So you want to build a hardware company,

Sara Chipps
May 12, 2015 · 9 min read

and you’re a software engineer…. (Part 4)

(TLDR; Crowdfunding is important. Jewelbots has kicked off a Quire campaign, we’d love for you to join us in our journey by investing)

Scroll down to read part 4 if you have already read the introduction

A major part of my career has revolved around being an information beacon. I have found great success through learning and then regurgitating back to the community that I have grown with.

Since starting work on Jewliebots a little over a year ago, I have learned an incredible amount about hardware, engineering, and manufacturing. None of this information is readily available online. There is no exhaustive how-to. I have gotten much of it by speaking to people who have done it before, learning from my mistakes, and from the incredible staff and mentors atHighway1.

To continue the spirit of disseminating my knowledge and learnings to the larger community, I’m going to write a series about how to navigate the world of building a hardware product when you are a software developer.

The series is mapped to rollout as such:

Part 1: Prototyping

Part 2: Debugging

Part 3: User Testing

Part 4: Proving Traction

Part 5: Design for Manufacturing

Part 6: Manufacturing

Part 4: Proving Traction

Hardware and traction, this is a huge topic and a monster hurdle for many companies. Traction is important in order to attract investors. Investment is important because hardware is very expensive to build.

Dorothy, you’re not in software anymore!

this is what it feels/looks like

(editors note: I was so smug after coming up with the title of this paragraph I walked away and didn’t start typing again for three hours)

You can build an MVP for nearly any software product in six to eight weeks. Google, Facebook, Twitter, you name it. You can ship version 1.0 in six to eight weeks. Quitting your job and bootstrapping yourself through six to eight weeks is a fairly attainable goal and a perfectly normal thing to do.

One thing I have learned on the Jewelbots’ journey is that the six to eight week cycle you see in software is a nine to twelve month cycle in hardware. As you can see from the earlier posts in this series prototyping is an intensive process punctuated with user testing and multiple iterations and levels of resolution.

Most people don’t have nine to twelve months of savings they can live off of without consequence. Add on the thousands you will spend prototyping and you’re in a situation where it’s fairly difficult to bootstrap. I feel like I can fairly say that it’s nearly impossible to bootstrap a hardware company.

Catch 22

So, now that you know that it’s impossible to self fund a hardware company, and most VCs wont invest in you until you can prove traction what can you do?

Well, for us, the first step was to find people that believe in what we are doing. We have several angel investors, an amazing accelerator, and one institutional VC firm that has allowed us to grow as much as we have so far. The thing they all have in common is that they all care very much about democratizing the toys and games that turn middle schoolers into software developers.

One of them said to us “If you came in here just promising the next unicorn we would have passed already”. We are lucky to have the investors we do, as they are incredible mentors that want to join us in changing the world.

The thing is, though, we DO think we are the next unicorn. We WILL grow exponentially. Our patent pending technology allows users to communicate over mesh networks through their wearables. We want to make this world a place where no one needs a cell plan and your friends are a wrist away.

How JBots talk to each other

Jewelbots’ goal is to change the way we all communicate.

We’re building what is, arguably, the most advanced communication technology that exists, and we’re starting with your teenage daughters.

Really, though, how do you show traction?

Regardless of how many people are passionate about your mission, or how strong your founder’s success record is, or even how cool your pitch deck is, at some point you’re going to need to show traction to potential or existing investors.

If you can find the investors from Silicon Valley, the show, this graph also works.

How do you demonstrate traction before you have a product to ship? How can you show that people care about what you are doing? That you’re not wasting resources on a product that no one wants?

There are a few schools of thought. Email signups are good, user accounts are better, but the best way to show traction pre-product is crowdfunding.

Why Crowdfunding?

If people fund your product they are putting their money where their mouths are. They are buying a product that hasn’t been created yet. They want what you are building so badly, they think it needs to be in the world so much, they are handing over their cash to help you. There is no better indicator for a hardware company that you are on the right track. 100 dollars knock 1000 email addresses out of the park for showing that people want your product every time.

Pebble raised $10m on Kickstarter. That’s a lot of traction

A “successful” crowdfunding campaign is not one that meets its goal. A successful crowdfunding campaign is now one that raises 3x+ of its goal.

There are many examples of hardware companies showing amazing traction pre-launch. The ones that first come to mind are Pebble, Coin, Spark, and Oculus Rift.

How To Crowdfund?

Fact: “Crowdfunding consultants” are a thing, and they can be helpful.

Fact: Many of your favorite Kickstarters became your favorites because they spent north of 10K putting together a campaign (sometimes much more) using VC.

