

Ask HN: How much money would it take to get into hardware? - mcav

Let's go hypothetical and pretend that your software startup was successful. Having accumulated some cash, you now have the resources to start something bigger -- potentially a startup involving hardware. How much money would one need to accumulate in order to have a serious chance at success?<p>More specifically, if one wanted to manufacture a next-generation Tablet PC (perhaps like the TechCrunch tablet, but not at the rock-bottom price point), how much capital would be necessary to bring a company into fruition to make/sell one?
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brk
A lot of it depends on the hardware you're going to use. Assembling a bunch of
off-the-shelf components into a new idea (ref: Chumby) is going to be much
cheaper than developing your own custom asic's (ref: SiCortex).

My experience over the course of a couple of hardware startups doing more off-
the-shelf approach is it would take you about $20-$35MM in total funding for a
typical hardware startup doing something semi new/radical.

The hardware design itself can actually be relatively cheap. Packaging (custom
tooling for cases, etc.) can easily cost you $20K-$300K (ie: as much as a big
Angel round for some software startups). Manufacturing costs are usually a
function of volume commitments and timing. So, you are going to be incented to
commit to larger manufacturing runs than you are comfortable with to keep the
per-unit cost low. Inevitably, after you do this you find there is some
trivial but important item you missed, so you end up with re-work costs, or if
you're very unlucky a lot of scrapped inventory.

To answer your Tablet PC question, my guess is that you're looking at $10M.
There is not a lot of invention there. You'd pull together a lot of off-the-
shelf components into a new form factor. Most of your early costs would be
sucked up by the design and tooling of the casing and overall industrial
design. I'd venture that you'd be $500K into it just for ID and an ME to
layout the (presumably) injection molding designs for the case and first mold.
Budget another $150K ish for UL and FCC certs (your outsourced factory can
help you with a lot of this process). Then you're likely to go through
probably $250K in the initial hardware designs and single-unit prototypes.
You'll generally need or want 1 prototype for each developer (probably 5-8 in
this case), plus another 6-12 for QA, and another dozen or so for demos and
for employees to carry around and just "use" out in the wild. If you're making
a tablet with an $800 price point, your production BOM is going to be around
$200, and total manufacturing costs around $350ish, but your first prototypes
will cost you $1000ish/ea at first because a lot of it will be work done by
hand, etc.

So, thinking purely off the top of my head, you'd probably take a $1M angel
round, a $4M A round and a $5M B round. Since this is a semi-proven CE device
and not something radically new, you just need to build it and get it out
there, not convince the world why they need it.

~~~
tocomment
Wow, that's a lot. Is that how much you reckon Anybot is spending? Would it be
a lot cheaper to simply sell your hardware as a kit (less certifications,
etc)?

~~~
anamax
The cost savings from requiring user assembly are much smaller than the market
loss from limiting your market to folks who are willing to assemble.

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graemeklass
The major costs would be the assorted tooling charges: \- plastic moulds: for
a tablet size probably $50-70k. I would recommend you get an experienced
industrial designer to guide you through this process. Make sure if you get
quotes from China that you don't give the 3D model for the quote - give 2D
technical drawings with enough information for a quote but not for full
production (your industrial designer should know this). \- PCB boards:
nowadays tooling charges are quite low. We use OurPCB.com for a smallest
circuit board and the tooling charge is in the low hundreds. We source the
important components and get them to ship it to the PCB makers. they then send
the completed PCB's to us. \- packaging: allocatae a few thousand to set up
your box or plastic packaging.

Stage your production: \- pilot run (say 10 PCB boards to get all of your
component logistics sorted out). \- 1st run (100 PCB's with 100 plastic shells
and packaging) \- production run (1000 PCBs, 1000 plastic shells and
packaging)

Assemble, program and test your devices close to you (ie. your garage :). This
allows you a) to keep your IP close to you and b) iron out any production
bugs, processes etc. so you are ready to outsource the whole production and
assembly (if you so wish).

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jwilliams
Hardware as a rule isn't necessarily expensive. If you had a specialised
peripheral you might be able to get going on a million -- maybe even a lot
less if you can push functionality to software (eg a simple setup where the
fpga or microcontroller does all the heavy lifting).

The problem is when you want to compete in a market with volume and wide
distribution. Eg something like a tablet pc. Unless most of the idea comes
from OEM parts then you need big money.

