Archive for the ‘Buildling a Business’ Category

The New Way to Fund Consumer Product Start-ups?

By admin on June 1, 2011 | Category: Buildling a Business | Comments Off

One of the biggest challenges to developing, sourcing, and launching new consumer products for start-ups has been raising the funds to do it.  There’s no question that raising money to produce a product design, create CAD files, source a manufacturer, build tooling, and place early orders with manufacturers–all before your product has really hit the market and been tested, has been a very tough challenge for consumer product entrepreneurs.  Tech investors flocked to software based start-ups, and most in Silicon Valley shy away from anything that involves a physical product.  The options?  Self-funding.  Family and friends.  And…that’s about it.  Until recently.

Many have heard of Kickstarter by now.  For those that haven’t, it will defy what you think is possible in the way of trust and money on the internet.  Kickstarter allows you to post a description of your project or product, your fundraising goal, what you plan to do with the money, and what different levels of investment receive in return.  It’s crowdsourced funding that started with a desire to allow people to raise funding for their art projects, and quickly broadened with projects related to products and businesses.  Most people, when they hear of the site for the first time, run through a litany of doubts, such as “what if someone steals your idea?”, “how do you know the fundraisers won’t just steal your money?”, etc.  But upon seeing the success of a few notable projects, their doubts immediately become amazement.

Some of the most notable investments and products so far?

  • TikTok and Luna Tik Watch Kits.  They transform your Ipod Nano into a wristwatch.  Fundraising goal: $15,000.  Amount raised: $941, 718 from 13,512 people.  Fundraising goal: $9,500.  Amount raised: $306,944 from 4,818 people.
  • Coffee Joulies.  I mentioned these guys in a previous post.
  • Lockpicks.  Think its limited to mass market products?  This guy raised money to create a better lockpicking set.  Fundraising goal: $6,000.  Amount raised: $87,407 from 1,159 people.

And if you don’t score seed funding on Kickstarter, perhaps you’ll get in front of the right people who can supply this.  Kickstarter project Grafighters, an online video game development group, failed to raise their funding goal on Kickstarter.  However, being on Kickstarter got them in front of angel investors who were apparently hanging out on Kickstarter.  The result?  They raised $200k from this private investment group.

Profounder, started by the former founder of Kiva.org, Jessica Jackley, takes the Kickstarter concept and targets business rather than art.  And AngelList, founded by Naval Ravikant, is working to change the way entrepreneurs meet investors and find funding.  I know start-ups that have successfully used this to fund their consumer product launch.

Thankfully, the investment landscape is changing.  Thanks to web entrepreneurs, it’s becoming democratized and more efficient.  We’re seeing levels of trust and investment on the web that I would have certainly scoffed at before I saw Kickstarter in action.  It’s a major barrier removed in getting started.  Now, a capable person with an idea can go out and, at the least, find a small amount of seed funding to accomplish the first key stages in developing and sourcing their product.  Of course, the process of marketing it is also becoming easier and cheaper due to social networks.

How long until the new way to fund and launch consumer product start-ups becomes THE way to fund new product start-ups?

Stanford “Bring Your Product to Life” 2010 Workshop Roundup

By GSS on March 5, 2010 | Category: Buildling a Business | Comments Off

I wanted to post a review of some of the topics covered at last weekend's Bring Your Product to Life Workshop at Stanford University's Annual E-Week.  The event was a lot of fun and really interactive.  The audience had a lot of good questions, I assume which were formed from their own entrepreneurial plans or experiences.  The nice thing about events like this is they cover several topics and integrate them all under the framework of a real world goal, such as getting a product out in the market.  The panelists put together an article that summarized their main points from each area of expertise.  The article is posted below.  

Bringing products to life is one of the most exciting things early stage companies focus on.  It involves customer need assessment, concept creation, design, and production.  However, early stage entrepreneurial designers can often feel paralyzed by the gap that lies ahead.  Challenges range from concept creation to getting a product into the market.  “There are a number critical steps in this gap that must be carefully navigated in order to launch a product at the right price, volume, and timeframe,” say Marc Theeuwes, Consulting Associate Professor, Stanford University Mechanical Engineering Design Group. “Crossing this entrepreneur’s gap involves careful attention to design lockdown, intellectual property, prototyping, navigating overseas, sustainability, and strong team management.”  This article explores a number of these critical elements and provides some guidance for entrepreneurs crossing the gap.  Some of the critical steps for crossing this entrepreneur’s gap include: 

1.     Design to Manufacturing planning and execution

2.     Protecting Intellectual Property

3.     Rapid Iteration

4.     Going / Working Overseas

5.     Contract Manufacturing

6.     Managing Teams

7.     Sustainability

 

 