Fact: Kickstarter and IndieGoGo are two of MANY platforms around crowdfunding

Fact: I’m not an expert at this, but I’m going to try my best to tell you all the things I’ve learned from the many people I’ve spoken to about their successful campaigns.

One of the most important things to figure out pre-launch is: if you plan on selling product as a part of your campaign make sure you are 100% sure what it is going to cost you to make. Not just an estimate but, where is it being made, how is being shipped, how is it being assembled? These questions all affect your margins and there are three mortal sins when it comes to hardware crowdfunding campaigns:

  1. Charging too little — It’s great to have low prices that appeal to your backers, and it’s super tempting to estimate on the low side when it comes what price to set. However, if you underestimate what it’s going to cost you to make a product you can end up paying people to build things for them. If your product costs $20 to make, and $10 to ship, and you charge, say, $50 you have absolutely no margins for anything to go wrong. Things go wrong, it’s a fact. What happens when your first shipment is going to be 2 months late unless you can pay an expiditing fee. Or when you find out that you actually need to employ two factories in order to get the parts or finish you need. Once you have your cost multiply that by four and that’s what you can sell it for. So, in the case that it costs you $20 to make your price point is $80. Add your shipping costs on to that and you have your total price. You need to factor that into your reward levels.
  2. Shipping incredibly lateShit happens. It just does. If you’re a hardware company the potential for shit to happen is 4x what it would be when you are a software company (based on the facts that you’re dealing with physical products and science). You can do all the communicating in the world with email updates, it doesn’t change the fact that I paid $250 for the developers version of your VR goggles two years ago and I still have nothing (**cough**). So, try not to commit to a specific date, and be as transparent about your timeline as possible. Also, when you do miss your dates, communication is key. You have 90million more important things to do, I’m sure, but these people invested in you when you had nothing. That makes them as important as your other investors and you should be updating them as often.
  3. Shipping to retailers firstOh man, this one is the worst and will make people turn on you FAST. When Target wants your product and they are willing to give you a lot for it it’s super tempting. These backers can’t offer you the same brand boost that Target can. They’ve already waited 9 months, why not two more? Again, these are your investors. You owe them your business and your loyalty. Companies like Pebble and Spark go back to Kickstarter repeatedly to fund new projects. If you ship to Target before your very first backers they will remember that and you will lose a strong community.

Comparing Platforms

From Inc article linked below

TIL there is a whole internet out there for this. You can use this chart, or read this article, or even use this actual startup that is made for this. There are advantages and disadvantages to each of them. There is no clear winner and it truly depends on where your business is and what your model is. Some of them are for equity, and some of them are for product. Do some research, however, and don’t just go with Kickstarter or IndieGoGo because everyone else is.

Marketing and Growing your Community

Again, listen to the experts on this, not some irrelevant 90's blogging software developer (an actual pet name my boyfriend has for me). There are crowdfunding experts. There is this list of people. There are meetups.

You must do a press release.

I hear great things about Facebook ad targeting and creating look-alike audiences.

Crowdfunding is a marathon that doesn’t end when you post your campaign. Putting together a strategy for each week that your campaign is live has come highly recommended to me. One week you can focus on reaching out to press, another you can send personal emails to friends, another you can ask your friends and family to share on their social media sites. You can definitely do all these things at once, but the point is that it’s a marathon and it’s going to take a lot of your time and resources. Budget for that.

Our Strategy

We went back and forth about how we should approach showing traction. We landed on rolling out two crowdfunding campaigns.

Quire

Our spokes models are THE CUTEST

We went with Quire because I met with Erin Glenn a few months ago after an introduction from one of our investors. I was very impressed with her zeal and mission and she loved the goal behind Jewelbots. Giving our community the opportunity to benefit finacially when we do well is a win all around. Our campaign launched on Monday, and starting this Thursday anyone that qualifies will be able to invest in Jewelbots.

We’re also giving away 10 alpha units to awesome kids that want to build things as part of that campaign.

I mean, that alone makes it worth checking out.

Kickstarter

After our Quire wraps up we will be rolling out a Kickstarter campaign. This will be everyone’s chance to get their hands on some Jewelbots. We will be selling Jewelbots in packs of two or more (there is still an internal debate around whether we should sell single units, I’m leaning towards “no”). We have a team meeting this week to brainstorm rewards, so let us know if you have any ideas.

We’re really hoping that you agree with us that we need to get more girls understanding that engineering is a profession that is wide open for them by building tools for them.

Please join us and we can show the world together.

Thanks to George Stocker

Sara Chipps

Written by

I jam with the console cowboys in cyberspace. CEO @jewelbots #levolove JS4life

Jewelbots Ink

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