I was musing about this sort of topic yesterday after reading a thread on people angry about the Aliens Pinball situation. Seems to me every small company that tries to make a go of this run into the same problem. they Majorly underestimated the cost of production. And they take on too much responsibility too fast. Then I asked myself how that problem could be approached? Here's a theory, tell me what you think:
1, make a prototype table. This can be made in someones garage. so location costs are essentially zero. Stream the process, interact with community, get feedback on the game as its in production. This process will take at least a year or more, and you wont be making any money. But materials and tools expect under 10K to build a prototype allowing mis steps and mistakes to be made.
2, Prototype made, playtest the hell out of it. Nail down the design. Get people excited. Auction off "3 ultra limited edition units" to be made. With some special features never to be included again. Start the auction at %200 production cost. (for the sake of math, lets say the machines are estimated to have a $3,000 production cost) So if 3 people in the world are willing to pay $6,000+ for the machines, you have 9K+ 'gross profit' but hopefully more if folks start a bidding war for the machines.
3, Once those machines are sent and customers are happy, take your net profits, put them back into production, Take an order for 6 (2nd run) machines. Again, auction style with a minimum bid of 6K.
repeat step 3 until people stop ordering them. with a gross profit of $18,000+ per run of the machines. This way you only ever have 3-6 people 'mad' at you for delays, and if you start to get overwhelmed in production you are not millions of dollars on the hook. At some point during this process you could probably start renting a small workshop or makers space for production, and start work on prototype #2 if you are confident #1 production is running in a smooth loop.
You wouldn't be making money on this for a few years, and even when you did it would be small amounts at first. but it seems a much safer way to go in my mind, not only financially, but Brand Reputation seems to mean life and death for a pin developer. Minimizing risk would be my #2 goal.