Finances Update & Where We Go From Here
Hi again, we wanted to add this Financial Summary into last update, but it took about six hours to distill all the technical details into something that could be digestible, and it took the better part of today to get all these things we’re about to share organized in a way that’s easy to follow.
This update will show where our money has been spent to date, over the last two years. As many of you are asking about refunds, we wanted to open the books so you can see where the money you’ve contributed has been applied.
The money has mostly gone into development, tooling, and purchasing the parts that go into making the watch and charger. We have included detailed pie charts below showing money in and money out.
We are also publishing this information to show where we have not spent money. We realized immediately after the Kickstarter campaign ended that we had to run a tight ship and put every penny toward parts, development, and tooling, so we went to extreme lengths to keep our other expenses as low as possible.
Finances | The Details
The chart below shows all the money we raised. There’s a large chunk of money from all the Kickstarter backers and some additional funding post-campaign via pre-orders. You’ll also see $100k of additional outside funding we raised.
The money spent was separated into into two groups. The first group, money from Kickstarter and pre-orders, was used exclusively for tooling, parts, and development costs of the CST-01. The second group is the additional investment, which we used for our operational expenses. We split our expenses up this way to ensure that your contribution was unequivocally used on the specific manufacturing costs of the CST-01.
The first chunk of money went to Kickstarter and Amazon fees. This was for hosting the campaign and processing payments. This was roughly $100k. The money we received from the campaign was $923,634.
The Validation, R&D, Shipping & Start Up Costs bucket covers things like creating programming and test fixtures, experimentation of adhesives and materials, test tools for proving out the encapsulation process, sample batteries for evaluation, sample metal bands, and evaluation circuit boards.
The largest slice was spent on parts for the watch and the associated tooling. Big-ticket items are the E-Ink display, batteries, battery-management ICs, microcontrollers and clock crystals. Tooling includes injection mold tools for the plastics, dies to form metal bands, diecut tools for trimming circuits, ultrasonic weld tools, and a custom machine for applying adhesives and encapsulants. Here is a break-down of all parts, tooling, programming and certification paid for to-date:
Running Lean, Keeping Operating Expenses to a Minimum:
Our operating expenses came out of the additional 100k investment. We’ve broken this out below.
Certain numbers stand out, for instance, you’ll see that “Compensation” is roughly around $18,000 for two years. This number reflects the net salaries paid to both of us over the two years we’ve been working on CST. This number is low because we not only invested a lot of our own savings into the company, but we paid ourselves the minimum we needed to scrape by month-to-month once the remainder of our personal savings was exhausted.
Some things to note are what we’re NOT spending money on. When we could do things ourselves, we did. This includes all of the CAD & specification drawings for the watch, the electrical engineering, a large chunk of the programming, the electrical testing and calculations, making our own programming and testing fixtures, procurement of parts, and identification of outside vendors (for steps that our manufacturer didn't have the capability for). We do not have an office (we worked from home or on-site at our manufacturer). We did not buy computers or software. We did not hire a staff. That has certainly helped as paying for even a small office seems like an unnecessary expense.
We both live in Chicago. When we have to travel to San Jose for CST, we organize our schedules so that we can find the cheapest airfare and lodging possible. We found that hotels are too expensive to stay at when we have to be in San Jose for weeks at a time (even the cheapest hotels can be over $100 a night per room). So, AirBnB always comes out as the cheapest option. We sort options by price and select the cheapest possible accommodations.
Most recently, Dave has been spending almost every other week on-site. Because money is tight, Dave took the cheapest possible option for accommodations to the extreme. He rented a van from AirBNB with a futon in the back that he parks in the manufacturer’s parking lot. It’s $35 a day, so he gets transportation and somewhere to sleep. Again, since we’re mostly working when we’re on-site, these sparse accommodations don’t really matter too much, and it has allowed us to be at the manufacturer’s site more often in recent months.
What This Means for Delivery of Watches
As you can see from the numbers here and in the last update, continuing production at this time is a challenge. We have the majority of the parts needed, but are struggling with the yield and the costs involved to assemble them into final units. At the moment, we don’t have the reserve funds to make up for the yield and labor costs. We are currently investigating options that may allow us to get units out to the backers and continue to produce, but the details of these conversations are still in the early stages. We will be shipping as many watches as possible and are working with the manufacturer to see how many watches can be shipped.
We hope that this update helps to communicate that we have been doing everything in our power to get through these issues and get these products out to you folks. We’re deeply sorry for what looks like may be a negative outcome and it pains us to write this post. We assure you that we will continue to look for ways we can get watches out to you and we will ship every last watch we are able to.
-Dave & Jerry