I have to agree on this. A lot of the ones I have followed but not necessarily funded failed due to the stretch funds. I think if you have a valid working prototype but just lack the funds to bring this to a wider market then the likes of Kickstarter would allow that, then the idea for me is good. Not adding goodies to your design unless you are 150% sure you can meet the deadline is a good thing.
Having my last go here - it’s not that I’m not enjoying the debate, but I can only make these points so many times…
@ MrJohnSmith, Zano did not fail because of “scope creep” because they were over-funded. It failed largely because they never had a working system that they could mass produce. Sure, the report does mention “additional features” but that’s one small point in the list of woes.
Would KS holding onto “stretch” funds have saved many backers from losing all their money in Zano? Yes. Would KS holding on to “stretch” funds have reduced the likelihood of success of the overall project? Yes. Which yes is more important?
If you totally spend your $100k and don’t have any capital reserves to draw on to help bridge what could be that last little technical hurdle that is the difference between succeeding and failing, is that good for the overall project? If you spend everything you have getting your 1000 widgets produced, crossed all those technical hurdles, but then can’t afford to pack and ship them to backers and KS won’t release you more funds until those backers get their goodies, does that do anyone any good?
Nowhere in my scenarios outlined above did I hint that I was chasing a bigger bone. I was simply saying that because I had a higher production requirement I HAD to re-evaluate how I intended to produce my product. All my process decisions were made with flawed data as soon as I got to my 1001’th backer. Some times, scale is linear; sometimes, scale brings significant complications.
My 3d printer guy told me to shove my 10k unit order, there’s no way he’s biting that off - so I have to re-evaluate how to produce that. Should I spend that money getting him and 9 other similar suppliers to (try to) produce the same thing, or for the same overall cost produce something that is simpler to manufacture and with higher reliability, but has a different cost vs time profile (because of mold manufacturing and testing, and then production). I’m not chasing a bone, just being realistic about the difference in producing 1k units vs 10k units.
I wasn’t going to have a formal ship/track process besides someone keeping a heap of tracking IDs in a spreadsheet for my 1k units, but now if I get 10% of shipments that go “off the rails” I really need something better - so I have to find a logistics house willing to take the task on. Again, not chasing a bone, just being realistic about what people expect when I have 10k units to get to their hands.
The printing / box one is one where I’m going for a better quality outcome - that’s possibly chasing a bone, but it’s only choosing to add small incremental cost to the overall expenditure. Not possible if I don’t have quantity (+ more capital) on my side.
You’ve shared a little - let me hypothesize a bit if I can @ MrJohnSmith? For your project, if you get 10 orders, you’re funded. Those 10 widgets will take a certain length of time to make - I assume you’re largely making them yourself. You can parallel the process where possible, but at some point it’s a single unit production line, even if that’s you boxing up a final product. If you lay out the project plan assuming 10 orders and tell everyone their orders will ship by X, but instead you get 1000 orders, where do you get the chance to re-lay out the expected delivery schedule? Does order 999 expect the same delivery date as order 11 - if you’re smart you’ve laid out that in your grand plan so you don’t have to have all of them delivered by X, so you won’t disappoint those backers. In most cases a $3000 product is likely much more effort to construct than my $100 mass produced device, so I can scale easier than you - instead of 10 hours of a single production line, I need to go to 100 hours total, but I can run four lines for 25 hours, 6 lines for 16 hours, to the scale of my manufacturer. Your scenario might be something like 2 hours a unit, 10 units = 20 hours, and you’d planned to do it yourself over a couple of weeks in mornings/evenings/weekends. You can’t scale the same way as my mass produced product; all of a sudden you now have to spend 2000 hours and have to think about not doing your normal day job, or finding some other way to take the lag out of your delivery, otherwise backer 999 gives you grief about when their device is being made. Again, if you’re up front and tell people that this is the way they should expect delivery schedule, then it’s a non-issue - or if you can rope in family and friends to help you ship quicker then you get in front of the curve. But doing 10 versus 1000 is still a huge change, you may need more tools to do it (streamlining your own process = more profit for your labour), you may need more space to store raw materials, you may need more space to store finished product, but equally you may be able to negotiate better rates with a shipping supplier (again, that helps the profit engine)… it’s all balancing tradeoffs, should I only buy stock in the quantity I needed for 10 which negates my buying power but also negates my need for storing the excess, but then I need to repeat that in 9 other orders.
