The new capital brings Udaan’s total funding to date to US$1.15 billion. Indian Business-to-Business (B2B) ecommerce startup Udaan announced on January 6 that it has raised US$280 million in additional financing from existing investors Lightspeed Venture Partners, DST Global, GGV Capital, [...]
By Jared Haw
The best manufacturers are on board with your startup’s needs
In today’s fast-paced startup environment, founders typically leverage the services and knowledge of a few key partners to launch and grow their companies. For a product-based company, like a hardware startup, one underutilized partner is the manufacturer. This gap is most likely due to the differences in mindset between the two organizations.
Factories are infamous for insisting on large, short-term purchase orders before agreeing to manufacture. This has made it difficult for early-stage hardware startups to grow: most startups don’t have the funds to place an acceptably large purchase order, and they may also be faced with other limitations, such as the product lacking market validation.
Due to these constraints, startups prefer to build long-term relationships with partners who understand their limitations and believe in their potential. Until recently, manufacturers were unable or unwilling to grasp these nuances in the way startups work, making it challenging for startups to form partnerships with them.
However, in recent years, contract manufacturers have started to see the value of working with startups. The mindset has shifted from providing the most competitive quote, to building up internal engineering teams and expanding supplier networks, giving clients end-to-end manufacturing support.
Nowadays, contract manufacturers with an evolved mindset will provide their clients with engineering support, supply chain consolidation, capital, project management, and more. They will also provide these services quickly, as they understand that if the client is successful, they will also be successful.
One of the biggest challenges for a startup is to figure out how to transform a product from a prototype to something that can be made consistently over and over again.
This is where the evolution of contract manufacturers really shows. Previously, it was difficult to enjoy any extra services without a few million dollars worth of purchase orders. Nowadays, factories will analyze a startup’s product and potential. If it shows promise, the manufacturer may supply an engineer or even an engineering team.
Another hidden but crucial consideration is whether the product is manufactured at a competitive rate. If the manufacturer supplies an engineering team, then they won’t just make a prototype functional, but will make it work within a set budget. They are, after all, the people who best understand the ins and outs of manufacturing costs.
Managing the supply chain is also a common pain point for startup founders, as coordinating with electronics suppliers, plastics suppliers, and raw material suppliers is a daunting task. Also, how does one plan for all of these materials and sub-components to arrive at the assembly factory all within a specific time frame and all within the correct quality requirements? Unfortunately, startups must operate with all of this uncertainty.
One advantage of leveraging an evolved contract manufacturer is using an advanced network of suppliers. What this means is that there is no longer a need to search for each individual supplier. Instead, it’s possible to use the suppliers working with the contract manufacturer. By placing one purchase order, the main supplier then becomes responsible for placing all the subsequent requests with each sub-supplier.
The result of contract manufacturers’ effort to open themselves up is a big plus for startups and SMEs. The ability to use their services to improve a product will allow for a more streamlined approach, save on development cost, and enable the startup to allocate its resources to sales and marketing.
Unfortunately, not all suppliers have been able to evolve their mentality. These manufacturers are most likely the ones who only close deals for commoditized products due to their pricing. Certain due diligence steps are needed to ensure that a manufacturer will be able to adhere to high standards and work closely with a design team to produce good results. However, once trust has been established and the same vision is shared, you’ll see a considerable improvement in your business.
Jared manages EPower Corp, a global contract manufacturing company that develops and manufactures consumer electronic products.
About the Author
Jared manages EPower Corp, a global contract manufacturing company that develops and manufactures consumer electronic products. He works with some of the top innovators to transition their products from development to production. EPower has been recognized as the fastest growing contract manufacturing company with production facilities in China.
This story was originally published in Jumpstart Issue 29: Back to Basics as Tapping Into the Modern Factory Mindset.