So much for the momentum of all these great 3D printer crowdfunding campaigns. In the past several days, 2 Kickstarter campaigns have been cancelled. They are the campaigns of the Tekma3D printer and the MOTA 3D printer. Perhaps the pricing on these printers were not feasible with what the cost for R&D would be. Read more about this at: http://3dprint.com/9005/kickstarter-3d-printers/
The MOTA is too expensive? The prices seemed OK, even a bit low. I'm all for reducing prices, but there's a point where it's too good to be true. These Kickstarters are trying to be too cheap too quickly, and I'd really like to know their chops, because it seems like there's a lot of inexperienced people doing Kickstarters. Sometimes technology advances and economies of scale kick in, and sometimes there's just corners cut and otherwise poor design.
MOTA looks decent at a first glance, but the filament cartridge is a walk to the dark side.
I also won't crowdfund $100+ to anyone without a track record. For instance, a track record in designing, building & delivering a volume of products, as well as a track record in dealing with people that can do this. That they've been in business for themselves before and understand what a sustainable pricing is, as well as considering contingencies.
I actually wrote a massive post on my thoughts on cheap kickstarter printers failing on reddit yesterday (entirely coincidental I had this drafted before MOTA cancelled), I will repost it here. This post is entirely regarding the fact that K$ printers set themselves up for failure, there will be many more to come if they continue to set low goals.
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Once again I see more basic printers with goals of like $50k and I've finally bothered to ask.. does anyone here have some good numbers on what it really costs to build and mass produce a 3D printer? I ask because me and a few others tried to do this earlier this year but I pulled the plug on it since the numbers didnt add up to me. As time goes on and I see more and more 3D printing startups become insolvent (or lie about it until they are) I feel validated in doing so but I want to know what others have experienced.
Please refer to this graph I drew up, I link it again below but this is in-case people miss it.
http://i.imgur.com/0TPhe6K.png
So when I see printer creators wanting $50k I dont actually believe it is possible. In fact any less than $200k and it still doesnt seem right. Any company that asks for $50k and gets any less than $200k concerns me. As totally rough numbers, this is what I found. Please note I am from australia and our prices vary.
Injection molds, look around $50-75k for everything all up
Printer parts (around $180 for each printer assuming < 5000 sold)
Paying 4 people to build and support the product for a year after reaching funding $200k (no full time workers = no tech support = dead product)
Warranty and replacment parts (assume $40 extra per printer over course of a year, so $220 each)
Let me spell this out very clearly here that THE PROFIT BUILT INTO EACH PRINTER IS THE SALARY, SINCE THATS THE POINT OF RUNNING A BUSINESS. I hope no one here starts asking why I built a big profit and a salary because I didnt, I only put the salary in and its the same thing anyway.
Therefore to successfully make this work, we need to satisfy this equation
Total cash = Total expenditure = Break even
Since we dont want to be perpetually on-edge, it becomes > Printers sold * selling price = $KS funds, therefore
$kickstarter > $50k + $200k + (printers sold)*(printer cost)
P = printers sold
$KS > $250K + P*$220
Now what we see here is 3 variables, however they are all intertwined. Its impossible to set a printer cost without knowing the rest but people do this anyway! so this is what you get
A kickstarter sets a target of $50k and selling point of the MAGIC NUMBER $299, therefore assuming they reach their goal
Printers sold = $50,000/$299 = 167
$50,000 > $250,000 + 167*$220
$50,000 > $286,000... Uhuh
But we cant change the price point! ok then lets change the number we plan to sell.
This is where every kickstarter seems to fall apart. This is what has to happen to be viable!
$KS now = P*$299
P$299 > $250,000 + P$220
P*$79 > $250,000
P > 3165
At $299, your new $KS goal has to be... over $946k!!!
Any less and youre in trouble and will face insolvency.
This is what I found. Could we make $946k? Every $ below that would come directly out of the $200k we allocated for 4 of us for 1 year. So if we go only $700k, we would be in debt since 3165 printers @ $220 each + $50k for molds = $746k. What im saying here, is that any kickstarter printer which sets itself a goal of anywhere below $500k is in SERIOUS trouble and I do not see how they can last over 1 year. Unless they make a massive impact and steal a huge chunk of the market, the amount needed to be viable is just too gigantic. It is a terrible shame this is the case because of there being SO MANY low-cost 3D printer options out there, it cuts away from the margin that any company that has to ability to succeed, needs. Their competition is killing themselves, and everyone in the low-cost 3D printer world around them.
