Reading through some of the comments is interesting in that my experience with Kickstarter seems to have been --so far-- nearly polar opposites to that of others.
I have almost exclusively backed technology projects. Out of those, not one of them has failed to deliver. And, not one of them has delivered on time. Out of all the projects I have supported only one has ended-up in the trash can. However, that was not because the widget was not executed well or it was junk. It was simply a case of my idea of the utility of this gizmo failing to align with reality once I got it. No issues on my part. I've done that plenty other times even buying stuff from brick-and-mortar stores.
If I allow myself to presume about the reasons for my "success" I'll have to say that the only thing I can reasonably point to is that I have a lot of experience actually designing. manufacturing and, yes, shipping technology products. I am intimately familiar with the design, sourcing and manufacturing process (and issues) of most products that entail software, electronics and mechanical components using various technologies.
This, to me, means that I have a fairly decent "bullshit" filter when it applies to these kinds of projects. Not to pick on them, but my most recent "this is bullshit" call was the LIFX light bulb:
You have to rewind to when the project first posted. Their pledge goal was set to $100K. A project like that could easily burn-up half a million dollars just in engineering, NRE's and regulatory testing. Very easily. In fact, my immediate thought after reviewing the project was that the project needed somewhere in the order of two million dollars.
When I see something like that I have to ask: Are the project originators truly clueless about what it might take to get the project done? I don't like to think that fraud is involved. I am one of those saps who believe that the vast majority of people are basically good. So, no fraud. Yet, $100K?
What would have happened with LIFX had they received funding just about their requested $100K goal? Say, $150K. Well, in my world that would have meant that there was no way to complete the project. No way. At least not with anything that I'd want to plug into a lightbulb socket at my house for a myriad of safety reasons.
I avoid such projects.
As it turns out, they have raised about $1.3 million. This may or may not be enough to get this done. Keep in mind that bringing in partners isn't free. COGS must include all costs.
With regards to the ARDUINO issue. I saw that project come up and immediately went to the known Arduino sites. I saw nothing promoting the project or making this connection of having an ex-Arduino manufacturer behind the Kickstarter project. So, I stayed clear.
I see the relationship between Kickstarter and their vendors very much like that of a shopping mall owner and the stores it might house. Imagine that one of the stores decides to sell counterfeit Gucci bags or defraud people in some other way. I can't see the mall owner as being guilty of the crime being committed. If a direct nexus is established, well, then, that's a different story.
I also see the buyer as having to be responsible for the decision they make. If someone sells you a perpetual motion machine and you were not smart or informed enough to realize that this can't possibly work, well, in many ways, it's your fault. Be an informed buyer. That's the only way to protect yourself.
EDIT: I should say that I like Kickstarter very much. I don't have a problem with the service. If you know what you are doing both as either a project originator or a project backer, it's wonderful.
I too called BS on the LiFX bulbs. In part because Phillips had recently won a prize for one of their LED bulbs and it cost them $25M+ to develop. So even accounting for 'knocking down the hard problems' I couldn't see a 10x reduction in cost.
However the cool thing about it was that they saw an actual demand for programmable LED bulbs with RGB capability and came out with 'Hue.'[1] I suspect they took the Apple Store only route because it was a single partner who could conceivably move enough product to technical saavy people. It seems to have worked as they are sold out in the Bay Area, not sure how many kits or bulbs that was in the initial batch but probably a few. They also sell the bulbs for $60 each, which is another interesting number. If you take all of the money raised for LiFX and divide by the number of bulbs they are committed to shipping out as rewards it comes to $55/bulb.
[1] Full Disclosure: I bought a starter set of "Hue" lights when they were announced and did not back the kickstarter campaign for LiFX.
A 10x reduction in development cost is reasonable for a small company. Large corporations have to float a huge boat just to stay motionless. Another way to say it is that they burn millions of dollars per day just to exist and do nothing else. When you see cost-of-development numbers for large companies they include an element of total-cost-to-just-exist/days-per-project/number-of-current-projects (oversimplification).
A small motivated team without the baggage and overhead can certainly do thing far, far cheaper than a large corporation. In fact, it can put a large corporation to shame in terms of productivity and the ability to pivot and innovate.
