Dallas hw meetup_140205

How to Scale Hardware CompaniesDallas HW Meetup

140205

Dragon Innovation, Inc.

Dallas HW Meetup 140205

[email protected]

dragoninnovation.com

1Wednesday, February 5, 2014

mailto:[email protected]


•Informal - Please Interrupt•Quick Survey•Dragon & Bolt Overview•NPD Paradigm•One -> Many•Q&A

OVERVIEW

2Thursday, February 6, 2014

Quick Survey


Dragon & Bolt Overview




Selected Companies We’ve Helped


Helping Hardware Startups


Helping Hardware Startups

‣ Product designer & entrepreneur

‣ Principal @ Brainstream Design (4 years)

‣ Product vision and prototyping expert

‣ Developed >15 commercially available products, ~10 others

Managing DirectorBen Einstein

PartnerSCOTT N. MILLER

PartnerAXEL BICHARA

‣ Manufacturing expert

‣ VP Engineering @ iRobot (10 years)

‣ Founder & CEO @ Dragon Innovation

‣ Manufacturing many VC-backed startup hardware products: Pebble, MakerBot, Sifteo, etc

‣ VC with mechanical engineering background

‣ Partner @ Atlas Venture (19 years)

‣ Lead investor or co-founder SolidWorks, Belmont, GrabCAD, Premise

‣ 7 funds totaling >$2.6B


HW Revolution Enablers


Hardware Wave Enablers

• Nearly Ubiquitous High-Speed Wireless Access

• Unprecedented Global Technology Innovation

• Fearless and Connected Entrepreneurs & Consumers

• Available Capital• Inexpensive Devices, Access & Apps• Ability to Reach Millions of New Users

in Record Time

KPCB DECEMBER 2012


13

Hardware Innovation Now Comes From The “Little” Guy


PROTOTYPING HAS NEVER BEEN EASIER

• 3D Printing

• Arduino, Raspberry Pi, Beagle Bone

• TechShop

• GrabCAD, Upverter, GitHub

• SparkFund, Adafruit

• Easier Access to Capital


Delivering Is Hard

Getting from prototype to delivery is a long journey with many ‘unknown unknowns ’:•COGS, tooling and manufacturing costs•Lead times•Permanence of Quality•Iteration cycles•DFMA•Factory Selection and Management•Team Scalability•Schedule & Project Management•Specialized skills (ME / EE / SW/ Q / SC / Logs)


NPD & Crowdfunding


NEW WAY

Pre-Sell then Build

The Product Development Paradigm is Changing

OLD WAY

Build then Sell


PRE-SALES AREPERFECT FOR HW

• Raise capital

• Validate product / market fit

• Create engaged and passionate community

• Access media and investors

• Understand build volumes


Global Crowdfunding Is Exploding

$530M $854M $1,470M $2,806M

20102009 2011 2012 2013 (est) 2014 (est)

61%growth

72%growth

91%growth

67%growth

74%growth$4,676M $8,141M


$10.4M

Pebble

$8.5M

Ouya

$2.9M

Formlabs

$2.4M

Oculus Rift

$1.4M

ElevationDock

$2.3M

Lockitron

Lockitron

$1.3M

LIFX

$1.96M

Canary

$2.3M

Wobble-Works

$2.7M

Tile

EXISTING DRAGON CLIENT

Products Are Raising Serious Amounts Of Capital


But … It Can Go Terribly Wrong Without:

• Analysis of COGS and Fixed Costs• Designed for Manufacture and Assembly• Manufacturing Strategy & Schedule• Threshold Analysis• Marketing Strategy


DFMA Review, COGS Analysis, Cost Estimation, Manufacturing Strategy

Platform Optimized For Hardware,Campaign Strategy, Marketing Execution

Factory RFQ and Selection, Production Startup, Certifications, On-the-Ground

Far East Project Management

There Is A Better Way: The Dragon Integrated Approach



One -> Many


Manufacturing TriangleCost (COGS)

Quality

Cost

Schedule


Cost of Goods Sold (COGS)

• Direct costs for goods produced.• Does NOT include Tooling.• Actual price depends on where a

company takes ownership:- Ex-Factory (XF)- FOB (add overland transport to

XF)- Landed (add shipping to FOB)- Inventory (add warehousing)

• Price will vary by date depending on running changes, transportation costs, currency exchange, commodity costs, etc.


Very Simple Retail Costing Model

$

Sell-Through Price(Retail Price)

Sell-In Price(Wholesale Price)

COGS

RetailerGross Profit

CompanyGross Profit

COGS


COGS Drivers

YOUR DESIGN•Material and Component Selection•Fabrication Method•Manufacturing Efficiency (First Time Yield, machine tonnage, assembly labor, number of operations, etc.)

•Quality Requirements (driven by requirements / Voice of Customer)

•Packout (replaceable vs. rechargeable batteries; packaging; spares, etc.)

