If you arent in a position to completely refund everyone, don't do it.
If you need the funds to afford the manufacturing, take smaller deposits instead and use that money to negotiate a line of credit with a bank.
If you need the funds to afford the manufacturing, take smaller deposits instead and use that money to negotiate a line of credit with a bank.
The idea behind taking preorders is to convince VCs that we have a market. They can get on TikTok and read the comments asking for our products, but I don't think that's going to convince them. Hence the need to have pre-orders.
Any idea how many pre-orders is enough to validate a new hardware product? The MSRP is $200.
It convinced VCs of absolutely nothing. So I just went ahead and served those customers with a backup plan that the web services behind it could be run by the customers themselves if I folded.
To be honest, it didn't exactly work but I'm still going.
The product costing $200 isn't enough information to give an answer on proving the market. VCs don't necessarily put any value on a basic question of simpler product transactions. They want "eco-systems" and "crowd dynamics" and potential unicorns. You'd be better off with normal financing if you have demand for enough widgets to make a viable business, plus the bonus of not having to give up any equity to some disinterested finance bro.
Our TAM is $12 Billion, expected to reach $32 billion by 2025. It is a large, fast-growing market. We can definitely be a unicorn. But I have to dwell some more on the question of ecosystems and crowd dynamics.
I like to use the (now failed) Logitech Harmony Remote. The remotes were good, not the best, but good. The real value was the massive database of equipment that the users put together. Logitech ended up with a massive, crowd sourced database of infrared remote commands that made the remotes much more compelling for the users who came later.
My widgets aren't special in any particular way (except maybe the firmware). Even if somebody grabbed the firmware, the real value is in the database of stuff that the devices are gathering, because individually it's worthless but at scale it's incredibly powerful.