I thought the same thing when I started my startup (we make physical stuff too). Then I started learning about injection molding, tooling, materials, minimum order quantities, packaging, etc.

It turns out that very simple things are very expensive to start with because of the low quantities. I thought an order for 30,000 was massive, but some companies we worked with flat out laughed in my face.

So even though he raised a million bones, he's "only" making < 13,000 watches. That'll still be pretty expensive for him.

He does have to make and ship 18,000 watches.

I assume he planned for a lower quantity initial run, so his margins are probably pretty high now. The "fixed" costs of initiating manufacturing are probably the biggest component.

My new theory is that kickstarter actually works best as a demand gauging/preorder tool for a completely finished product that is in the process of working out a mass manufacturing deal. These guys already knew exactly where/who to go to and took care of all the business side of things for manufacturing very very quickly. I'm pretty sure they could and would have manufactured some of those watches with or without kickstarter. The only real problem kickstarter solved for them was knowing how many to manufacture. The fact that other successful kickstarter projects such as Glif, Lockpick tools, and C-loop succeeded under similar conditions seems to somewhat back this theory up.

The pledges are actually orders for the watches.