From Idea to Prototype for Non-Technical Founder: Budget Part 2

*If you haven’t read part 1, I suggest you go read it first as this post takes off from where the previous one ends.

You have searched all over google, You have read all the patent papers, You have gone through every relevant PubMed research data. You have come to a conclusion that the sensor you need for your system is not available off the shelf in the market. Now you’re left with two options:

  1. Pivot. (The easy out)
  2. Develop what you need. (You’re a rebel)
  3. Find a validation prototype, from the future pipeline of existing vendors.

If you decide to pivot, the reason would obviously be to build something off from the available components in the market.

If you decide to develop what you need, you’ll spend a significant amount of your time and huge sum of money to develop the sensor. This could either be done in-house or in partnership with a firm that has a similar sensor in their pipeline. If you’re a non-tech founder, the chances are you know a little about the talent you need to develop the sensors yourself. Also, the talent you need is already engaged with a big player in the industry. There is definitely a chance to poke him, but you need strong connections. (You can get him on the advisor board though, but that’s a whole different discussion)

I’ll try to narrow my suggestions to building your first prototype by sourcing a prototype from existing players.:

1. Search that vendor.

For my product, I started out by calling all the gas sensor vendors in the business. I spoke to their sales representatives to inquire if they have a sensor in the works that could meet our requirement. In 80% cases, they had one.

If you ask them to ship you a sample, they’ll ask for a 30–60 day lead time, depending on their development status. (Lead time is the time they’ll take to develop and ship you a sample.)

As I was in India and the customs suck here, It usually took another 24 days to get the shipment cleared from the customs and get it delivered. (That’s almost 90 days of lead time!)

I asked for samples from at least 5 firms. I paid about $2000-$5000 per unit for those samples.

So that’s $2000 x 5 units= $10,000

CAUTION 1: This whole process could be really time consuming because big players don’t like to talk to small startups. They like to deal with clients that could order 100k units rather than 1k. I used to tell them I’m looking to buy 10k units (when in reality I only needed one :P). This helps to get considered in the first call. Later, as you’ll communicate, they’ll open up. You’ll open up. You’ll build a relationship. You may tell them the truth then. ;)

CAUTION 2: If a vendor asks for more than a month of lead time or takes a lot of time to respond or uses terms like “Maybe we could develop it together”, it usually means they’re in the very early stages of the development process. In my case, the project got delayed by almost 8 months because the Oxygen sensor guy committed a lot on paper, even signed agreements but never shipped. Push them to ship as soon as possible and see if they can keep their word.

2. Test that sensor.

Testing is not a joke. You had a vendor that claimed the sensor he shipped could do what you need it to do. But now you need to create an environment that will replicate the conditions you need the sensor to work in. Depending on the complexity of the requirements, Testing could range from $100-$2000.

3. Build that prototype.

Now that you know, hopefully, that those sensors meet your requirements, you need to build a functional prototype. This is the easy part. Follow the instructions from my last post and you’ll be able to build a prototype for roughly $100.

Now you have a functional prototype. You may go and raise some money, build a team and launch the beta. But there’s a cache!

You may not be able to raise the money, because given the market condition in your industry, investors may need to see some traction before they bet their money on you. You’ll be left with a choice to keep hunting for the investors and raise at a lower valuation or build a final works-like looks-like prototype, generate traction and then raise at a higher valuation.

What will you do?

Cheers.


Originally published at www.halfindian.com.

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