1. Design to Manufacturing

The planning and execution required to launch a product is a highly iterative process.  The final design of the product is often very different from the initial design as a result of this process.  Once a design is conceptualized, prototypes are often made which allow potential customers to interact with the product concept and provide feedback.  Customer feedback influences the design and the process is repeated until the product is ready for the initial launch.  From there, products often follow a New Product Introduction process that provides a structured framework for moving a concept through the critical engineering and marketing phases in preparation for launch.  “New Product Introduction has been around for a long time but it’s really in the way it’s implemented that provides the right framework for success,” saysAllen Adolph, President, Adolph Consulting Services.  “Planning from concept to launch provides a framework to implement against.”  Mapping out the design to launch process enables entrepreneurial teams to back into the likely launch date and highlight critical areas that may slow down getting a product into the market.  The longer the development cycle, the longer the time to revenue, so getting the right process together is essential to maximizing the business opportunity.  Key new product steps include locking down the design, developing a bill of materials (BOM), identifying manufacturing processes, identifying and evaluating vendors, mapping out the assembly process, and creating a comprehensive quality plan that details component testing, product testing, and process validation. 

2. Protecting Intellectual Property

Protecting intellectual property is critical to maximizing the full commercial potential of a new product. There are a number of things that can be protected around the product and its surrounding brand.  The appropriate use of patents, trademarks and copyright can help entrepreneurial designers develop a comprehensive intellectual property strategy.  It is important to formalize this framework early in the process and prior to any public disclosures.  “Making public disclosures of product ideas will have significant impact on the ability to protect intellectual property,” says Jeffrey Schox, of Schox Patent Group, “We work with and advise early stage companies on the right strategy and also help craft patents that maximize commercial potential.”  Patents can be filled in the US and in foreign jurisdictions.  Prioritizing these steps in parallel with the launch to market is critical.  Provisional patents can offer some basic protection while the market potential is assessed and this is often done at a fraction of the cost of a full utility patent.  However, the proper crafting of a provisional patent is critical to ensure a smooth transition to a full utility patent and broad protection of the invention.  Provisional patents allow the entrepreneurial designer to make public disclosures and protect the concept in the US market.  It is important to realize, however, that any public disclosure in the US constitutes public disclosure worldwide. If this disclosure is made prior to filing overseas patents, then protection may be forfeited overseas – where the potential market for the product may be even bigger. 

3. Rapid Iteration

One of the most valuable tools to entrepreneurial designers is rapid prototyping and small lot manufacturing.  These tools allow designer to rapidly iterate on concepts as they move through the new product development process.  Rapid prototyping enables designers to experiment with different design tradeoffs and rapid manufacturing enables designers to produce small lots of products that can be used for showcasing, extended consumer testing, investor presentations, and even regional product launches. These techniques enable the designer to iterate the design while pushing off commitments to high cost tooling.  Once designs have been optimized, commitments can be made to high volume tooling that will drive down the costs of manufacturing.  Avoid the common mistake of committing to a tooling contract when the design is still in flux. 

“During my career in engineering I experienced a gap in the toolsets available,” says Phillip Trinidad, President and founder of ProtoPulsion. “There is a constant struggle with getting higher quality products to market faster.”  ProtoPulsion started out selling and supporting rapid prototyping equipment to Bay Area companies over 7 years ago.  Their engineering, design, and rapid manufacturing expertise helps customers solve their complex de
sign challenges in ways that save weeks of design time and thousands of dollars in prototyping.

The company works with designers to provide end-to-end solutions by taking an idea from concept to prototype, through design iterations, to low and mid volume production, to final high volume production and market delivery.  Cutting edge equipment used in non-conventional ways allows ProtoPulsion to help their customers take products to market faster and cheaper.

Good rapid manufacturing services have cutting edge equipment and offer industry experts who can advise entrepreneurial designers regarding concept, low volume production, and getting to market.  ProtoPulsion offers these services and others including: Urethane casting, model finishing, laser marking and cutting, fuse deposition modeling, high resolution prototyping such as Polyjet, SLA, 3D CAD Design Services, as well as 3D Scanning Services for reverse engineering and inspection. 

4. Going / Working Overseas

At some point, when the volume and product are right, consumer electronics companies inevitably look to overseas production in an effort to tap into expertise and lower cost.  “We’ve worked with a number of businesses to help them evaluate and move overseas,” says Ashton Udall, Founder of Global Sourcing Specialists. “Some critical elements to successfully moving in this direction include communications, vendor assessment, and building and nurturing a lasting network.”

Working overseas – especially manufacturing overseas – requires excellent communication.  There might be no clearer indication of communication gone wrong, than receiving a whole shipping container full of defects.  Good communication applies to more than just phone calls, emails, and in person conversations.  It demands soft skills, meticulousness, and an ability to build relationships in an environment where things get done differently.  Anywhere you go, people usually respond well to general displays of respect and courtesy, so don't check your manners at the door just because you're treated as an important customer.  Documentation and communication aids should be used thoroughly to ensure that both parties are on the same page because even the simplest projects present ample opportunity for costly errors and confusion.

