I’m opening preorders for the 2.4 GHz version of the system. In doing so, I want to explain why they are the only way forward and give some background on what is needed for those numbers to work out.
First off, fpv.blue has been loosing money since its inception. I used funding from another profitable endeavour of mine, a website, in order to bootstrap it. Over the years this other business slowly decayed and I’m not in a position where I can throw money at solving a problem I have at heart anymore, .blue needs to become profitable or be closed down.
Fortunately, I finally consider the technical aspect of the problem solved, with everything else being the only remaining minority issue. This is ironic, as most hardware startups fail being unable to manage cashflow or capital, not because they can’t solve the technical problem. The technical aspect is supposed to be “simple”. This one really wasn’t, it’s a miracle I got this far. Which leads me to the first answer:
Why now? Because it’s working
I never wanted to commit to releasing a product, even less so taking in customer’s money, before knowing for certain the thing to be actually real. You can think something up in your mind, prototype it, verify every theoretical aspect of it and lab-test it all you want, but there is no replacement for actually going out in the real world and praying. I can finally say this works, and it works well, and it’s insane but my theoretical understanding of the problem was actually matching reality well enough to materialise in a nice product. So it’s done, and working, and I will publish videos showing it. And I can finally open preorders.
Why preorders? Because this is a terrible business
Hardware manufacturing is a walking nightmare. Let’s put aside all of the issues that go into the manufacturing part. Let’s assume a perfect world where you pay some money to get some result and there are no unexpected problems, no delays, nothing out of specs and no one screwing you over. Let’s just talk about the money part of the problem.
Manufacturing requires upfront cash. That is one hell of a big problem, but here are another two compounding it:
- You need big volumes, otherwise the price will be too high and people won’t be interested. To solve it, you need a lot of upfront cash.
- Due to how online payment systems work you can’t use that money for manufacturing as in most cases it is only available after shipping. In solving this, no amount of (customer) upfront cash will help you.
Now some numbers. For the sake of argument, let’s assume:
- 100k as real fixed costs so far, like development boards and tools
- 30k salary per year times the last year of development, let’s ignore the time before it and how I could make more walking into any job
- 20k as additional running costs per year
So, as a gentle assumption, let’s say that if .blue is to break even within a year it has to make profits of 200k. (costs so far + costs for the next year).
At a 20% margin and 450 per unit, that is more than 2k units. There is no market for that. Let’s scale back, let’s say the fixed costs so far are something I should forget about and let’s consider the cost during last year and the next year, 100k. That’s 1k units in one year, 3 per day. A big nope still.
Let’s keep scaling back then. Let’s only consider the running cost from today onwards. 50k per year. Let’s assume I can keep doing everything myself without going insane. That’s still 500 units, that is a very, very, very positive proposition and it is unlikely to happen still.
So this is where I’m at.
I need a price low enough to be interesting. Volumes high enough I get better deals on manufacturing and hopefully get a slightly better margin than 20%. And a way to handle a frozen paypal/credit card account, that is going to cut on the margin for sure.
There aren’t many ways to come out ahead in this situation and the only one I see is good reception for this batch of preorders. Because of the volumes problem, I can’t rest my hope in a future batch. This isn’t to say “You need to preorder today without even a video of the system working”. This is to explain, as clearly as I can and even if at the bottom of a long blog post just a few will read, there is a very good possibility this product doesn’t materialise merely because the numbers aren’t good enough to make anything work.
So, if you want this product to succeed, please preorder as soon as you see a video online of the system working to your satisfaction. I will make sure to deliver that.