I have always been quite aggressive on keeping prices low. I’m very much more a consumer products guy than an enterprise products guy. I spent a long time working on projects on the side, and I really appreciate the need for great tools that aren’t outrageously expensive – even if professional organizations are far less cost sensitive. I also am a big fan of fairness and value for money. Also, low cost is a competitive advantage in that larger companies aren’t interested in trying to compete, and new entrants aren’t lured in by the promise of massive profits. And I think it has played a pivotal role in Logic become the most popular logic analyzer in the world (logic analyzers are a very small market, but hey, that’s still pretty cool).
I was extremely aggressive on pricing for the new products. The current price includes baked in assumptions about future cost lowering activities, like more in-house manufacturing, including pick and place, machining and anodizing, and injection molding. However, implementing these cost cutting measures requires capital or access to capital. And I’m sorry to say for a number of reasons we don’t have the capitol to aggressively execute on all those measures right now.
In creating the new product lineup, in anticipation of future increased sales, we hired more engineers – not that many really, we’re talking 4-5, but it put us in a moderately cash-flow negative position, which we funded with an SBA-backed term loan. However, since the development took far longer than we wanted we ran low on reserves and so to bridge the gap to we launched a pre-order. This would have worked fine other than for two reasons: 1 – actually getting the products out the door once again took longer than anticipated and 2 – for many of our customers, Logic isn’t the sort of thing you pre-order. It’s great for individuals to pre-order, but clearly not for companies – although many still did which was amazing and awesome. So as the pre-order period stretched on longer than desired, we began burning down cash reserves again.
Ultimately we did ship all the pre-orders, and I’m happy to say that sales rates are good enough so that the new larger company is now profitable by a reasonable margin.
However – this is a paper profit and the cash flow reality is more dire. Any company requires working capital (cash set aside for inventory and cash-flow-gaps – gaps between selling and receiving payment), and I let ours get way too low.
Complicating this, quite a few months ago I decided – and convinced others – that we should do our own pick and place. The new Logic products have FAR more components than the old units, and PCB assembly costs scale with the number of components/board. Because the boards are also expensive – both the board itself and the parts on it – we cannot build in large quantities overseas without a (for us) vast amount of working capital. On paper, doing pick and place in house lets you get close to overseas costs and – critically – allows you to run with very small inventory levels when properly managed. Given the number of boards we build and the number of parts on each board (Pro 16 has 930) this adds up to a pretty compelling story.
The reality of the pick and place has been different. So far I don’t believe I did sufficient due diligence in selecting a supplier and our equipment was both delivered quite late and has been functionally problematic, resulting in slow and delayed production. We are working every day on this issue, and building as fast as we can – and after enormous effort we’re now – fairly slowly — catching up with our backorders.
All this is a long winded way of saying that we need to raise prices. I have no choice. I know it will come as bad news to many. Although I think many would agree that perhaps a Saleae with higher prices is better than no Saleae all.
The new prices are as follows:
Logic 4: $109
Logic 8: $219
Logic Pro 8: $479
Logic Pro 16: $599
In addition to playing a critical role in our near-term survival, longer term higher prices are likely to allow us, with future cost reductions, to potentially keep up a larger software developer staff and develop new features faster, the pace of which I know has been frustratingly slow since all efforts have been directed at the new product support until recently.
In addition, we are raising a small amount debt financing from private individuals to help fund our working capital requirements. Details on that can be found here.
Please feel free to write us with any feedback you like, we read and reply to it all and take it very seriously. Thank you for being a Logic customer, and for all the support over the years. It’s meant a ton to my brother and I, I can assure you.
With kindest regards,
Joe
Co-Founder & CEO