Remember the old line “Low cost, high quality, fast delivery: you can have 2 of the 3?”  This captures quite a bit about buyers' expectations and some of the realities of operating overseas.  You will not likely find the magic supplier that can produce a product at the lowest price available, at high quality standards, and have it on the market in 3 months.  Many people underestimate the amount of time that will be needed to successfully develop their product, source a manufacturer, and receive finished goods. Constrained time lines lead to skipping steps, and skipping steps leads to quality problems.  It's important to understand what your needs are and to prepare accordingly.

Build a network of great people and nurture it.  In any working environment, good people and workers can be a challenge to find.  When you do cross paths with people that offer consistently strong results, it's important to develop and maintain a relationship with them.  This is even more critical when operating overseas because you'll likely be operating in an environment that is foreign to you in terms of how things work.   Thus, the positive benefits of working with exceptional people are even more pronounced.  This applies to anyone who can bring something to the party – be it a translator who forces you to repeat yourself a few extra times to make sure they communicate the correct message, an engineer who methodically goes through the bill of materials a third time to check for mistakes, a packaging vendor that will fix the colors on the packaging without trying to convince you that the wrong colors are the right colors, or a factory contact that is responsive and proactive.  These people are invaluable.  Keep your eyes peeled for them.  Reward them well when they do a good job.  Refer them to others when the opportunity arises.

5. Contract Manufacturing

When the decision has been made to move overseas, finding the right contract-manufacturing partner is one of the most critical evaluations an entrepreneurial designer has to make.  The process involves vendor introduction, requirements communications, bids and request for proposal evaluations, vendor auditing, facility inspection, and ultimately contract negotiation and product design transfer. 

Flextronics is a leading contract manufacturing organization and offers the broadest worldwide electronic manufacturing service (EMS) capabilities, from design resources to end-to-end vertically integrated global supply chain services.  Flextronics designs, builds and ships complete packaged products for its OEM customers and provides after-market and field services to support customer end-to-end supply chain requirements.  “We provide value and innovation to customers by leveraging our technical breadth and global scale in manufacturing, logistics, procurement, design, and engineering,” says Dr. Dongkai Shangguan, Vice President of Technology and Engineering and Senior Fellow at Flextronics.   

Flextronics operates in 30 countries and supports customers in diversified customer market segments. The firm provides design and engineering solutions that are vertically integrated with manufacturing, logistics, and component technologies to enable customer operations by optimizing costs and reducing time to market.  With a contract-manufacturing partner like Flextronics, an entrepreneurial firm can develop a successful market strategy.  Several key competitive differentiators of Flextronics include:

·  Complete range of value-added design services for OEM customers, ranging from contract design to original product design and design manufacturing. 

·  Complete electrical design for products ranging in size from small handheld consumer devices to large high-speed, carrier-grade, telecommunications equipment.

·  Complete mechanical engineering and tooling expertise for case design in plastic and metal media for low-volume and high-volume applications.

·  Printed circuit board design services, incorporating high-layer counts, advanced materials, component miniaturization technologies, and signal integrity.

·  Components solutions for specialty modules such as cameras, power converters, and displays.

·  Test solutions and system integration.

·  Seamless manufacturing pipeline from new product introduction (NPI centers & pilot lines) to full-scale global deployment (industrial parks) to enable product life cycles.

Building cost-effective, high-volume
manufacturing and distribution solutions requires partners with the right regional or global expertise.  Some contract manufacturers are regional in nature and only operate in North America, for example.  Flextronics covers the world with operations in the Americas, Europe, and Asia.

Contract manufacturers also have tremendous logistic capabilities with worldwide expertise in just-in-time, ship-to-stock, and ship-to-line programs, continuous flow manufacturing, demand flow processes, and statistical process controls. 

Products that require greater functionality in a compact device, like consumer electronics, demand more sophisticated manufacturing technologies and processes.  Good contract manufacturers are up to speed on these processes, and by working with them, entrepreneurial firms can tap into this expertise.

Finally, large global contract manufacturers have invested heavily in the creation of strong supply chains and deep vendor networks.  The industrial park strategy, which Flextronics employs, minimizes logistics costs throughout the supply chain and production cycle time by co-locating a number of suppliers in one low-cost location.  Each Flextronics park incorporates the manufacture of printed circuit boards, components, cables, plastics and metal parts needed for product assembly.  This approach to production and logistics is designed to benefit customers by reducing distribution barriers and costs, improving communications, increasing flexibility, lowering transportation costs and reducing turnaround times.  Industrial parks enhance the company’s total supply chain management, while providing a low-cost solution for customers.  Flextronics has strategically established large Industrial Parks in Brazil, China, Hungary, Mexico, and Poland.

