Don't dog paddle.

If you’re a consumer device company, don’t dog paddle.

Dog paddling is when you’re swimming in inventory (debt). This typically happens when you’re retail payments (receivables) don’t match up to your vendor payments (manufacturing). For example Apple retail will not pay you until your product is sold off the shelf. And guess what? Your product left the factory in China 60 days ago. You were counting on revenues from retail sales to pay the manufacturer. Oops. That’s dog paddling. 

Dog paddling leads to a cash crunch. Cash crunch leads to unfavorable terms with your vendors, emergency capital needs (bridge notes, etc) and sometimes even worse, bankruptcy. 

A lot of consumer device start ups with freshly minted VC money are quick to chase retail orders with pre production models. They launch at TechCrunch, Indiegogo or launch a PR campaign to build awareness, community and pre sales. Suddenly they’re flooded with orders and channel partner requests. It’s all great, it’s what start ups want. But… it’s only a momentary buzz. The real work comes next. Building a model that scales requires building cash, not just sales. If you manage your cash cycle you’ll scale. If you don’t then you’ll dog paddle. 

How do you avoid dog paddling? Follow these steps:

1. Know your cash cycle… how long can you survive without payment? Until you’re paid by retailers and distributors you are essentially a bank. You are financing you’re own inventory until someone pays you for it. This is your cash cycle. 

2. Understand manufacturing terms (and be ready to negotiate).Manufacturers require payment for finished product, otherwise known as ex-factory. What are their terms, net 30, 45 or 60 days? Do they require you to pay for specific components upfront such as memory, CPU, sensors or wireless chips? If so are you financing these parts through third party vendors like Arrow? Do they charge you for warehousing or docking fees? What are their penalties for late payment? 

3. Manage retail terms & shrink. Retailers pay differently. For example Apple does not pay until product is sold off the shelf. That’s a long time before you’re paid. Other retailers will pay you for a percentage of product upfront. If you have a hot product (who doesn’t in their mind) then you may have some wiggle room with retailers but not a lot. For example you may be able to negotiate better terms with an exclusive deal for Apple stores. A successful Indiegogo or Kickstarter campaign with pre orders makes a big difference with retailers (the “Pebble” effect). Retail shrink is managing inventory to your advantage. I discuss this in The 2-Year Itch. It’s important to keep retail hungry, not well fed. 

4. Use distributors to float inventory. Distributors will pay for inventory upfront for a fee. This includes managing delivery to retailers and reverse logistics (product returns, etc.). You’ll give away gross margin to distributors and direct control of retailers. In some cases distributors will mark down unsold inventory below agreed upon pricing. You need to actively manage distributor relationships for missteps and fine tuning but they’re a necessary option if you don’t want to finance ALL of your inventory. At Ugobe we used retail partners and distributors globally. Most of our product (Pleo) was sold through distributors in Europe and Asia and direct to retailers in the US. 

There are other nuances to avoiding dog paddling that I cover in The 2-Year Itch but for now these tips will keep you out of deep water. Retail and manufacturing are the bookends to your business model. What you do between them is learn to swim or dog paddle. Hopefully you’re swimming :) 

Bob Christopher; robot guy 

& author of “The 2-Year Itch”. 

ugobe07@gmail.com 

A cool robot?

You know, someday we'll understand why robots are cool. Not the kind of cool that you associate with your friend's new fury hat, iPhone, downhill skis or their "pretend" tattoo. No, what I mean is the kind of cool that someone associates with "why didn't I think of that... it's so cool.."

We all know that robots are the future, well some of us do. Yet we only find them in University labs, in Sci-Fi movies and sometimes as interesting little toys. Okay, I left out all the military robots that help us find and destroy the bad guys, medical robots for tele-medicine and other applications. And of course there are the every day utility robots that vacuum the floor or sniff out bombs, etc. The problem is that none of these applications make robots "sexy" or fascinating for the general public. In other words there is no "hey, that is totally cool" application for robots.

