You Least Expect It
http://bits.blogs.nytimes.com/2014/03/08/on-instagram-a-bazaar-where-you-least-expect-it/?_php=true&_type=blogs&_r=0
Instagram, the photo-sharing app owned by Facebook, is my favorite place to skim through pictures of friends.
Something else I’ve grown to love about the website is much less expected: It’s a wonderful place to shop.
Instagram isn’t designed to be an e-commerce site, and that’s part of its appeal to me.
Beverly Hames, an owner of the shop, said she began posting items on Instagram as an experiment a year and a half ago. Now, sales deriving from those postings make up 20 to 40 percent of the store’s daily revenue, she said, and they come from all over the country and occasionally from overseas.
“At first, it was just my friends buying things,” she said. “But then, people who weren’t my friends started commenting and calling.”
“I’m sure this bubble will burst somehow,” she said. “Either it will get oversaturated by other companies selling on Instagram or they will start charging.”
Tomi Engdahl says:
PayPal mends fences with crowdfunders with revised policies
http://venturebeat.com/2014/03/13/paypal-mends-fences-with-crowdfunders-with-revised-policies/
PayPal and the crowdfunding community have had a rocky relationship — but the eBay-owned payments company has rebuilt that bridge with revamped crowdfunding policies, multiple PayPal executives told VentureBeat today.
Tomer Barel, PayPal chief risk officer, admits crowdfunding campaigns are inherently risky, but consumers are becoming more informed about the uncertainty inherent to crowdfunding, he said. In conjunction with its platform partners, PayPal intends to make that distinction between crowdfunding and pre-selling for every single campaign and clearly communicate that to crowdfunders.
“We believe if there is transparency, consumers understand it. They’re not really consumers in this case, actually — they’re backers, they’re investors, and they’re not in a position to say, ‘I didn’t get what I was promised’.”
Tomi Engdahl says:
“Investors make choices every day,” Andreessen wrote, in a continuation of the thread. “Many things don’t get funded that would make $ but aren’t ethical, moral, and/or legal.” He confirmed that ’public opinion’ sensitive LPs are one reason behind this, and notes that “headline risk”, “branding risk” and “explaining to family risk” are some others.
Source: http://techcrunch.com/2014/03/15/investors-debate-the-ethics-of-anonymity-apps/
Tomi Engdahl says:
Out Early: 67% of Tech Exits in 2013 Went to Early-Stage Startups
http://www.cbinsights.com/blog/trends/tech-exits-2013-early-stage
Unicorns garner the headlines but 67% of investor-backed tech exit transactions last year came after the company raised just a seed or Series A round of financing. March 16, 2014
The headlines may obsess over the WhatsApps and Twitters of the world, but the reality is most venture-backed startup exits are smaller and far from being unicorns.
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Tomi Engdahl says:
The Virtual Genius of Oculus Rift
http://time.com/39577/facebook-oculus-vr-inside-story/
How a 19-year-old hacker set out to invent a gaming headset and ended up reviving a dead technology and building a global communications platform worth $2 billion
Tomi Engdahl says:
Crowdfunding still has a trust problem
How do you trust a platform that promotes mind-reading pet gadgets?
http://www.theverge.com/2014/4/4/5580814/indiegogo-fraud-protection-and-crowdfunding-risk
The Danny DeVito to Kickstarter’s Arnold Schwarzenegger, Indiegogo has been the perpetual second player in online crowdfunding. Second is no bad place to be in a rapidly expanding market, however, and Indiegogo has managed to attract a number of high-profile projects from the likes of Shaq, Ubuntu, and even the Jamaican bobsled team.
Though interest in and backing for crowdfunding have never been more plentiful, there remains a significant element of risk
The key reason for the existence of centralized funding platforms like Indiegogo or Kickstarter is trust. Funders need to be assured that their money is going toward the stated goals, and project creators require some certainty of the promised income. But what is that trust actually based on?
Peruse Kickstarter’s Terms of Use and you’ll find the following disquieting message:
The Company cannot guarantee the authenticity of any data or information that Users provide about themselves or their campaigns and projects.
Further still, Kickstarter can’t guarantee the identity of users you interact with, nor can it guarantee the receipt of pledged amounts.
Indiegogo has a low threshold for listing projects for funding
At the same time, the all-or-nothing absolutism of Kickstarter funding also ensures that you only pay if production can realistically be achieved.
The great irony of crowdfunding is that it ultimately boils down to a direct one-to-one relationship between a project’s creator and individual backers. Indiegogo is the middleman in that relationship: it connects, it facilitates, but it doesn’t actually assume any of the legal responsibility.