6. Managing Teams

People make it happen and at the end of the day, no product gets launched without the effort and coordination of an entire entrepreneurial team.  “Success in entrepreneurial environments comes about by having a small number of people, with complementary skills that are committed to a common goal,” says Dr. Richard Toepfer, owner of INTJ Associates.  “The team exists to satisfy a customer need with a product or service.  If the customer is satisfied, the stakeholders will realize a return, a profit, and continuing return on investment.”

Entrepreneurial teams benefit from clearly identifying (1) the purpose (why the team exists), (2) performance goals (clear expectations), and (3) the approach (process) with mutual accountability. 

The top three concerns in team building and management usually involve poor communication, a lack of process, or a lack of commitment. 

A poorly defined product or service leads to conflicting responsibilities and confusion over the right customer/vendor relationships.  A lack of process stands in the way of the product life cycle.  Teams can’t move in the right direction without a clear plan.  Plans change frequently, but not having one at all will lead to communication issues.  Clearly identifying problems allows a team to rally around and jointly develop a solution methodology.  Clear milestones with “signoff” procedures should be created to signal when a product can move from one phase of development to the next.  Having a coordinated team also facilitates stronger commitment to the project.  When process needs are clearly identified, plans and schedules can be created enabling sufficient resources to be available at the right moment. 

Strong team building requires each member of a team to define his or her job in the following terms:

(1) Key objective of the position – How do you add value?  What is your scope? – Usually a product line or service

(2) Major responsibilities – The two or three areas on which people will be measured.  Each responsibility should contain activities and
each activity should have some measure that indicates when success has been achieved.

(3) A list of Customers and Vendors – These include your boss, your internal and external peers, and all of the people who you depend on for the resources you need to do your job. 

The process of team building includes clarifying the goal, building ownership across the team, overcoming obstacles, and creating a mechanism for timely feedback.  To improve its current performance, a team uses the feedback from team assessments in order to identify any gaps between the desired state and the actual state. 

Finally, teams need to stay flexible and adapt to changes.  Designing a gap-closure strategy allows the team to adapt to changes in customer requirements, available resources, and the external environment. 

7. Sustainability

Designing products for positive impact on the planet, people, and profit is a core tenant of sustainable product design and manufacturing.  This core is rapidly becoming a major element in all product development processes, globally.  Some countries have implemented stringent regulations to ensure that companies include sustainable elements in product design and comply with sustainability requirements.

Sustainable designs and manufacturing consume less non-renewable resources and have less impact on the environment than traditional products and processes with equivalent functional performance.  “A firm’s decision to develop a sustainable product might be in response to regulatory requirements in the served market, to the customers’ preference, or to the firm’s strategic concern for resource availability and outlook on social responsibility,” says Dr. Dariush Rafinejad, Consulting Associate Professor of Sustainable Product Development and Manufacturing. “For an entrepreneurial designer, not addressing sustainability can significantly limit market potential and even block a product from making it to the market. “

Traditional product development strategies are often driven by mutual satisfaction of the customer needs and the supplier’s return-on-investment (ROI) target.  The customer needs are primarily met with functional benefits that the product has to offer at a competitive price.  These cost/benefit requirements establish the basis for tradeoff analysis and managerial decisions in development of a product design and manufacturing process. 

Sustainability considerations often manifest as compliance to regulatory mandates that impose certain constraints on the product design and on manufacturing practices.  Several of these have become particularly important in the electronics market such as WEEE and RoHS. 

Entrepreneurial designers should address sustainability throughout the entire product development process and not as an afterthought. Good designs and processes close waste loops, maximize recyclability, and minimize the use of energy and raw materials.

Conclusion

As we’ve highlighted in this article, bringing products to life is one of the most exciting things early stage companies focus on.  The careful coordination of design to manufacturing planning, intellectual property protection, rapid iteration, overseas considerations, contract manufacturing, team management, and sustainability planning is necessary to achieve success.   By understating some of the dimensions of these stages, entrepreneurial designers can cross the entrepreneur’s gap and ultimately “Make it Big.” n


Speakers & Article Contributors:  p>

The Product Realization Network thanks the following speakers for their contribution to this article and the “Bring Your Product to Life” workshop session at Stanford’s Entrepreneurship Week. 

Allen Adolph, Adolph Consulting

Jeffrey Schox, Schox Patent Group

Dr. Dongkai Shangguan, Flextronics

Dr. Dariush Rafinejad, Blue Dome Consulting

Marc Theeuwes, Nokia Growth Partners

Dr. Richard Toepfer, INTJ Associates

Phillip Trinidad, Protopulsion

Ashton Udall, Global Sourcing Specialists

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