Maybe I am having a little fun with this "cool" moniker but it truly fits the experience of my last four years building robots. You see I helped create and build the first life style robot company, Ugobe and our legendary Pleo. Yes, Pleo was supposed to be that "cool" device that made people stop and think about it as something more then a robot. And for the most part they do. People bonded with Pleo more then their own pets or friends sometimes.... well, sometimes. And most people around the world became fascinated with this creature.

I remember spending time in Copenhagen where the press and local media went completely wild for this creature, uh robot... One interview led to front page news in Denmark, Sweden and Norway. It was very wild and it was all about this robot that was kind of "cool". And when I was in Ukraine the local TV station spent 30 minutes focusing on Pleo and how it was going to take over the world... Maybe things don't translate so well in Russian.

The folks in Japan, Hong Kong, China and Taiwan thought Pleo was "cool". They even stopped me in the streets of Hong Kong to tell me how amazing Pleo was. Grown men in their executive suits would run across the street just to pet Pleo... It was very surreal. "This is going to be very big, very big... in Hong Kong" they would tell me. Hmmmm...

But did we really create a cool robot or something that was cool for the moment? I would like to believe Pleo offers enduring cool value through evolutionary AI and software downloads. And with it's 1,800 parts, sophisticated sensory network and emotional response system I think Pleo rises above a lot of the not-so-cool robots and toys. It's too bad so many companies focus on cheap not-so-cool toy robots for 15 minute thrill rides that fall flat and become annoying after 20 minutes. These type of products seem to find their way to the Target shelves more often then not.

No, to really create a cool robot you have to think about the human experience, what we do all day, what things we need, what entertains us and what inspires us.

Robots are an expressive medium just like CGI. And as a new expressive medium robots hold truly amazing potential. Think of it this way, if a robot could communicate character, story and believable emotions then the boundaries of entertainment are greatly expanded. I don't mean some talking Bear that reads bed time stories or a robot with simulated emotions. What I am inferring here is the ability for a robot to express believability in character and content. Think of HAL in Space Odyssey 2000. HAL was a believable robot in his character and content- he expressed his thoughts and his emotions in a life like fashion.

Of course this brings up all sorts of thoughts like singularity, sentient like awareness and our Sci-Fi future. Whenever I mention these thoughts to someone they reference Terminator or David from the film AI with a wild look in their eye. Robots don't need to evolve to this level of technical status to offer an new expressive medium. I would argue that Pleo already achieves this. And future robots like Zeno from Hanson Robotics will also demonstrate this ability. The art of illusion mixed in with some savvy AI and an emotive response system are the fundamentals needed for today's expressive medium. Of course, just like CGI advanced to the level of Renderman from Pixar so too can the level of robots advance to greater believability in expression and intelligence.

But this is only part of the answer for how to make a cool robot. The other part of the answer involves applications and what value they can provide. We discussed this at length over the past few years. And it was the very question from every VC that led to their investment decision "what exactly does this robot do for people...?" It makes them happy, it entertains them, etc, etc was not an answer that led to money. We developed an answer that became part of our bigger vision of robots at Ugobe that attracted $24M in capital. Let's just say it's a good vision.

We asked ourselves "what's a robot?" Could a phone, a computer, a silicon controlled device be a robot? Well, the answer is yes. A robot does not have to be something that resembles organic life, such as an android. Of course this is the image in every one's mind. A robot can be a thinking machine with emotions, with self expression, with a personality and adaptive intelligence. But to make it alive, interactive and interesting it needs a finely tuned sensory system that prevents it from looking "broke". In other words if you make a sound or touch it the robot should respond within the context of it's character.

So why is an expressive, emotional and intelligent robot cool? Because it transforms technology into living machines that begin to understand us. With greater understanding of our needs, of our social patterns, our personalities and expressive ques they can literally bring applications to life that would better serve us on so many levels. Understanding leads to empathy and greater emotional engagement which helps blur the lines between people and machines. It's not just Science Fiction anymore, it's real.

A thinking robot could be anything with a CPU (preferably an ARM 9 or above), memory and a sensory system. Hmmmm.... how many devices around you right now have these qualities. iPhone, your laptop, your car. Well, the possibilities are endless which helps us shape our thinking where the robot industry is heading. And hidden in all of these devices lies the future of a very cool robot, very cool.