What Are The Best Pieces Of Advice For Founders Wanting To Start Companies That Build Physical Products, Given The Current Funding Climate Where Incubators And Accelerators Seem To Focus On Web, Mobile, And Social Companies?

The question is really too broad as stated. 

We’d need this information:

1) Do you have a market and can you prove it? Meaning can you list specific customers or specific distribution channels to reach customers with? Or are you hoping to build a product that will sell itself?  Because that doesn’t happen unless it’s either sex or money.

2) What is your plan to produce this product in volume? And do you have production estimates from reliable firms?

3) Do you have a prototype that works already? 

4) If you produce this product and get any traction at all, who would be interested in buying your company, and who do you know at those organizations?

5) Can you explain how this product is valuable to someone in 30 seconds or less? or does it require specific domain knowledge?

6) Does your product require external infrastructure or investment by others in order to sell and distribute or can you sell it over the web, or directly without externalizing any costs?

These questions determine what kind of funding sources you’ll have to pursue.

As someone else said, if you have an interesting idea, Kickstarter works wonders. If it doesn’t fit the Kickstarter profile, then there are always people with money willing to invest in product companies if you have a market, an exit they can understand, a production plan they can understand and a product they can understand.  Right now, multiples for social companies are speculatively high. So they attract the easy money.  But if you want to raise money for something that isn’t ‘hot’ you need to find people who have experience in the same industry you’re in, so that they can at least understand your idea.

Generally it’s better to work nights and weekends to get your first customer(s) and then go to investors when you have a production or distribution problem.  “Early Stage” investments are a random number generator: they are unpredictable and effectively a matter of luck — and you simply have to knock on a lot of doors to find that luck.  Time is better spent on the product or on a customer.  The low capital requirements of social media are attractive despite the fact that it’s proven hard to make money in the space. The high capital requirements for products are not attractive. A patent on a product that can be sold to a large company is a net positive. All things being equal,  a consumer product is not — the point is that it’s a pretty complex question.


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