Was having a discussion with an inventor. He's the archetypical "loves to build" inventor that sees business a fun lab/shop to invent and build in.
However, he's been toiling away on his newest invention for quite a while, and isn't sure about if there's light at the end of the tunnel, or what to even do next. Here's what I wrote him -
Ikigai - thank you. I really appreciate it. [he bought a copy of Ikigai; you should too]
Re: business... here, let me blunt here, for your own good.
Stop this "build first then sell" if you want to do business.
It basically doesn't work. Sell first then build almost always works, because you're forced to deliver after the product concept is pitched. Build first without a team around you usually doesn't work... I'd sell some sort of contract version of your work ASAP, maybe non-exclusive where you still own the IP afterwards, or whatever, but get someone to pay you and get real deadlines, and you'll be forced to deliver.
Honestly, I've tried build-first-then-sell many times, and it almost always fails. Sell-first-then-build almost always gets resolution quickly, either in that you sell first and then have to build rapidly (plus, you've now got money and cred to attract people with) or you find out the market doesn't want it. Both of which are much better outcomes than toiling away with uncertain payoffs at uncertain times.
If you've got the skills to deliver (and it sounds like you do), then sell-first is the way to go.
There's two general philosophies employed by inventors -
1. Build first, then sell. This is the "Archetypical Crazy Inventor" way. You build something thinking it's the greatest thing in the world, and the masses will flock to your door for your better mousetrap. Unfortunately, it's just not true. This way usually leads to discouragement and product abandonment. (There's noteworthy counter-examples, but they're noteworthy because they're so damn rare. I'll hazard a guess that 99% of build-first projects never lead to anything noteworthy, not even a credible completed failure.)
2. Sell first, then build. You make an ultra-rough prototype, define the benefits if you can deliver, and get it in front of your customers ASAP. If they won't buy, commit to buying, or help you improve the product, you're going down the wrong path. You correct mistakes before they happen with this route, and it leads to success - or, at least, a quick completion and failure that doesn't hurt.
I think inventors take the first path so often because they don't understand selling, which is understandable. But note that the second path still requires selling, just later - and if you're not studying marketing and sales while you're inventing, it's going to be just as hard after you've built whatever. Actually, arguably it'll be harder - when you have a loose prototype and benefits, customers will tell you what exactly they need and don't need to buy, and you can build with their input in mind. When you're building off of your own intuition, that's not going to cut it unless you've got a mind like someone like Tesla.
(Of course, every serious inventor fantasizes that he's got a mind like Tesla, so maybe that's part of the problem.)
Anyways - sell first. If your idea is good enough, someone will pay you to build it. If no one will pay you to build it, then you're doing some sort of hobby or project or experiment - not a business. Unless you're Tesla, which... well, then you don't need my advice, so carry on.
I honestly feel unethical promising things before I can deliver them. But I've discovered that people with a business background are less squeamish about that.
Oh, and I partly agree with your first point, you are always asking people to invest in a combination of you and your product. Just what combination depends on the stage of development you are at. Even a buyer of a mature product places some faith in the ability of the supplier to support the sale.
In my engineering career, the most successful products, without exception, have been the ones where customers have parted with at least some cash in advance of substantial development. I didn't understand this in my early career, and it always frustrated me to under the gun to develop things that have already been sold. Usually, the first customers were sold on a mix of mock-ups and PowerPoint presentations. Experience taught me the sales guys were right.
Evert single complete flop I have seen (there have been plenty) involved a build-it-and-they-will-come product.
A successful product or service needs customer feedback during it's development and the only feedback that counts involves prospective buyers choosing whether or not to part with cash.
The majority of my point still stands, though.
1. no prototype -- people are investing in you, not your product (although with some sleight of hand you may have convinced them otherwise)
2. prototype -- you still built something, you just decided when to stop.
The whole of this article still doesn't show the crux of the issue: build first mentality is a slippery slope, because it doesn't say at what point anyone has stopped 'building' to start 'selling'.
If you're nervous making a promise, ask yourself what specifically you're unsure of being able to make, then prototype only that. Then start selling, and when you have customers you can fill out the 99% of the product that's routine construction.
My guess is unless you're on the bleeding edge of physics or biology where money can't buy a product, you can make anything you sell -- the bigger it is and the sooner it's needed, the more you'll be receiving from the buyer to fund development.
I don't see how this is a helpful tip. In both cases you cite, you're still building something. In a tech startup, you'd probably call it a Minimum Viable Product. You can call it a 'prototype' or whatever, but you still have something that you can show to interested buyers. I don't think I'd even want a buyer to throw money at me without me proving that I can do something for them, which would mean at a minimum to prove that I can build, or that I am almost there anyway. Would you want to give money to someone based on nothing but promises and dreams?
It's more interesting and infinitely more valuable to know:
1. when to stop building that MVP
2. how to sell it
And I'd rather read about either of those.
Got an email from a Nigerian engineer asking for my take on where he's at. Basically, he's on a steady upward career track but he doesn't care for his field of engineering. So he's got a tough decision at hand - he's already got a great credential and skills, but he really wants to do more abstract/entrepreneurial work - but he doesn't currently have the skillset for it. He had two kinds of questions - a high level strategic question about whether the tradeoffs between switching professions are worth it, because he'd be losing out on a lot of his current credentials/skills and be behind other people. And second, tactical questions on getting started on the creative/entrepreneurial path even though he's got a good full-time job right now that he doesn't love, but doesn't want to quit.
He felt pretty unhappy and stuck when he wrote - good solid job right now, not a ton of other opportunity in his area, and worried about how his skills and life would transfer to his desired field. Here's my reply -
Okay. You're obviously a highly intelligent guy. I think one problem that people have is when they decide to become ambitious, they see there's 10,000 ways they could improve and it's easy to kind of panic or get overwhelmed.
Don't panic. Don't get overwhelmed. Calm down, pick 1-3 things to work on, improve those areas like crazy, then pick the next ones. Rome wasn't built in a day.
Sue and I took a tour of the Tesla Model S factory in Fremont, CA today. This is the old NUMMI plant. If you haven't heard the NUMMI story between GM & Toyota, and you're a car buff, there's a This American Life episode about it that's just mind blowing. The net of it is that GM tried to learn Just In Time assembly practices from Toyota, they built a factory together for Toyota to transfer this know-how to GM, and GM completely blew it. The factory shut down and was sitting idle after that fiasco.
When Elon Musk was looking for a place to build his new Model S sedan, he approached Toyota with a $50MM bid for it, which Toyota accepted. Why would Toyota sell a car production plant arguably worth $1 billion or more for $50MM? For the answer to that, you really have to understand the relationship between Musk and Toyota, which is well portrayed in this 2010 WIRED magazine article.
As a reservation holder for the Model S, I'm proud to support one of the most amazing entrepreneurs of our generation. What makes Elon even more amazing is that he's not only revolutionizing the automobile industry, but the space industry as well, with SpaceX... at the same time. Elon, my hat is off to you.
Below are a number of pictures and vidoes of the factory and the event, which was very well done.