From Nest to the Misfit Wearables, hardware is back in a big way. And along with the lower barrier to entry thanks to cheaper components, crowdfunding, rapid prototyping courtesy of 3-D printing and Arduino, there is more competition than ever before.
As a result, a number of VC-led hardware accelerators and incubators–driven into a field that is (currently) less crowded than the jam-packed software space–have entered the fray. Led by names like Lemnos Labs, Highway1, and HAXLR8R, these hardware accelerators are helping hundreds of would-be entrepreneurs try to hit the big time, with everything from connected consumer electronics devices to full-blown robots.
Acceptance into one of these programs brings much needed cash flow to a budding hardware startup. This can vary from $40,000 up to $150,000 (normally somewhere in the middle), and it’s usually in return for an equity stake.
With five or even six-figure amounts being little more than pennies on the dollar for larger VC firms, it’s not unheard of for them to adopt what is called a “spray and pray” model–money is given out to a large number of startups, with the expectation that only one or two will ever amount to much. In these cases, the “superstar” winners are enough to offset the cost of betting on losers.
That might be okay if all you’re looking for is funding. But the real value of any accelerator or incubator is in the features that make them more than just a long-term bank loan.
“I’ve always viewed the best accelerators as schools,” says HAXLR8R founder Cyril Ebersweiler. “Forget the money and the resources–although those are important too–what you learn though the experience is something that will benefit you over the course of your career.”
Like a school, would-be hardware entrepreneurs looking to be taken under the wing of an accelerator should consider both the “teaching” and the facilities of any accelerator they plan on joining. Lemnos Labs, for example, boasts some prime real estate in the form of a large warehouse located in San Francisco. Startups get to spend between 6-15 months in a dedicated facility with plenty of workshop space and prototyping tools. Lemnos takes a broad view of what hardware means (“anything that involves moving atoms or electrons,” their website claims), which means that there are tools to meet the requirements of people working on everything from robotics and satellites to consumer electronics.
“Right now we have eight startups, with about 50 people in all,” says Jeremy Conrad, Lemnos’s founding partner. “They work together every day, and that cross-pollination can be really useful. Although it might not sound like satellites and consumer electronics have anything to do with each other, the reality is that they all use electronics, they’re all made of plastic or metal, and they all have to test out their early prototypes. There’s a huge amount of commonality across different sectors, and sometimes that exchange of ideas can yield really interesting results.”
The “teaching” side of accelerators is the other side of the coin. Not only does being part of an accelerator mean access to a deep Rolodex of designers, suppliers, and contract manufacturers, but also 24/7 access to key mentors and the company’s founding partners. At Lemnos, the likes of Conrad take weekly meetings with all of their startups, helping them with everything from engineering problems to questions about scaling businesses.
“There’s so much that can go wrong in the hardware space,” Conrad continues. “Terrifyingly most of those wrong decisions you’ll make in the first 6-12 months: whether it’s design or business model. That’s where we focus our time. We want to get involved with the founders as early as possible to put them on the path to success.”
But while that covers the “who,” “how,” and “why” questions, an equally big conundrum when looking for your ideal accelerato is “where.” While the Internet (and tools like Dropbox) now mean that it’s more than possible for individuals to work with colleagues across borders without ever having to meet in person, in fact the geographical location of an accelerator is as vital as ever.
“One of the main things people need to ask themselves is where do they want to be based?” says Brady Forrest, vice president at Highway1, the incubator program run by PCH. “We’re in Silicon Valley, which is of course where a lot of the big tech investors are based. If people want to make connections and meet mentors, there’s no better place.”
What Forrest says is absolutely true–although that doesn’t mean that entrepreneurs should automatically head West like prospectors heading for gold. Being in a place where you have access to the best tech mentors in the country, or even the world, is key, but there are other aspects of the hardware business to consider.
HAXLR8R is a venture fund and hardware accelerator, with over 50 companies launched during the past two years. Unlike many other accelerators and incubators, HAXLR8R focuses the majority of its time on startups working in Shenzhen, where they are in close proximity to China’s massive supply chain and factory ecosystem.
“You shouldn’t view the people manufacturing your products as your suppliers, so much as your partners,” says Cyril Ebersweiler. “Without them there’s no product coming out of the door–simple as that. Being in a place where you can build those relationships is essential.”
In addition to the usual work space and mentor-driven learning, HAXLR8R therefore features plenty of factory visits and the like during the 14 weeks (out of 16) that participants spend in Shenzhen. In addition to seeing where products are made, startups also get a firsthand look at the reality of shipping, along with crucial meetings with figures like factory managers.
“Just like anything in business, being face-to-face helps,” Ebersweiler continues. “It’s impossible for a factory to know exactly how you want whatever it is that you’re building. If you’re doing your job right as an entrepreneur your product is the first time something of that type has been built. You need to be able to communicate that vision.”
Ebersweiler says that working in close proximity with the supply chain is no different than keeping up to date with the latest 3-D printing technologies or programming languages: It’s all about empowering entrepreneurs to know their tools.
“It can also help you to build better products, or to better innovate, in the future,” he says. “A company like Apple is very famous for its innovation at the point of manufacturing. It enables them to create new processes that might never have been thought of otherwise. If you’re serious about what you want to do, you want to spend as much time as possible understanding it. And there’s no better place for that than Shenzhen.”
Different hardware accelerators and incubators have their own rules about the stage at which they want to get involved with startups. Approach them too early and, even if you’re accepted, the experience can be frustrating for all involved. Leave it too late and the value isn’t there for either party–as strategies are well underway and key decisions have already been made.
“We need to see a functioning prototype,” Highway1’s Brady Forrest says, describing his own preference for the ideal candidate.Preferably they’ve already moved off of Arduino, and have started to think about moving beyond 3-D printing or plastic paper. The best time to meet is when they’ve got one or two more prototypes left to do.”
Although it might be tempting to try and create a buzz for yourself with a crowdfunding campaign, Forrest says that he’s never yet taken on a company with outstanding orders to be fulfilled from an incomplete Kickstarter project. Raising $50,000 might sound an impressive way to leap to the top of an incubator’s “must have” pile, but compared to some of the bigger crowdfunding campaigns it also shows that your product doesn’t market very well–or, even worse, that you’re not the one to market it.
“The number one thing we look for is team,” Forrest says. “We want to know you have the skills and the drive. Just as important is that you all get along–because founder disputes are the number one cause of startups collapsing. I also look for a product that’s interesting, that’s different from the competition, and that’s going to make the world better.”