HARDWARE STARTUP WINS & FAILS

Transcription

1 HARDWARE STARTUP WINS & FAILS THE REALITIES OF SELLING HARDWARE Dana Madlem VP, Services Rush Order

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3 Tpics n n n Backgrund / my perspective Separating fact frm fictin: What des the empirical data say? Q&A What d successful hardware startups really lk like behind the scenes? Hw hard is it t get started? Sales channel management Returns Lgistics design

4 Turnkey Ecmmerce, Fulfillment, Accunting, and Custmer Supprt frm Silicn Valley s Mst Experienced Firm

5 What is Rush Order? (aka my perspective ) Make the prduct Prduct strage Ship t custmer End user custmer supprt Get yu paid fr the rder Handle all returns Glbal warehusing Califrnia New Yrk Canada Netherlands Hng Kng Japan Order Fulfillment t cnsumers and retailers. Cntact Center Phne Live chat Scial media Accunts Receivable Credit Card Fraud Mgmt Sales tax cmpliance Reverse Lgistics Repair & refurbish

6 THE FLEXIBLE BACK OFFICE OF THE WORLD S BEST IDEAS TIME AND TIME AGAIN.

7 My Windw int the Hardware Startup Landscape N sales pitches. We see the unvarnished data and help clients manage real-life peratins. And we put ut their fires. A gd friend will help yu mve, but a true friend will help yu mve a bdy. Steven J. Daniels, Weeds in The Garden f Lve

8 Prfile f Current Clients n ~100 Clients ttal n 75+ are hardware startups actively shipping in % are still perating as independent businesses 8% died last year 8% recently had majr liquidity event r exit this year Of the remainder perating independently, there is a fairly clear trajectry (up r dwn) n All 75+ startups were funded between 1999 early funded after early Why? Average Funded in 2012.

9 Prfile f Startup Clients n Mstly cnsumer prducts. A few B2B. n Funding ranges frm $500k in seed rund t $725M raised in private markets (unicrns). n Ttal funding raised: $1.8B n Average private funding, including unicrns = ~$30M n Average private funding, excluding unicrns = ~$14M n 78% raised mre than $1M t date. n 35% raised mre than $10M t date.

10 Tpics n n n Backgrund / my perspective Separating fact frm fictin: What des the empirical data say? Q&A What d successful hardware startups really lk like behind the scenes? Hw hard is it t get started? Sales channel management Returns Distributin design

11 EMPIRICAL EXAMPLE ORDERS SHPPED BY MONTH PHONE SUPPORT REACHES 75,000 MINUTES PER MONTH ,000 UNITS IN WAREHOUSE FLASHED & REPACKAGED MAJOR PRESS COVERAGE ACQUIRED FOR $590 MILLION

12 Hw Hard is it t Get Started? n n n 0% shipped in the same year they were funded Average timespan frm funding date t actual custmer ship date = 31 mnths Over 70% f clients prducts required significant re-wrk after leaving the factry. 1. Firmware flashing 2. Batteries all srts f issues 3. Packaging (e.g. prduct munts and trays, adhesives, scuffing, barcdes) 4. Other cmpnent failure (e.g. wheels, mtrs, plastics, wrist straps, etc.) 5. Sensrs Everyne has a plan until they get punched in the face. -- Mike Tysn

13 Sales Channel Management is Hard After the first crwdfunding / pre-rder campaign, 0% cnsistently reached thse direct-t-cnsumer sales vlumes ever again. Be prepared fr the cntributin f B2C vlume t switch frm 90% t 10% f yur grss sales.

14 The New Retail Reality Direct sales are fun and prfitable, but scale happens with channel cverage AND pull demand effrts. B2C is n lnger a lng term strategy fr mst. Start strategically. Yur prduct n the shelf at Best Buy Success. Sell-thrugh at any stre = Success Majr trend:.cm drp-shipping

15 Hw d the Best d Sales Channel Management? The ld schl stuff Large marketing and PR budgets Successful channel strategy and executin it s nt accidental. VP f Sales (r similar) rle is critical. Every client is selling prduct n Amazn (80% are selling prduct t Amazn). Seller Fulfilled Prime is pssibly next big trend. Every successful cnsumer prduct we manage is ging t ther majr retailers t (nline and brick & mrtar) Direct t cnsumer channel shuld be viewed as ne tl in yur Swiss Army knife

16 What Variables are Cmmn Acrss the Success Stries? Sales & marketing. It des take mney t make mney.

17 (Mstly) Recverable Mistakes We See Manage all yur crwdfunding backer data n spreadsheets. Prmise a specific delivery date. Embrace seasns, nt mnths. Crwdfunding scammer speaks ut at SXSW Be surprised by credit card fraud Insurance? What insurance? Theft, inventry lst at sea, hungver frklift driver, smelly prduct, etc. Retailer chargebacks.

18 Majr Retail Operatins are nt Trivial

19 Watch yur Screcards carefully Rbtics Prduct IT / Wearable Device Smartphne Accessry

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22 Hw t Avid Certain Death Sell in is nt sell-thrugh Get yur marketing machine ready Manage credit risk Hurray! We finally made it! We just signed n GdGuys, Circuit City, and Sharper Image! Inventry management and sales frecasting are hard

23 Hurray! We signed a majr retailer! 6 mnths later Hey, what are thse pallets being ffladed n the dck?

24 Return Rates are Dictated by Nature and Nurture 8% 10% - 25% 3% - 8% Prduct quality (duh) Cnnectivity (bluetth vs. wifi vs ) Mving parts Other prduct cmplexity (e.g. installatin) Brick & mrtar retail sales US is highest. Asia is lwest. Prduct quality (duh) Certain categries like tys Direct nline sales and etailer drpships N cnnectivity Lw cmplexity in prduct US is highest. Asia is lwest.

25 Mre n Returns Invest heavily in beta testing. Tell us what yu think desn t wrk. Cnsider design fr test, and design fr repair in yur prduct NOW. Yu will re-wrk units in yur warehuse. The ability t create refurbished units can help sften the landing. Hw? Use refurbs fr warranty replacements Sell refurbs / pen bx units thrugh creative sales channels (this is what yu see n Wt, Grupn, Overtsck, etc.

26 Develping a Plan

27 Develping a Plan

28 Fr Every Bx in the Plan, Answer: 1. Wh is ging t perfrm this task? 2. Hw is that emplyee, cntractr, partner, etc. ging t perfrm this? 3. Where are they ging t perfrm this task frm? 4. Hw des each step integrate with the next? Hw des each?integratin impact custmer experience. 5. Hw much will it cst? Service prvider fees, duties, taxes.

29 Clsing Thughts "Yu can lse a lt f mney fast in a hardware business if yu d it wrng, and mst peple d it wrng. "But building it is nt the hardest part," he cntinued. "It's making it, distributing it, managing inventry, managing distributin thrugh the channel, understanding the market and supprting the prduct This is really difficult stuff. The nly way t win is t learn faster than anyne else. Eric Ries The Lean Startup: Hw Tday's Entrepreneurs Use Cntinuus Innvatin t Create Radically Successful Businesses Randy Kmisar Kleiner Perkins Caufield & Byers The Wall Street Jurnal March 2014

30 HARDWARE STARTUP WINS & FAILS THE REALITIES OF SELLING HARDWARE Dana Madlem VP, Services Rush Order