The only way to survive this is with fat profit margins. If anyone tells me that printer parts only cost $200 therefore why should I spent $1k, they need to consider the above maths.
Now of course there are ways to get printer parts for cheaper, say you manage to source the parts for $140 (+$30 for replacements) but you still want that magic number of $299, now you have to sell
P*129 > $250,000
P>1934 = $KS goal of $580,000.
Thats pretty high for any newcomers to reach
Do not even bring up the scenario of working for no money to remove the $200k from the equation. Dont pay your employees, theyll leave. This isnt a question.
I therefore bring this down to a graph of viability of a printer vs required goal and its surprisingly smooth for the most part. If you are below the line, you cant succeed.
http://i.imgur.com/0TPhe6K.png
(edit- here is a graph assuming a 6-month campaign-to-completed distribution time scale http://i.imgur.com/JyD1Srq.png)
The equation of this graph is easy if anyone wants to play around with the numbers
S = the amount you want to pay peoples salaries, calculate it as total salary per person * people in the team C= Cost of printer parts, make them what you want
X is the price point you intend to sell at Y = X * ((S+molding costs)/(X-C))
If you think you can source printer parts for $100, chuck them in the equation and see how many you need to sell and what Kickstarter goal you need. Dont forget to pay yourself a salary, since food is generally important.
One last thing, if anyone looks at my graph and thinks 'hey, that looks possible at $299! A few companies sell at that and are WAY over $946k, so theyre doing good. Take a look at how many people are 'working' for those teams. Around 15 or so? Dont forget to add that to the equation and watch as it become more and more impossible to reach.
Okay, and now what if they're being built in China? Hmm? (actually doesn't change much at low volume, to be honest.)
Also, not saying that you take the profit margin down to nothing, but a $50k/year salary is actually pretty high (outside of the West Coast and metropolitan Northeast). Unless you live in those high-cost areas you won't starve or miss rent on a $25k salary.
Still, your article has a good point. There is vastly more to consider when pricing a product than just the cost per product. And there is more to getting funding than just the number on the crowdsfunding page. While the MOD-T for instance might have something around $250 in pledges, you can probably bet that they aren't relying on that for their costs, but instead using it as a metric to show to their parent comapny and possibly other investors.
This is where crowdfunding is important, as a tool to show real investors "this is how willing people are to buy our product on faith alone" to intice them to put the effort in to put it on store shelves where the real sales are to be made.
Unfortunately many KS and IGG players have this aversion to participating in big business. (understandable, people here are constantly taught that big business is somehow inherently evil) With that mindset, your article is perfectly accurate, unless they make that $900,000+ they won't make it for long on their own.
With manufacture in China you just set yourself up for quality issues and very angry posts unless you have a Team on site to drive things. Not a saving from what I've seen on small non-industrial quantities.
@djbrowni : very nice analysis.
You don't have to go to China to have quality issues. Just look at the American car companies.
Well, when outsourcing manufacturing to anywhere, not just china, you have to invest a large amount of your savings back into quality control. For every 10 iPhones that come out of Foxconn, one goes back to China before the customer has the dissatisfaction of getting a defective iPhone. The returned phones tend to get recycled if they completely fail to turn on, or are rebranded and sold on the cheap if they only have moderate hardware defects. (this is incitentally why many Chinese knockoffs can have identical components to quality goods, but still have vastly worse quality.) Thinking you can send off your order to the big foreign factory and have the product shipped right from there to your customers is a spectacular way to ruin your reputation forever.
EDIT: Also, crowbar brings up one of those reasons outsourcing manufacturing is a good idea, even if not out of the country. If the QA is part of a seperate company for whom the factory works, then they can demand better quality or threaten to go to a different factory. If the QA process is in the same company as the factory, then the pressure is in the other direction, and the factory can bully their in-house QA into letting defects slide to make their numbers look better.