Tomi Engdahl says:
What Heartbleed Can Teach The OSS Community About Marketing
http://www.kalzumeus.com/2014/04/09/what-heartbleed-can-teach-the-oss-community-about-marketing/
If you’re a technologist and you’re not living under a rock, you’ve heard about Heartbleed, which is a Severity: Apocalyptic bug in the extraordinarily widely deployed OpenSSL software. Heartbleed lets anyone capable of finding a command line read encryption keys, passwords, and other private data out of affected systems. If you don’t remember addressing this in the last 48 hours close this window immediately and get to work.
Heartbleed is much better marketed than typical for the OSS community, principally because it has a name, a logo, and a dedicated web presence.
Compare “Heartbleed” to CVE-2014-0160, which is apparently the official classification for the bug.
Geeks sometimes do not like when technical facts are described in emotionally evocative fashion.
The Heartbleed announcement should be taught in Technical Writing courses. It is masterful communication.
That is tight, precise, hard-hitting writing,
The Heartbleed logo is probably one of the highest ROI uses of ~$200 in the history of software security. (I don’t actually know whether they got it done for $200, but that is about what I paid the last time I had a logo done for an OSS project.)
There exists a huge cultural undercurrent in the OSS community which suggests that marketing is something that vaguely disreputable
Tomi Engdahl says:
Product / Market Fit is a Trap.
Why you should focus on the jobs to be done instead
https://medium.com/product-love/2c2bf6c88cc6
The only thing that matters is getting to product/market fit.
Product/market fit means being in a good market
with a product that can satisfy that market.
— Marc Andreessen, The only thing that matters
Everyone is obsessed about product/market fit.
I hate to break it to you but …
Obsessing about product/market fit is a huge waste of your time.
Yes … waste of your time.
There is no such thing as having product/market fit.
First of all, product/market fit is not a distinct point in time.
Product/market fit is not a certain goal you reach.
You are never before or after product/market fit.
Product/market fit is not tangible.
Product/market fit is a continuum.
Product/market fit is a process.
So frankly having product/market fit or obsessing about it isn’t very useful.
It’s as actionable as obsessing about having success or being productive.
Reaching product/market fit just means that …
… there is a lucrative market you operate in
… you create a product for that market
… you get better at it (either at product or at distribution or both)
Reaching product/market fit is just a side-effect of doing the right things. The only way to get there is to focus on product and distribution.
Tomi Engdahl says:
Kickstarter fraud: Washington files first consumer protection lawsuit involving crowdfunding
http://www.geekwire.com/2014/attorney-general-asylum-playing-cards-crowdfunded-project/
If you raise money via Kickstarter and don’t deliver products you promised backers, the government will come after you.
Back in October 2012, Nash raised $25,146 from 810 backers — including at least 31 from Washington — for a playing card game called Asylum designed by a Serbian artist and managed by Nash. The campaign exceeded its funding goal of $15,000, meaning Nash was legally responsible for sending every backer the products they paid for.
But as the estimated delivery date of December 2012 passed, customers never received their Asylum product.
“This IS pathetic,” another said. “Kickstarter dont care at all same as Ed he dont care he has his money.”
“Consumers need to be aware that crowdfunding is not without risk,”
“If people mislead and defraud people, they can expect the government to take action,”
“Tens of thousands of incredible projects have been brought to life through Kickstarter”
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Tomi Engdahl says:
Hardware Startup Review: Spark
http://hackaday.com/2014/05/12/hardware-startup-review-spark-io/
For our first issue, we picked a relatively innocent target – Spark, the team behind the Spark Core development board. By embracing Open Source and Open Hardware as the core part of their strategy, Spark has so far been a positive example in the sea of otherwise dull (and potentially creepy) IoT “platforms”. So we thought we should give [Zach Supalla], CEO of Spark a call.
We were curious about the choice of CC3000 as a WiFi module and [Zach] came back with a reason:
“This might still be true, but at the time of our launch, this was the only affordable WiFi module that you can purchase in low quantities extremely easily. For instance, there are other companies that make affordable WiFi modules, when you get to scale – Broadcom and Qualcomm are two of note. One of the challenges with them is that it’s difficult to gain access to these chips in low quantities. And to be meaningfully Open Source, that was important for us”.
