DRAGON INNOVATION, INC.

MIT  FOUNDERS’  JOURNEY  OCT 23, 2014

SCOTT N. MILLER | CEO | @DRAGONINNOVATE | WWW.DRAGONINNOVATION.COM

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Presentation Download

http://bit.ly/MIT-Founders-Dragon-2014

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Agenda

http://en.wikipedia.org

•Quick Survey

•Dragon Background

•Manufacturing Overview

•How to Prepare for Crowdfunding

•Understanding Product Cost (COGS)

•Q & A

Quick Survey

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Dragon Innovation Background

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MIT RoboTuna

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Agenda

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Robotic Corvette Powered Dino

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Agenda

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Initial iRobot Expertise (Revenue)

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Journey from $100,000 to $100 Price

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My Real Baby ~ 100k

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Velociraptor ~100k

+

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Rooomba and Scooba

Agenda

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We are going to take something as insanely

complex as manufacturing consumer electronics and

make it feel easy.

VISION

Bolt

Bolt

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MANUFACTURING SERVICES

FACTORY SELECTION SERVICESFind the right manufacturing partner for your product.

· Factory Selection & Vetting· Preparation of Request for Quote (RFQ) package

· Quote comparison / Apples-to-Apples analysis

· Far East and US location support

PROJECT MANAGEMENTFull Dragon team support plus a dedicated Project Manager located on-site at the factory.

· Factory contract negotiation· On-site support with dedicated Project Management

· Schedule and budget planning· Independent inspections and factory oversight

· Certification process coordination and assistance

· Iterative design reviews· Component sourcing assistance· Total product lifecycle cost reduction· Creation and implementation of quality plan· Schedule negotiation / acceleration· Sustaining engineering strategies· Rapid response / “fire fighting”· Factory relationship management

Focus on what you do best. Benefit from real-time responses, improved quality, higher efficiencies and easier communications. Plus, you’ll save a bundle in travel costs.

Applying 250 Combined Years Experience To Build >100 Hardware Companies

BRE PETTISMAKERBOT

“During the final stages of product design, we have the Dragon team come in to assess manufacturability and assembly. They’ve been very helpful and made our products strong. Dragon Innovation can act as a trailguide to help navigate the decisions and drama of producing hardware.”

CARLOS HERRERA CEO / FOUNDER, PINTOFEED

“We really had no concept as to the manufacturing process. Thankfully, Dragon was keen on educating us - helping us identify gaps in our design, and guiding us on the full manufacturing process from inception to fulfillment.”

“During the final stages of product design, we have the Dragon team come in to assess manufacturability and assembly. They’ve been very helpful and made our products strong. Dragon Innovation can act as a trailguide to help navigate the decisions and drama of producing hardware.”

ERIC MIGICOVSKYPEBBLE

"Dragon helped us take our crowdfunding success and translate it into to shipping more than 100,000 Pebbles in just over a year. They provided critical support on-the-ground in China and sourced excellent suppliers."

KELLER RINAUDOROMOTIVE

JEEVAN KALINITHISIFTEO

“If you’re looking to produce stuff at scale, you have to realize that the manufacturing process is hard. Dragon helped us climb the manufacturing learning curve with their expertise.”

DRAGON INNOVATION HAS HELPED LAUNCH AND SCALE OVER 100 COMPANIES SINCE 2009

HARDWARE IS EXPLODING

Unprecedented periods of growth come with lots of chaos.

Hardware Wave Enablers

• Nearly Ubiquitous High-Speed Wireless Access

• Unprecedented Global Technology Innovation

• Fearless and Connected Entrepreneurs & Consumers

• Available Capital• Inexpensive Devices, Access & Apps• Ability to Reach Millions of New Users in

Record Time

KPCB DECEMBER 2012

PROTOTYPING HAS NEVER BEEN EASIER

• 3D Printing• Arduino, Raspberry Pi, Beagle Bone,

Edison• TechShop• GrabCAD, Upverter, GitHub• SparkFund, Adafruit• Easier Access to Capital

HARDWARE INNOVATION NOW COMES FROM THE LITTLE GUY

Product Development

The New Way: Sell then Build

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• Raise capital upfront

• Validate product / market fit

• Create engaged & passionate community early

• Get the attention of media and investors

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BE CAREFUL YOU DON’T SELL SOMETHING YOU

CAN’T BUILD

Idea DeliverCrowdfund

Manufacture

PERCEIVED PRODUCT TIMELINE

Prototype

D E F G H I J K L M N O P Q

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

R S T U V ZW X YA B C

Idea DeliverCrowdfund Manufacture

MORE REALISTIC PRODUCT TIMELINE

Proto

CF Prep

X Y ZK L M N O P Q R S T U V WI J F G HC D E A B

Manufacturing is Complex

Why Delivering Is Hard

Getting from prototype to delivery is a long journey with many ‘unknown unknowns ’:

• COGS, tooling and manufacturing costs• Lead times• Permanence of Quality• Iteration cycles• DFMA• Factory Selection and Management• Team Scalability• Schedule & Project Management• Specialized skills (ME / EE / SW/ Q / SC / Logs)

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•NRE for Prototype to DFM•COGS•Tooling Costs•Manufacturing Costs•Pre-Sale Price•Transaction Costs

Calculate An Accurate Funding Threshold

COGS DriversYOUR DESIGN

• Material and Component Selection• Fabrication Method• Manufacturing Efficiency (First

Time Yield, machine tonnage, assembly labor, number of operations, etc.)