MANUFACTURING PARTNER•BOM Transparency•Profit Margin•Labor Rate•Currency•Geographic Location (shipping, tariffs, etc.)

•Capability (in-house vs. outsourced)

•Supply Chain (Purchasing Power, volume (piggy back), Consigned vs Purchased, etc).


Controlling Costs

1.Deconstruct the BOM.2.Separate special components.3.Transparency4.Compare to standards.5.NegoAate Inclusions


COGS Strategies

Cost

•When manufacturing in volume for a CE product, it is cri8cal to understand and control COGS. Focus here! Because of the volume, every penny counts ($10k @ 1M units)

•Calculate labor rates. Pop Quiz – How???

•Bill of Material Transparency: Require factories to provide an item by item costed BOM. No mysteries or hidden formulas.

•Build a “Standard Cost” database. Price out cost reduc8ons.

•If 8me permits, develop rela8onships with mul8ple vendors to avoid single source suppliers. Leverage is a beau8ful word.


Anatomy of a BOM• Plastic• Purchased Parts• Electrical Components• Consigned Components• Deco• Packaging• Assembly Labor• CM Profit, Overhead and Scrap• Overland Transportation


• Does it matter that it is a gear???

• Components (3)1. Material Cost

= Part Weight * Resin Cost

2. Machine Overhead: = Hourly Cost * Cycle Time (sec) / (3,600 sec / hr)

3. Factory Mark-up, Scrap and Overhead (%)

• Total Part Cost: = (Material Cost + Overhead Cost) * (1+Factory M/U)

How to Calculate Plastic Costs


HK Resin Prices (USD/Ton)

Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp(you will need to create a login)


http://www.nhh.com.hk/eng/trading/price_trend.asp

http://www.nhh.com.hk/eng/trading/price_trend.asp

Item Cost (USD)

280 Ton / hr $15.48

220 Ton / hr $10.96

180 Ton / hr $8.38

140 Ton / hr $7.09

100 Ton / hr $5.80

80 Ton / hr $5.16

Typ. PRC Molding Rates


How to Calculate EE Costs

• Cost = Component * Usage• Separate high cost components over a certain

threshold. Apply a lower mark-up.• Apply Factory M/U


Typical PRC CM Margins(Profit, Scrap, Overhead)

PCBA6–8%

Toys12%

Consumer15%

Medical >40%


Other BOM Costs

• Deco (Tampo, Paint, etc.)• Labor (PRC $2 – 6 / hr)• Packaging (Gift + Master)


Add It Up

• Plastic• Purchased Parts• Electrical Components• Consigned Components• Deco• Packaging• Assembly Labor• CM Profit, Overhead and Scrap• Overland Transportation


Quality


QualityDefini&ons:•Quality = Customer Sa&sfac&on = Performance – Expecta&ons•“Fitness for Use”

•Incoming Quality Control: Use good ingredients.•Build and test along the way. Use sub-‐components.•Sta&s&cal Process Control (SPC) / Yield. Find out now, not later.•Sample Tes&ng: Temp/Humidity; Transporta&on; Drop; T/T; Small Parts; Heavy Metals;

Compliance; Func&onal; Life. How do tests match reality? ISTA-‐2A.•Final Inspec&on / Acceptable Quality Levels (AQL)•Walk the line. Get your hands dirty.•It is much easier (and less expensive) to make changes before Produc&on Start.•What happens if something fails?•Will make or break a product … and a Company!•Quality is rarely considered in the engineering phase by startups due to schedule, cost and

technical pressures.•Watch out for the Unknown Unknowns.•Strong indicator of long term success, etc.•Can you answer the ques/on “How do you know the product is good”?


Schedule


Schedule•Many consumer products are driven by the Christmas (which has a fixed date).

•Plan con&ngency in your schedule. Things never go according to plan.

•Have an onsite presence.•Track schedule carefully and take correc&ve ac&ons early.•Avoid: “There is never &me to do it right the first &me, but there is always &me to do it again. ”


The Road to Production


Detailed Milestones‣Hand Over / Kick-‐Off

-‐Form CM Team-‐Contact Lists / Roles and Responsibili&es

-‐ME and EE File transfer-‐Works Like / Looks Like Samples-‐CM trip to the US if possible (access to models and team, rela&onship building).

-‐Factory Input‣Components

-‐Engineering-‐Quality-‐Produc&on Planning (interface with Sales)

-‐Sourcing / MA / Cos&ng-‐Logis&cs-‐Process / Procedure-‐Financial (modeling and payments)

‣Pre-‐Produc&on Milestones-‐Tool Release-‐Tool Start (TS)-‐First Shots (FS)-‐Engineering Pilot 1 (EP1)-‐EP2-‐EP3-‐Final Engineering Pilot (FEP)-‐Produc&on Pilot (PP)

‣Produc&on-‐Produc&on Start (PS)-‐Ramp

‣Engineering Change No&ce (ECN)‣Sustaining (Quality Up / Cost Down)‣Sunset


Questions?


[email protected]




