Why Not KS/Indiegogo We are building a product that has a large b2b angle and while the b2c angle is perhaps substantial enough that Kickstarter and Indiegogo could work, they have big enough draw backs that we decided to forgo. Specifically, it forces you to share your idea (AND its popularity which is more important) publicly. This is bad because 1) right now successful campaigns are immediately cloned since the market has been proven publicly before you even ship and 2) because it forces you signal the b2b viability via the early adopter b2c channel which of course makes zero sense but most investors don't think that hard... Thats not to say we couldn't do it or even that we shouldn't do it, but rather that if we didn't have to we didn't want to. There are other advantages to preorders on our own site, namely, the ability send traffic our way instead of staying on KS which ultimately plays well for your SEO and also the ability to iterate on your pitch over time. Kickstarter is a very all or nothing proposition but if you are convinced that you have a large market, opportunity, and inevitable product market fit, why take the risk on kickstarter if you don't need to.
Costs
There is of course the people time. If you are wealthy or have a ton saved then maybe you can work for free for 6-12 months but we weren't/aren't. If you can build your entire product in 6-12 months with 0 money, you also have to wonder if this is something that is simply too easy to make and thus has no moat unless you have some sort of other advantage (former employer that has promised to be your first big customer, key network in the industry/space, etc.). So there are people costs that need to get paid from somewhere and its also worth noting that when you start working on your company, you don't have a preorder campaign ready to go day 0 - you will need time to develop at least some aspects of the product and hopefully have tested that its physical incarnation/features/etc make sense before you decide to start committing to making and selling it.
If you make hardware and software there are some costs around initial prototyping (lightweight or maybe even free hosting, small print or prototyping jobs etc.) These will be in the thousands and likely 10s of thousands if you are iterating over 6 to 12 months. Especially if you need to make some pilot units and send them to people for testing. Now I'm sure some of you are thinking - but I can just 3D print an enclosure and make a cheap pcb for nothing. The answer is maybe at best. I would argue the age of simple little sensors in plastic boxes has come and gone for getting a new connected hw company off the ground. Also, how many of the companies that you have seen/heard of have done this successfully past the first 3 months? I'm sure there is some anecdata out there but most quickly move on to higher fidelity techniques (CNC or SLA at least) and those begin to get pricey. And you need to buy and ship all those components. If you are buying in the states its, mouser/digikey which means $. If its Shenzhen, well, unless you live there you still are spending to fly and live somewhere so its not really free but the cost of the components is at least considerably cheaper.
Tools are the next big hurdle. Depending upon your product size/materials/etc, you are likely to pay between 10k and 200K for tools (variance here can be quite high). Don't forget, the designs for these processes need to be very carefully modeled before hand for moldability/formability and this is nontrivial to do if you are an EECS type person. Even your mech-e if you have one may or may not be qualified to do this well so it may cost time or money to get this done. Also, its worth noting that this assumes your mechanical design doesn't have too many moving parts otherwise you need a lot of testing at the pretooling stage with all of your draft angles etc in place. Also, tools can take between 2 and 6 months in our experience and even after the tool is finished, you will spend plenty of time testing different plastic forms, verifying your powder coater isn't shipping something toxic/unallowable etc. Getting rid of sink/flow/flash literally can mean a new tool if you have complex/unbalanced shapes and that means time/money. Tools are literally set in stone so the changes you can make are rather limited.
Inventory
So lets assume magically, you were able to do all those things above without any VC/Angel money. Now you need to make units. So you have a few thousand preorders maybe. Great. If you have a large CM, MOQ (minimum order quantity) is often 5K so you are on the hook for paying off the rest. If you can get good credit with your CM, thats great, but also unlikely on your first run unless you have worked with them in the past. What about bank loans? Banks will do nothing for you. They want collateralized loans so they will loan money to a likely to fail restaurant because they can sell the stoves/ovens/chairs etc to he next likely to fail restaurant that will move in. Same goes for xyz you name it non 'startup' businesses. We sell smart vents as an example - so if the bank funds the inventory and you can't sell it, they aren't going to be able to sell it either. So no banks. Even with a sales agreement in hand, you are likely not going to get the bank to fund you unless its from a brand/company that is well known (Big Box store maybe).
So what does that mean? It means, many of these things are precisely what Venture money is there to solve. Riskier bets than banks are willing to take but with a higher upside. If you had the money in hand already, this is a different discussion but for the many hungry first time founders, this is one of the only ways to get your product to market. What you do after getting to market is almost an entirely different angle. Post getting the product to market, you may want to keep the company small/nimble/innovative and your investors won't care about that as much as growth since thats how they make their living. But for that early stage, there aren't really substitutes from what I have been able to surmise.