Julie Uhrman and Debbie Sterling wanted desperately to be in the 25 percent of funded Kickstarter projects that actually ship on time.
Yes, the odds were against them -- especially because of the type of businesses they wanted to crowdfund. Uhrman, founder of game console-maker Ouya, and Sterling, founder of toy company GoldieBlox, were both venturing into manufacturing. That introduced difficulties completely different from those faced by apps makers or filmmakers.
In the races to meet their Kickstarter deadlines, each entrepreneur got a crash course in manufacturing. They shared the lessons they learned -- and the bruises they sustained learning them -- at New York University's Women Entrepreneurs Festival last month.
Know the rhythms of your company's cash flows.
Uhrman said repeatedly that when it comes to manufacturing, your cash cycle is the single most important thing to track. For example, her company needs to buy components six months before it actually takes in any money from the tablets it will eventually make from them. "We're talking half a year before you get paid," Uhrman said. "You don't have enough money to keep you going." If you can get 60 days to pay, but it's going to cost you $2 more per unit, do it, said Uhrman.
Be prepared to compromise.
When Sterling first envisioned her children's engineering toy, GoldieBlox, she wanted it to be made of recycled materials, preferably wood, and assembled in the United States. That didn't last long. Sterling discovered that wood was not a suitable material for her particular toys, and that recycled plastics didn't have the tolerances she needed. And manufacturing in the U.S. just wasn't affordable, so she ended up making toys out of injection-molded plastic, in China.
Find someone who has built your product before.
There is always someone who has built a product similar to yours, said Uhrman. "If they have good products to show for it, you can have some comfort that they're not going to screw up your product."
Ouya makes tablets, which means that during the development process, Uhrman could get advice from any number of veteran manufacturers and consultants, the vast majority of whom were in China. She looked for someone with reasonable terms (they would charge a fair amount, and give her a decent amount of time to pay), whom she liked, and who spoke English well. As she put it, "You're going to be spending a lot of time with them, so it really helps if, generally, you like them."
Sterling also found a veteran to help her build GoldieBlox. A colleague of hers at a previous job had worked in the toy industry and had manufactured in China. She was able to hire him as a consultant to find her manufacturer, verify its safety certifications, and set up her global supply chain.
Start with small production runs.
The sane way to begin production, the entrepreneurs agreed, is with a small initial manufacturing run. Start by building one manufacturing line, and it will probably produce a minimum of 5,000 units. That minimum run gives you a chance to fix any problems before they're repeated tens of thousands of times.
But sometimes a successful crowdfunding campaign doesn't allow for that process. After GoldieBlox finished its Kickstarter campaign, it found itself committed to delivering 40,000 items all at once, which meant there was time for only one run. Said Sterling, "In retrospect, that's crazy."
Uhrman had it worse: Ouya's massively successful Kickstarter had committed her to turning out 70,000 tablets. "Nothing was going to get in my way of delivering on time," said Uhrman. "So I built multiple manufacturing lines. That's horrible if things get messed up, and they do."
Worse, she said, after scaling up like that, you can't turn around and ask your manufacturers to cut back and do a 5,000-unit run. Your vendor likely hired extra people to meet your higher initial demands; if they take those workers off your project, it'll take 30 to 60 days to get them back if you need to scale up again.
The solution is to explain to your customers, early on, that you're going to start with small batches and scale up gradually, and that they may have to wait. "Start slow and build up," said Uhrman. "It may cost more. There are tons of benefits when volume goes up, but it's not worth it."
Don't assume that distant engineers will read your mind.
Both Sterling and Uhrman said they had had difficulties working with engineers in China. Part of the problem, they agreed, was the distance. But they also said that the engineers they worked with there tended to follow instructions to a fault rather than make adjustments if needed.
"If there is an obvious thing that common sense would tell you to change, if you do not explicitly tell them what to do, they will not do it," said Sterling of her experience. The only way to deal with this, Sterling and Uhrman agreed, is to spend a lot of time physically at the production site, especially during the early runs.