The good news is it seems to me that you’ve not done what Zano did, you are only looking for up-front orders not looking for funds to develop your idea into something that works. That’s a great place to start from, means you have less technical opportunity to stuff up.
I think there are many lessons potential start-up / crowdfunding campaign owners can learn from the story. There’s also other accelerator / mentor companies that can help you get to a good place without doing a Zano. And with a modicum of realism I’m sure many others will succeed where Zano did not - both in their drone space and in crowdfunding projects.
@ Bret, Perhaps we’re both right. Maybe its not about if kickstarter withholds the extra funds, but it’s about the discipline to use it.
The first yes is more important. Why? Think about the other project that those funds could have funded if they weren’t squandered. Every investment plan should have a stop loss strategy, and these types of ventures should be able to fail gracefully.
Further, the concerns of a $100 widget might be way different from a $3000 widget. Excess funds might help the smaller project but damage the larger one. Buying a bad batch of stepper drivers for 100 units is more devastating to a larger project.
I’d actually like to know more about that part. So there is such a thing as too many orders? If so then either do the process 10 times or find 9 other suppliers. If the project can’t withstand that kind of variability, then perhaps this will be a growth experience.
Just to add, my 3K widget is estimated to take 16 hours to build each, which goes down to 8 hours if I scale out; and yes at those figures I would leave a day job to go produce.
If you take the perspective that the first $100k was under-estimated by 10% (not a bad allowance for error?) and an extra $10k would have allowed them to resolve the outstanding fundamental issues, by killing off the funding source you’re now squandering the first $100k as well as destroying the reputation of the person who couldn’t deliver the product, and probably killed off the innovation they were going to provide unless they can recover by selling the IP (if anyone is interested).
I would dispute that there is benefit in returning cash to the “late backer” crowd because KS held back the funding. Those people are going to back what they will, when they will, and the fact they got burned and lost money or were one of the luck ones that escaped the chop probably won’t change their investment strategy - and if they were just there to buy a Zano, they’re not going to go back a 3d printer or CNC machine or whatever other flavor of the day things are on offer, they wanted a drone, they’ll go buy a DJI or some other off the shelf brand and that’s it.
I think KS and IGG and similar platforms have a responsibility to properly lay out what a backer can and can’t expect. IGG flexible funding for example means the creator gets the cash even if funding isn’t reached - and there’s no guarantee that a product comes out the other side of that process. I like the changes KS made about requiring actual prototypes in the photos/videos; I’m sure there’s a lot of checks they go through to qualify a campaign before it’s ever live, to increase the chances of success, but ultimately they can’t 100% guarantee once any cash is handed over that something will eventuate - all they can do is look for (obvious) factors that are increasing risks not decreasing them, and try to convince creators to deliver on their plans.
Businesses go bust all the time. Some big ones even. Bankruptcy isn’t uncommon. But all that doesn’t mean all bad ideas (or bad execution of a good idea) need to be shut down and saved early - or that they should be left to the last minute to pull life support either. Balance is important. Certainly it sucks when you lose some cash by not having someone deliver what they said they could in KS. It sucks when the sharemarket tanks and your investments and superannuation goes backward. But a few bucks (*) from a failed KS spread over many is less impactful overall than some shonky investor taking 20 families for all they are worth.
(*) yes, that can be a problem for some people, but KS is not like ordering online from a supermarket or big-box retailer and getting a shipping notification the next day.
oh well, you got another post out of me
16 hours per unit, wow, that’s some assembling, hope your weekends are free . Good luck in your campaign where ever you host it. 8 hours when you scale out - that to me sounds like a change in what you have planned (just kidding!)
This post is getting boring; @ Brett post something…