The New Engineering Entrepreneurship
By Doug Lyon, PhD, PE
Crowdfunding has provided a catalyst that
eases the commercialization of innovation.
However, in the search for a viable business
model, the pre-sales approach of kickstarter only
mitigates inventory risk. There is still plenty
of prototype risk. In this story, I describe
the path to launching a kickstarter project, the
approach, steps (and missteps) as well as the
thought process that goes into a launch.
For details on my product launch (with video,
rewards, etc.) see:
1. The Go/No-Go Decision
This is the first, and most critical phase of
any new product. The decision to commercialize an idea
is not an easy one. Typically we are faced with several
A) Sustainable competitive advantage
Can the product be knocked off easily?
In my case, I have a very simple product, one
that includes software and hardware. Since I control both,
I see no need for either a patent or expensive
intellectual property. As long as I keep my customer
base happy, I have no fear about letting others
know about my hardware, as my ability to
continue to innovate software features for the
product is my special sauce. For me, a trademark and copyrights
are probably enough. I have no money to prosecute a patent.
I am the President of the Inventors Association of Connecticut.
On our board is a patent attny. He has practiced for many
years and is a partner in a law firm. He says the number of
small inventors that he (and his firm) who have made
money with their patents is ZERO. Prosecuting a patent
costs between 2 and 25 million dollars. Who can really
afford these patents?
My last international patent (PCT, Canada, Japan, USA) cost
$100k over the life of the patent (and we never sued anybody).
And the patent never really made very much money.
Now, if your business-model is based in licensing, then
patents may be the way to go. Licensing is a topic
of another article.
B) TAM) Total addressable market
This is a hard one. I am after the arduino market.
For me, the total addressable market for arduinos is small.
Arduino had registered over 700,000 official boards in 2013, but it is
growing, fast. Nobody knows, but guesses in the low millions are
probably as good as we can get.
C) SAM) Serviceable Available Market (subset of TAM)
I am after those who are interested in audio and have an arduino.
Here it is a total guess, perhaps 10%? Figure 70,000.
D) SOM or Serviceable Obtainable Market (subset of SAM)
This is the part of SAM I am after. Customers are on
kickstarter and are willing to back a start up.
Perhaps 1% of TAM? Figure 700.
E) Margin; I like to take the target price, cut it
in half, then determine if my SOM can bring the cost
of goods down to that figure. For me, building
500 units on a first kickstarter run would let me
charge $20 and make a $10 profit with $10 on the cost
of goods. Kickstarter research shows, $20-$25 is
a perfect price point for kickstarter projects
So, we are a GO, next comes the prototype.
Here we spend time and money on:
A) Hardware and
I have been making use of Freelancer.com to find people.
In Entrepreneurship, everthing has to get done, but
you can't do everything yourself!
So far, I have run over 76 freelancer projects.
There is a lot of learning that needs to be done with freelancer.
Of the 76 I started, 9 were cancelled, due to my own specifications
being unclear (my bad!).
Another 4 were cancelled because the freelancer took 4 ever.
There were 26 of the project that expired, as I did not
like the freelancers that were bidding
There were 4 that were incomplete (this cost me!).
There were 9 that were revoked and the payments returned.
There were 10 disputes (I won them all).
There were 19 reviews, I have a rating of 4.8/5.0
At then end of the day, I had a 27% completion rate.
However, I had assembled the RIGHT team and now can proceed
with the project without using freelancer.com
<http://freelancer.com> (most freelancers
take paypal). So, for prototyping a self-funded
device, freelancer is a great way to meet people and assemble
the virtual team.
A production ready prototype is a must-have for
kickstarter. Several generations of boards, software
and configurations were needed before the prototype
was ready for production. Only then did I make
a decision to create the kickstarter production.
Everything had to work and fit correctly.
Everything had to be demonstratable.
A) The video
I started the project and knew NOTHING about iMovie.
Most of the training videos that are on youtube are
written by pre-teens (and the 10-year-olds are the REAL
experts!!). Basically, every single question I had about
producing a video had to be done by googling it and trying it.
This was my very first iMovie (it's true!!).
It is a lot of work and time, but worth it, as you
can say you did it all on your own.
B) The rewards
The number of units at a LOW price started small, this means
that additional units can be added, but at a slightly higher price.
Thus, we convert the the tire kickers into BUYERS (this is so
5. The Launch
After approval, the launch phase was a TOTAL let down.
Right now, we stand at a $1500/$10000 raise, with 26 days
to go. The rate of new backers has flatlined.
6. The advertising
I am just an engineer! But I have to learn how to sell.
A list of places that I have approached appears below.
Also, I wrote an instructable and placed a google advertisement.
7. Mitigating Inventory Risk
Manufacturing is routine engineering. It is work, no doubt.
But the big risk is that the product will not sell
(inventory risk). Sales should drive production.
The worst-case is that you have unsold product
sitting in the garage. Kickstarter does a good
job at testing the market.
The jury is still out on this one, but if Mr. Market
says "NO", be thankful that you did not go into production.
Yes, you lost your prototyping time and money, but it could
have been worse!
A failed kickstarter project is a learning
experience. Lessons cost money. And good lessons
cost LOTS. Such is the life of the entrepreneur, in
a search for a viable business model.
