Why Venture Capital and Pre-Orders are a shitty combo?

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Where ever there is venture capitalist there is that line on the website asking you for a “pre-order”. Where ever there is pre-order there there is venture capitalist. What the hell is the pre-order? Before the VCs era there was either an order or cancellation of the order. But pre-order is the request to make an order for a product that is still NOT produced yet… but exist only on paper or probably in plans. If there are…

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 sufficient orders so much so that the production will be able to make profit ONLY THEN will they START making the product. If there is not much pre-order then the product is deemed to be of low demand and therefore low profitability thus unviable. This is proof that VC’s do not understand the product or its market, after all they are investing in multiple markets and cannot be the masters of each. They are just investors and because they want to protect their investment they ask for pre-orders. Its like if a startup is creating “Light” in a world of darkness the VC’s will ask if they can show a shadow… because only if there is a shadow can there be a proof of success of light. But in a world where there is only darkness how is it possible to create a shadow??!!? What VC’s are really interested is… WHEN they are gonna get their money back with profits?.. the bigger the amount the higher will be the pressure… and the VC guys who do not understand the product or the market will start taking decisions for the people who understand it.

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Apple I

The whole pre-order stuff is quite stupid in case of a product that is ahead of the curve. How can the consumer think ahead and imagine how it would be? Its like asking for pre-order of for a refrigerator when there was none. Or for a computer in the times of a typewriter. Even for Apple I if in 1975 had Steve Jobs and Steve Woz gone around with slides asking for pre-order for a machine with “fully assembled circuit board containing about 60+ chips. Users still having to add a case, power supply transformers, power switch, ASCII keyboard, and composite video display”. How much pre-orders would they have got?

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Gordon French speaking at the Homebrew Computer Club meeting

Even after showcasing it at the Homebrew Computer club which was much smaller but almost as powerful as any Exhibition today. They were expecting 40 orders but they got only 1 order for 50 computers from the owner of The Byte Shop. Then after pocketing US$ 25,000 they developed the next better version called the Apple II. This was a club where every single person would have benefited a lot from the machine but nobody except 1 person thought it was useful…. And the order of 1 instead of 40 was quite small but the numbers in that single order was bigger than what they had expected.

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What if he went around showing Apple II on a slide having faster microprocessor, with built in BASIC programming language, cassette tape drive, joystick-connectors, speaker and 8 expansion slots… all for US$ 1,296 which was quite pricey even in year 1976? Then Apple II would have got probably about 10 pre-orders. And by today’s VC per-order-standard the product would have been shelved just like the Electric Harley Davidson motorcycle. The main part was they MADE and sold 50 Apple-I computers AND THEN they had the Apple II machine ready even before hunting for the VCs.

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Indian electric 2-wheeler market is in exactly same situation. Ather & Tork are out for Pre-Orders. From my close watch on them it is clear that they has been on the egg for 3 yrs now… and hatching is supposed to happen in somewhere in 2017…. and if you are interested you are supposed to sign up or preorder. (OK guys just got word from Volta that they have tested their vehicle and showcased it to more than 300 people as you can see in the below picture and also in Exhibition).

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This image is a mosaic made from the 300 plus test rides!

During that time of course they were busy chasing VC’s, raising funds, studying the market, developing the product etc but not one of them has displayed their vehicle or even their  prototype to the buyer/consumer till last year. Tork at least had the vehicle that they took to Isle of Man TT. Where is it? What are they doing with a bike that gave them a podium finish?

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All they have is one or two videos on you tube. This just cannot be…. they need at least 25 different videos out there on video… at least. If they don’t do it they are selling themselves very low. Cant they display that bike somewhere at some expo or something?

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Only Ather has displayed their vehicle at an Expo and one test drive. No doubt all the 3 are making great vehicles… but that doesnt explain why they cannot be a regular at some of the Exhibition. Technically the electric 2-wheeler can qualify for multiple categories – Electric, Electronics, Solar, Cycle, Automobile, etc. But in an Automobile expo EV will get the least priority or publicity because there are many bigger, more established companies and mighty vehicles around and most people who come there are petrol-heads anyway. Thus not showing up at an automobile expo would be ok… but definitely they have to show up in the other expos The foot-fall that these expos get in just 3 days are huge and these guys have a chance to collect much more details and connect with the “customer” directly. Even parts of this footage can go on their youtube channel!

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But to make some noise and attract attention at an Expo they need something either their bike or some video footage. If not the actual bike at least posters or cutout replicas of the bike at least. Or screening some audio-visual footage of the bike in the stalls would be sufficient.

But do they have such footage? If they have its kind-of-like top secret and kept undercover like some file in government department. If they have no confidence to showcase their existing product… the balls they have to ask for preorders??!!!? Its like asking us to give our word irrespective of the stuff you guys come up with…. Why should we? Why should the consumer? Just because we support EV or Green Energy why are you guys expecting us to give our word to buy your bike?

The whole pre-order stuff is so silly that the whole Indian industry could get a black spot if some startup did some con-job like the Ringing-bells mobile guys did. A couple more like that and the whole Indian start-up industry could get a bad name. There needs to be a minimum standard to be adhered to. The consumer should get a look and feel of the bike. If you cannot display the vehicle then stop asking for pre-orders. Its fair enough… keep your palms on the table… show your current bike and take pre-orders like gentlemen. Nobody is going to rob your design or stuff. That doesnt mean there will not be competition. There are already 3 makers but each having different category of products. Hero Motorcorp is fairly unshaken as their bigger market is slow-speed lead acid battery scooter (of Rs 30,000) which none of the newbies are targeting or competing with. There will be more entrants as these 3 newbies succeed.

They can even showcase the bikes at informal get together at various places although test-drives are still not easy as the place has to be cordoned off and controlled and possibly dont have the vehicle permits. But they can display the bikes in cities they plan to launch so the consumers would get the look and feel of the bike and make their decisions.

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So the best way for newbies is to first start to make and sell the vehicles themselves and THEN go to Venture Capitalist instead of the other way around. But to do it themselves the expense is high so a good way would be to start with Lead Acid Batteries and slow speed vehicles. In US$ Li-Ion is cheap once it gets multiplied 67 times the rate of rupee Li-Ion is absolutely expensive and exorbitant. Hero Motorcorp is one example they are at the top of the game yet are making & selling vehicles with Lead Acid Batteries only because it is low cost. When Li-Ion cost comes down even Hero Motorcorp will switch no big deal.

Moral of story: Just like the Apple I… you DON’T really need a venture capitalist at the very beginning if you can make an awesome bike or product in your garage with your own hands just like Steve Jobs & Steve Woz did with their first Apple Computer! And you DON’T really need pre-order if you believe in the QUALITY of the bike… and are able to showcase the bike to the community… the stuff will fly off the shelf.

First make, then sell, then catch a VC… to scale up… not the reverse!

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