Where things get difficult for a startup is when it is time to move to manufacturing. Unlike software projects, making physical products is really capital intensive. The first phase is, of course, the upfront design and DFM work that has to be done. Then comes all of the prototyping and testing. Finally, setup for manufacturing, procurement, manufacturing, packaging and shipping. If a startup isn't well funded it might be able to get through the design phase but not survive to reach manufacturing without an additional influx of funds.
Comparing startup development costs to huge company development costs is non-sensical. For starters, Phillips would need to worry about multi-multi-million dollar lawsuits. LIFx won't. And there are many similar issues.
Nice rundown/analysis. I've got a friend running a similar project to the LIFX - and they've got some pretty believable-looking accounting showing why they need to raise $700k to get to market - any they've already got experienced product designers and electronics designers on board, and have sunk something like 50% of what LIFX asked for up front.
I looked at the project. It's interesting. The numbers are probably reasonable.
My only reservation might be that there seems to be very little room for error and the assumption is that they are going to get orders for some 7,000 units as well as $40K in $5,000 contributions (which I think is unlikely). On a project like this one I would like to see around $200K or $300K buffer.
In other words, double their costs. the spreadsheet comes out with a profit of $39.72 if they raise a little over $733K. At $700K you are already over $30K in the negative. I would have gone for $1,000,000.
The good news is that they are not asking for $100K as LifeX did, which would have been ridiculous. I would really love to know what LifeX would have done if they just got the $100K they asked for.
I am considering backing your friend's project. I need to think about it a little. I really do think that they need more "insurance money" for the unknowns that always rear their ugly heads.
I have almost exclusively backed technology projects. Out of those, not one of them has failed to deliver. And, not one of them has delivered on time. Out of all the projects I have supported only one has ended-up in the trash can. However, that was not because the widget was not executed well or it was junk. It was simply a case of my idea of the utility of this gizmo failing to align with reality once I got it. No issues on my part. I've done that plenty other times even buying stuff from brick-and-mortar stores.
If I allow myself to presume about the reasons for my "success" I'll have to say that the only thing I can reasonably point to is that I have a lot of experience actually designing. manufacturing and, yes, shipping technology products. I am intimately familiar with the design, sourcing and manufacturing process (and issues) of most products that entail software, electronics and mechanical components using various technologies.
This, to me, means that I have a fairly decent "bullshit" filter when it applies to these kinds of projects. Not to pick on them, but my most recent "this is bullshit" call was the LIFX light bulb:
http://www.kickstarter.com/projects/limemouse/lifx-the-light...
Why did I call this BS?
You have to rewind to when the project first posted. Their pledge goal was set to $100K. A project like that could easily burn-up half a million dollars just in engineering, NRE's and regulatory testing. Very easily. In fact, my immediate thought after reviewing the project was that the project needed somewhere in the order of two million dollars.
When I see something like that I have to ask: Are the project originators truly clueless about what it might take to get the project done? I don't like to think that fraud is involved. I am one of those saps who believe that the vast majority of people are basically good. So, no fraud. Yet, $100K?
What would have happened with LIFX had they received funding just about their requested $100K goal? Say, $150K. Well, in my world that would have meant that there was no way to complete the project. No way. At least not with anything that I'd want to plug into a lightbulb socket at my house for a myriad of safety reasons.
I avoid such projects.
As it turns out, they have raised about $1.3 million. This may or may not be enough to get this done. Keep in mind that bringing in partners isn't free. COGS must include all costs.
With regards to the ARDUINO issue. I saw that project come up and immediately went to the known Arduino sites. I saw nothing promoting the project or making this connection of having an ex-Arduino manufacturer behind the Kickstarter project. So, I stayed clear.
I see the relationship between Kickstarter and their vendors very much like that of a shopping mall owner and the stores it might house. Imagine that one of the stores decides to sell counterfeit Gucci bags or defraud people in some other way. I can't see the mall owner as being guilty of the crime being committed. If a direct nexus is established, well, then, that's a different story.
I also see the buyer as having to be responsible for the decision they make. If someone sells you a perpetual motion machine and you were not smart or informed enough to realize that this can't possibly work, well, in many ways, it's your fault. Be an informed buyer. That's the only way to protect yourself.
EDIT: I should say that I like Kickstarter very much. I don't have a problem with the service. If you know what you are doing both as either a project originator or a project backer, it's wonderful.