I hope you liked my story. If you have any questions
(or suggestions) for me, I can be reached at:
[email protected] <mailto:[email protected]>
- Doug Lyon
P.S. About the Author:
Doug Lyon, PhD from RPI, worked at AT&T Bell Labs and Jet propulsion
Lab at Cal Tech. Director and founder of the Electrical and Computer
Engineering graduate program at Fairfield University, Senior Member
of IEEE, President of DocJava, Inc, President of Inventors
Association of Connecticut (IACT). Member of the Angel Investors
Forum of Connecticut. Author of 3 books and 49 journal papers. Free
papers, courses and software are all available from my web page,
------------------> Helpful links for social media marketing
gizmodo [email protected] <mailto:[email protected]>
digg tech (https://digg.com/tools/diggthis/confirm)
techCrunch [email protected] <mailto:[email protected]>
extremeTech [email protected]
<mailto:[email protected]> (editor)
geek.com <http://geek.com> [email protected]
<mailto:[email protected]> (editorial ideas)
The huffington post – [email protected]
techradar [email protected]
YCombinator – http://news.ycombinator.com/submit
Reddit – http://reddit.com
slashdot – http://slashdot.org/
Wired – http://www.wired.com/about/feedback/ [email protected]
engadget – http://www.engadget.com/about/tips/
theregister.co.uk <http://theregister.co.uk> –
[email protected] <mailto:[email protected]>
gadgetsin – https://twitter.com/gadgetsin
Mashable – http://mashable.com/submit/ [email protected]
Before it’s news – http://beforeitsnews.com/editorial/
gizmag – [email protected] <mailto:[email protected]>
guyism – http://live.guyism.com/submit
sellcell.com <http://sellcell.com> –
sellmymobile.com <http://sellmymobile.com> –
the next web – http://thenextweb.com/contact/
the gadgeteer – http://the-gadgeteer.com/well-review-it/
ewallstreeter – http://ewallstreeter.com/page/contact.php
gear diary –
android spin – http://androidspin.com/contact-us/
gizbot – https://twitter.com/gizbotcom
rfid journal – [email protected]
gentlemint – http://gentlemint.com/
pymnts.com <http://pymnts.com> –
dailyme – http://dailyme.com/mynews/addcontent
lazy tech guys – http://lazytechguys.com/contact-us/
techchee.com <http://techchee.com> – [email protected]
nfc world – http://www.nfcworld.com/tip-off/
tech wench – http://www.techwench.com/contact/
damn geeky – [email protected] <mailto:[email protected]>
runaroundtech – http://www.runaroundtech.com/product-submission/
golem.de <http://golem.de> – [email protected] <mailto:[email protected]>
betakit – [email protected] <mailto:[email protected]>
android rundown –
Android Banks – http://www.androidbands.com/
mobile developer tips – http://mobiledevelopertips.com/submit-tip
nfcnews – http://www.nfcworld.com/contacts/
TG Daily – http://www.tgdaily.com/contact
Electronista – http://www.electronista.com/contact/newstips/1
GigaOM – http://gigaom.com/tips/ [email protected]
Forbes – [email protected] <mailto:[email protected]>
xda-developers – http://www.xda-developers.com/suggest-content/
Here is the (Growing) List of contact information from the companies featured in the Logo Cloud:
partnering with the website: [email protected]
advertising in the print magazine- Media Kit
(the advertising page is malfunctioning, though) http://money.cnn.com/services/advertise/
For tips, ideas, and News - [email protected]
For advertising- [email protected]
Send Pitches to: [email protected]
Alternately, for all press inquiries, please contact:
Senior Director, Communications
Associate Director, Communications
*Bibliobytes is currently down. There's no site.
you register and join, like social media accounts. http://www.techsite.io
Contact form. http://www.smartcritique.com/contact-us/
To engage with site admins, email Vats Sanjeev at [email protected]
*WaT Replay Tv: it seems like the website is down. I can't find a site that matches with this logo.
Komputer Swiat: is a Polish website- need website translation.
General contact- Jacek Wąsowski, Project Sales Manager, at [email protected]
Advertising contact- Martin Wind, Project Sales Executive, at [email protected]
La Presse: is a Canadian French-language site- need website translation.
Press/Publicity page: http://publicite.lapresse.ca
Contact page: http://www.lapresse.ca/contact/
*Mikan: no info available. I'm getting some consulting firms in the search results, but nothing referencing tech, small business, or similar topics
advertising has a few lengthy documents discussing their actions regarding advertising (that don't lead to any contact links or email)
there is a social networking side: http://www.cnet.com/user/join-cnet/
Advertising Contact Form - http://idgcsmb.com/advertisewithus/ (this the company that owns PCWorld)
Or Email: [email protected]
Contact us: [email protected]
There is also something like an advertisement creator: https://advertising.yahoo.com/gemini/
To pitch an app: [email protected]
No direct link to advertising info, just a staff page. No clear distinction of which department handles press releases or adverts.
Can subscribe through various platforms; no indication of a network within the site, though.
Story idea submissions: [email protected]
Sales & Partnerships: [email protected]
It's a form: http://www.theverge.com/contact-the-verge
Stuff is based in the UK.
To advertise or for further information contact the sales team at [email protected]
Advertising contact: [email protected]
Press/Media contact: [email protected]
Business Development contact: [email protected]
News tips: [email protected]