Granted, not taking enough risk is probably one of the reasons why I&#x27;m not rich. (Another reason is that I haven&#x27;t had any great ideas). But in my risk-averse world, I have always thought that the idea of taking pre-orders is more to secure customer commitment, rather than to fund production.<p>I have a hobby business in a niche where I&#x27;ve seen a few small entrepreneurs take pre-orders (often 50% down payments), spend the money, go broke, and face a bunch of angry customers. They can&#x27;t deliver product, and they can&#x27;t refund the money. It&#x27;s possible that those were cases where something like a family emergency pulled them under.<p>But watching those failures taught me the lesson -- similar to what the OP suggests -- that down payments are a loan from the customer. In my own case, I decided that it was preferable to risk my own money than somebody else&#x27;s, and I kinda crawled out of the starting gates by doing all of my own production using small runs of parts. Thus my margins were lower, but my risk was commensurately lower too.<p>As it turns out, my business easily saturated its own world market quickly enough that I still sell a few units a week but am glad that I didn&#x27;t try to scale up too soon. My only regret is that I have so far missed the chance to learn how to scale up a hardware business.