Robin2:
Thanks for that explanation Bill.I don't see any particular need for a "business model" beyond the simple profit (or loss) associated with manufacturing and selling boards.
You don't have to.
But if you want large investment dollars to really grow, you better
have a business plan that makes sense to the investors.
Investors, particularly VCs that can bring large dollar amounts to the table want to
see how they get a return on their money.
Simple profit and loss on selling boards isn't going to be enough to get their interest.
That type of business is known as a "LifeStyle" business.
It can provide a very nice lifestyle for the owners but it doesn't provide much of
an opportunity for investors.
VC type investors have to have a multiplier on their money and an actual "payday".
There has to be a believable story that leads to an eventual exit strategy for the investor.
i.e. you put your money in, some time passes and you get a much larger dollar amount
back. A typical multiplier would be in the neighborhood of 10X or more.
If that doesn't look possible, you won't get large investors.
THE most important thing to large investors (and any investor really) is the management team.
Does the team running the company look like it has the skills and experience
to actually pull off their plan?
Also keep in mind that dribbled out return on investment like dividends
based on profits is not tax efficient and therefore not preferred.
Dividends are simply income and is doubled taxed (at least in the US)
There are all kinds of things that can be done to optimized net return
after taxes when the return is based on growth vs income.
The difference is VERY substantial.
And that is why a VC type investor is much more interested in an payday event
or exit strategy where the return is realized as a capital gain vs dribbled out
as dividends.
To the best of my knowledge the linux developers don't have a "business" and that is a far more significant activity than Arduino.
More significant activity, sure.
But linux developers are not a business that has to create a return for its investors.
Even projects like LibreOffice are not businesses, they are run by a foundation.
Once you start to take money from investors and have shareholders everything changes;
You are now a business with investors that want to profit from their investment.
Now, not only do you have to generate profit and/or create value, but you may not be able
to fully drive things in the direction you want, since shareholders can now vote on certain things.
You also have tons of financial rules and operating regulations that come into play.
From what I've been reading some on the Arduino team want to solicit investors to grow the company.
The question then becomes: What are you going to do with money
and how do you provide a return for those investors?
Just saying: "I'm going expand manufacturing capacity to make and sell these boards more efficiently,
and you can share in the profit made off the sales", isn't going to be good enough.
Also, spending lots of resources (money) creating and maintaining s/w that you give away for
free, which enables and lowers the barrier to entry for any competitors, is going to scare many
potential investors.
Like I said, using open source s/w is a tricky for a business.
Those that are successful using it in products are typically using it
as part of something larger which is a closed system.
This allows them to leverage the open source developers as unpaid slave labor.
The final product is closed and therefore does not enable any competitors.
In that model the open source saves resources since it pulls in and uses open source
but doesn't give away the final code or full plans to the final product.
In the current Arduino model the open source is backwards from a business perspective.
They spend resources on developing the s/w and h/w
and then give away and support all the s/w along with the full plans to the h/w.
This means that any competitor can come along and build clone h/w with little
to no upfront costs and then simply point their customers over to the Arduino site
for any s/w and support, so they also have no support costs.
So in terms of the product being sold "Arduino boards", Arduino LLC has overhead
that the competitors don't have.
As an investor, i'd be deeply concerned how the company can compete long term
with this business model.
I'd want to see how the company plans to transition into something else with large growth
potential.
What I find very hard to understand is why the "Arduino people" almost entirely ignore this Forum even though it must represent a very large proportion of the "value" of the product.
...R
For the most part, I'd say it is just resources.
My assumption is that the total staff for Arduino LLC is not as large
as we might think given the size of the project.
And they simply don't have the staff or hours in the day to monitor it.
Although, one thing I will say that I found very interesting is that
back when you could actually search the forum, you could do a search for
the founders and they had very very few responses.
So either they had aliases, chose not to respond to posts, or
pretty much ignored the forum, any of which I found a bit odd.
I think I saw the most posts & responses from a few of them during the 1.0 release debacle
and even then it wasn't more than a handful.
--- bill