On the communication side, Spark is using a slightly modified version of CoAP. “What we didn’t like about MQTT is two things: one, we wanted it to do request-response model and MQTT is pub-sub and second, it didn’t define the payload which felt to us like it’s not solving enough of the problem. CoAP had much more of that defined and it felt like a more complete solution”.
Tomi Engdahl says:
Monday, May 12, 2014 at 08:08AM by Charlie O’Donnell
http://www.thisisgoingtobebig.com/blog/2014/5/12/the-economics-of-a-small-vc-fund.html
Tomi Engdahl says:
Launching a hardware startup? The stars are aligned in your favor
There’s been no better time to get into hardware biz, says hardware biz analyst
http://www.theregister.co.uk/2014/05/24/launching_a_hardware_startup_the_stars_are_aligned_in_your_favor/
Launching a hardware startup is more difficult than springing software upon the world – all a coder needs, after all, is a keyboard and a creative mind – but recent developments are removing barriers and creating a new startup gold rush.
“It used to be really difficult to start a hardware company,”
“Perhaps you worked in R&D at a bigger company; perhaps you worked at an agency,” DiResta said, “but it was a really big challenge to take a product to market and to build a business around a device.”
That’s changing – thanks in part to the internet, she said, which enables rapid and relatively seamless collaboration between like minds around the globe with whom ideas can be shared.
like-minded hardware hackers getting together to bang up their ideas in a fast-growing number of public “hackerspaces”.
While the growth of hackerspaces is an indication of interest, it doesn’t provide data about how many of those sites are spawning startups. The growth in hardware startups, however, can be tracked
There is also a growing number of hardware-startup accelerators
Hardware prototyping is also getting easier, DiResta said, with 3D-printing quality going up and prices coming down.
The design prototyping ease provided by 3D printing is one thing; functional prototyping is, of course, another – but there’s help for hardware hackers in that area as well. For example, Arduino and Raspberry Pi boards and kits have found their way into many a hardware startup’s prototypes, the OpenPilot open source UAV autopilot is speeding the growth of drone startups, and Electric Imp is easing startups’ efforts to connect their devices to the internet.
Finally, once hardware startups get their products ready for manufacturing, they should not automatically expect that they’ll need to find a manufacturing partner in China.
She also suggested that “nearshoring” be an option that startups consider when choosing a manufacturing partner
Tomi Engdahl says:
Inside Innoconn: Foxconn’s new hardware startup incubator
http://www.cnet.com/news/inside-innoconn-foxconn-hardware-startup-incubator/
Will this Chinese manufacturer’s search for the next big thing pay off? CNET takes a tour of Foxconn’s Innoconn Beijing campus to find out more.
Tomi Engdahl says:
Kickstarter’s next campaign
The original crowdfunder is loosening its rules and opening the floodgates
http://www.theverge.com/2014/6/3/5775548/kickstarter-s-next-campaign
People know what Kickstarter is now – the term is eight times more popular on the internet than the generic “crowdfunding” – and they know how it works. They understand that projects don’t get funded until they hit their goals, they realize they won’t get their money back if the project fails, and they get that Kickstarter is not supposed to be a store.
Kickstarter has raised $981 million on its way to becoming a household name. Yet that money comes from a small number of projects: just 62,932 campaigns have been funded. If everyone has the potential to be a creator, as the crowdfunding movement would have us believe, there are many, many more people to reach.
That’s partly why the company is announcing two major changes today aimed at presenting a “simpler, friendlier Kickstarter,”
First, the rules for creators have been simplified from about 1,000 words to less than 300, and previously banned products are allowed back on the platform. Second, projects can now opt to “Launch Now” and bypass Kickstarter’s approval process.
At first, the changes may seem like a capitulation to market forces over principles. In January, Indiegogo raised $40 million from its own investors, the largest financing round for any crowdfunding startup, in part because its liberal acceptance policy has allowed it to grow fast. Campaigns on Indiegogo aren’t vetted, and its rules are ultra-simple: anything that isn’t illegal or dangerous, goes. “Indiegogo has no opinions,”
By contrast, Kickstarter has always seemed a bit restrictive. “Everything on Kickstarter must be a project,” the old rules began. “Every project on Kickstarter must fit into one of our categories.”
Under the new rules, Hansen’s campaign might pass. In general, Kickstarter will now only prohibit things that are illegal, regulated, or dangerous, Strickler says. Pretty much anything else will fly, he says, as long as creators are honest about what they’re doing. Charity, genetically modified organisms, and misleading photo-realistic renderings are still forbidden under the new rules, but sunglasses, bath and beauty products, and many items that were banned over time are back on.