November 26, 2014
Last week at TechShop in the Crystal City neighborhood just across the bridge from Washington, D.C., Tech Cocktail was welcomed by the maker community as we interviewed four prominent figures in the hardware startup industry. Here is what we learned from Jeff Hale, COO and cofounder of Rebel Desk; Jake Colvin, Director of Global Innovation Forum; Amber Wason, cofounder of Riide; and Josh Greene, Cofounder of Cleantech Open.
The Maker Space Ecosystem
The panel agreed that the growing abundance of maker spaces will make it even easier for a hardware startup to build, create, and work with a community for support. Even though neither RebelDesk or Riide had access to such spaces when they were starting up, they shared how they were able to seek out a support and information system.
“Barriers to entry are higher for hardware,” said Wason. “We leveraged our relationship with our suppliers.” The Riide cofounders had neither engineering backgrounds nor an engineering budget, so they had to really work on relationships with suppliers, mentors, and others in their network. “We pride ourselves on being really resourceful,” she added, pointing to the fact that they were able to create their first protoype for $10,000, which is less than 10% of the industry average.
Hale pointed to making use of freelance help and the systems in place at manufacturers that helped RebelDesk to create their early decisions. “A lot of factories will have people who are expert designers you can work with closely to get answers upfront,” he explained.
A Global Industry
Colvin says the opportunities are tremendous for startups today because global access and the ability to get into international markets is easier than before. “If you have a desirable product, you’re likely to be global from day one,” he says. “The mistake that startups make is that they think they’re too small, or not important, or ready to be global. You’re de facto global just by putting up a website.” The challenge is not in finding the global market, but in serving it – being prepared well in advance for logistics challenges such as shipping and logistics and for international payments are the key downfalls that can set a hardware startup back. “Small businesses and startups that trade internationally have a better chance of survival,” Colvin also said.
Greene says that Cleantech works across all sorts of technologies that have an application to sustainability, so this potential in a global marketplace is very large. Some global marketplaces are growing 45% annually. “Our present world configuration almost requires that startups look at a global marketplace,” he added.
The Hardware Startup vs the Software Startup
Hale notes that a lot of hardware products also have a software product, so it’s like doing twice the work right off the top. But more than that, truly researching every part of the supply chain is more intensive in a hardware startup. There are so many things to research that you would never think could come up. Small details such as the data around increased shipping damages claims around the holidays is good information to have when thinking about launching “in time for Christmas.”
“Adding more time cannot be stressed enough when predicting launches.” said Wason. A hardware startup often takes twice as long and costs twice as much money. When problems come up in a software startup, the software needs to be changed. In hardware, you have to rebuild completely. Delays can occur anywhere, from far up the supply chain.
Both entrepreneurs were emphatic about the importance of researching the culture around the origin of your supply, because traveling to build in-person relationships is often key. Not all cultures will communicate well virtually. Hale warned, “Go, and go early. See the people you will be working with. See the factory where your supplies will be made.” He later added to this: “Trust, but verify.”
International Law and Patent Challenges
Colvin noted that as you make these plans to establish international supply chains, looking into where IP and patents will be registered is important before putting this global partnership plan in place. Greene, who is an attorney, supported that notion and added that you should certainly file patents globally before building these supply chain relationships. Reviewing what product you are creating will help guide your IP decisions: making incremental improvements to an existing product will require different protection than a novel product.
Both entrepreneurs Hale and Wason, however, were confident in their respective decisions not to pursue early patent protection. Wason added that Riide had made decisions based on looking at patent cases that were not supported in international courts to make their decisions to avoid the cost of patents.
Another note of caution from the panel: review certifications requirements for the countries where you intend to distribute your product. Are there language requirements for your instructions? Are there other safety and packaging guidelines that the country will require? Utilize the commerce department at the Small Business Administration for guidance.
Kickstarters and the Wild West of Hardware Funding
Crowdfunding platforms can be a great place to test the market to find out if it will be well-received, says Wason. However, there is a misconception that “everyone” is on Kickstarter and will simply find your campaign just because you put it up. “The truth is, it is a very small percentage of projects that make it to the first few pages of Kickstarter, and that is where all of your traffic comes from.” She said that she found that they had driven the bulk of their own traffic to the Kickstarter, rather than the fraction of a percentage of those who found them on Kickstarter. “What Kickstarter gave us was legitimacy, the ability to be picked up by international press.”
“Press helps,” she adds, “but it’s not a sustainable business model.”
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