• Quality Requirements (driven by requirements / Voice of Customer)

• Packout (replaceable vs. rechargeable batteries; packaging; spares, etc.)

MANUFACTURING PARTNER• BOM Transparency• Profit Margin• Labor Rate• Currency• Geographic Location (shipping,

tariffs, etc.)• Capability (in-house vs.

outsourced)• Supply Chain (Purchasing Power,

volume (piggy back), Consigned vs Purchased, etc).

Controlling Costs

1.Deconstruct  the  BOM.  2.Separate  special  components.  3.Transparency  4.Compare  to  standards.  5.NegoIate  Inclusions

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1812 23

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2915

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ITEM NO. PART NUMBER DESCRIPTION QTY.

1 100132 Heatsink, Aavid 60520 12 PCB 1

100104 Circuit board blank 1 100015 LED, Luxeon LXHL-LW6C 1

3 GATE 1 100110 Film Gate 1 100011 Backgate 1 100024 Film Spacer 1

4 Bottom 1 100144 Bottom Plate 1 100029 Leaf Spring 2

5 Knobreel 2 100106 Cover Bush 1 100151 Dowel .125 dia 2.000 long 1 100009 Driver 1 100153 Gripring .125 dia 1 100149 Knob bush 1 100007 Clutch, one-way, Torrington RC-02 1 100152 Washer, ss .125 id, McMaster 98019A310 1 100017 Knob, plastic McMaster 7354K15 1 100045 Felt washer 1

6 Reel 27 condentube 1

100031 Condenser lens, small Fisher Price 1 100105 Condenser Tube 1 100154 O-ring Buna -120 1 100035 Retaining ring, internal 1.062 dia 1 100031b Condenser lens, large, Fisher-Price 2

8 100162 Spacer, condenser lens, short 19 100136 Spacer, condenser lens, long 1

10 100163 Spacer, projector, short 111 FHMS Phillips M4x20 812 PHMS Phillips M4x8 613 PHMS Phillips M4x6 514 PHMS Phillips M5x16 815 FHMS Phillips M4x12 616 PHMS Phillips M4x12 117 PHMS M4x8 618 100150 Endplate, Right 119 100160 Endplate, Left 120 100100 Front Plate 121 100138 Projector Lens Housing 122 100148 End Spacer 223 100145 Top Plate 124 100158 Window Edmund R39-773 125 100146 Handle 126 100161 M5 Acorn Nut 127 100147 Half Bridge 128 100012 Focus Screw McMaster 92558A170 129 100143 Spacer, .25 dia, .19 long 430 100156 Spacer, projector, long 131 FHMS Phillips M4x8 232 100150 Washer, Nylon, MSC 05401757 133 100159 Detent 134 100101 Bumper, rubber McMaster 9540K35 835 100039 Switch, SPST rocker Carlingswitch 136 100155 Projector lens, concave 137 100157 Projector lens, plano 1

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APPLICATION

DIMENSIONS ARE IN MILLIMETERSTOLERANCES: 0,1MM ANGULAR: 0 30'

MATERIAL

FINISH

DRAWN

APPROVED

DATENAME

TITLE:

SIZE

BDWG. NO. REV

SCALE 2:5

UNLESS OTHERWISE SPECIFIED:

KINKAJOU DELTA100141

DO NOT SCALE DRAWING

REMOVE ALL BURRS AND SHARP EDGES

allen 21july04

Anatomy of a BOM• Plastic• Purchased Parts• Electrical Components• Consigned Components• Deco• Packaging• Assembly Labor• CM Profit, Overhead and Scrap• Overland Transportation

• Does it matter that it is a gear???

• Components (3)1.Material Cost = Part Weight * Resin Cost2.Machine Overhead: = Hourly Cost * Cycle Time (sec) / (3,600 sec / hr) 3.Factory Mark-up, Scrap and Overhead (%)

• Total Part Cost: = (Material Cost + Overhead Cost) * (1+Factory M/U)

How to Calculate Plastic Costs

HK Resin Prices (USD/Ton)

Reference: http://www.nhh.com.hk/eng/trading/price_trend.asp(you will need to create a login)

Item Cost (USD)

280 Ton / hr $15.48

220 Ton / hr $10.96

180 Ton / hr $8.38

140 Ton / hr $7.09

100 Ton / hr $5.80

80 Ton / hr $5.16

Example PRC Molding

How to Calculate EE Costs

• Cost = Component * Usage• Separate high cost components over a certain threshold.

Apply a lower mark-up.• Apply Factory M/U

Typical PRC CM Margins (Profit, Scrap, Overhead)

PCBA6–8%

Toys12%

Consumer15%

Medical >40%

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•Volume Dependent (5k units Threshold)•Domestic CM (USA)•Overseas CM (China)

Manufacturing Strategy

Current Dragon Products