Migicovsky: Hardware startups should trade unit margins for shorter component lead times
Eric Migicovsky · A Conversation on Hard Tech with Eric Migicovsky · Y Combinator · Oct 12, 2018 · at 59:57
Eric Migicovsky (Pebble founder and YC Partner) explains working capital management and cash flow trade-offs for hardware companies.
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“Sometimes it's in your best interest to pay more for the product, pay more for the bomb, the bill of materials, pay more for the components, if The lead times are shorter because you may not actually have a margin problem. Maybe like you actually have quite a bit of margin free margin, but you have this cashflow problem where you can't like fund new batches of products because it takes six months to turn that product into revenue. So you could take some of the margin. You could do a trade off where you earn less profit per unit, but you're taking less of a risk upfront.”
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