In edition #8 DUST Design DNA 🧬 we talked about the roots of our team and design philosophy. Here we'll build on this to explain our unique approach to business that offers fans a higher level of access while also de-risking our financials. Especially through this VC winter, or as classically put by Gru "I know there have been some rumors that the bank are no longer funding us" 😂.
Cashflow really is the crux challenge for most mobility startups, and in this post we are going to go deep. Dull? Well maybe, but it’s how more than a third of start-ups die.
In 2018, Forbes wrote, “Hardware Startups Are Only As Successful As Their Cash Flow Management”. Forbes explains further “You’ve probably heard the notion that 'hardware is a cash flow business'. It’s a sentiment that should be obvious to any startup because, no matter a product’s potential to create a new category or capture significant market share, cash management will determine the company’s success or failure" and according to CB Insights 38% of startups fail because they run out of cash.
The major difference between hardware ventures and their software cousins come down to the upfront capital investments combined with extended lead times associated with development, testing and sourcing. A typical HW company commits serious capital before they get to test their product in the market, increasing risk of misstep, and extending the gap between spend and revenue generation. Paradoxically, if a new HW startup is a smash success before they have ramped to steady state, the cash flow challenges increase, as they must allocate massive piles of cash towards building production capacity and delivering on orders, before revenue occurs. There are several companies that we know of currently stuck in this pickle.
It is because these realities that we've devoted serious time to the strategy for building the business progressively, reducing cash flow challenges, and mitigating much of the typical risk for businesses of our type.
One of the primary tools that has surfaced in the past decade to smooth the rough edges for funding a HW business is the crowdfund model. Our friends at Peak Design have proven that crowdfunding product development efforts over time, essentially allowing their customers to vote with their wallets, up front, can mitigate many of these challenges. In the end it allows for the most customer centric designs to be built, while allowing for the business to remain healthy. That's not to say that we haven't all seen our fair share of kickstarters gone wrong.
The Dust founding team has decades of experience scaling hardware companies at a mass-scale, via a variety of funding mechanisms. We know the challenge intimately and our plan to manage cash flow effectively has three symbiotic streams:
- Firstly, we’ll bring our first 250 customers along the journey early, to fund development and ensure our first bike is a homerun.
- 8th August we launch an exclusive self-hosted crowdfund campaign through our Newsletter for our first 50 US customers - see Instagram. (Here)
- November 2023 we will launch a second self-hosted crowdfund campaign for our next 200 customers.
- Secondly, we’ll deliver notable successes in each phase to raise seed capital from diversified sources.
- Initial pre-seed round hosted now on AngelList to build prototypes and launch publicly.
- Seed round opening November once we've proven demand with working prototypes. This will fund final development and production validation.
- Thirdly, we’ll establish a debt finance facility to build inventory, so we’re not using precious seed funds for working capital.
A few sidebars on above:
- We’re restricting pre-order volumes to ensure we can make bike deliveries happen in a timely way.
- It’s likely that our Founders50 program is the first time a hardware company has crowdfunded via a newsletter premium subscription.
- If you want to go super deep on indie minded founders please read 'We’re Selling Entrepreneurship Short' from Bryce Roberts from Indie.vc. (Here)
We’d love to have you with us on the ride, so please join us on 08.08.
- Loretta Lynn AMA Amateur Nationals has been running this week in Tennessee. Legendary proving ground for the sports best! (Here)
- Updated specs for the electric Kawasak Ninja have been released, and the battery size may leave range expectations unmet for highway riding. (Here)
- More Stark Vargs are making their way stateside, as Dust friend Tucker at Electric Cycle Rider has gotten the first miles on his. (Here)
We've added a dedicated email to receive newsletter feedback! Catch us at firstname.lastname@example.org OR just respond to this email!
Done and DUSTED for this week. See you all on the next lap.