Lean Hardware Startups

Pretty slides?• I don’t like slides with a lot of text. I prefer slide shows with lots of

pictures I can talk over… but since you are going to be looking at this later, without the benefit of me talking, I put a lot of words on it• Slides will be available on Slideshare• Credits to Ben from hax and Gregor from alphaboard for creative

borrowing of their concepts

Who am I?• Went to NYU (Computer Engineering) and University System of

Maryland (BS Computer Science and Business)• Serial Entrepreneur: Internet, Games, Interactive Entertainment,

Finance, Security• Co-Founder of HARDWARE.co, community for Hardware Startups to

share knowledge• VP Engineering KIWI.KI GmbH—lead engineering effort and product

design. Prototyped and productized all gen 1 hardware and services.

Ideation• Don’t know what to do? Ask the internet…• Twitter search “someone should invent”• Google trends• Write down shower ideas

• Meet with other entrepreneurial people and tell them about your ideas!• Participate in events where you can meet new people and work on

interesting ideas.• Solve a problem you (or a loved one) has!

Vision—Customer / Problem Fit

Problem/Solution Fit

Product/Market Fit

Scaling

Who are your customers? What are their problems?

Does your solution actually solve the problem? Is someone actually willing to pay for it?

How do your customers segment? What is your unique value proposition?

Cost structure, revenue streams, unfair advantages

Biggest Risk: Is your problem worth solving?

The process…

The problem is the solution• “… so preoccupied with wither or not they could that they didn’t stop

to think if they should.”• The question isn’t can we make it, but is it worth making?• Why are we uniquely qualified to make this solution?• Is this solution the best solution to the problem?

Customer Problem Fit• Find (potential) customers to interview

“Hi, my name is ___ from ___. Right now, we’re starting a company to ______. We’re currently in the development phase and I was hoping you might provide some insight into the market. I would like to understand your perceptions of _____. In exchange, I would be more than happy to tell you about some recent innovations in the ___ industry. • “Is there anything I should have asked you that I didn’t?“• Take notes• Have a conversation, not an interrogation• More complaining = more prepared to pay• Ask if they have a workaround• Ask for intros!

• Who is the prototypical early adopter? How badly do they want this problem solved?• Document Everything

Problem Solution Fit• Lean Hypothesis: “We believe __ has the problem of ___. We can help

them with our ____. We will know we are right if ____”• Validate hypothesis quantitatively• Fail early, often, and cheap• Try to validate or invalidate before writing a single line of code or 3d printing• Use paper, clay, wood, lego—anything to get your idea across

Product Market Fit• What is a MVP?• Minimum: Crap no one wants• Viable: Built with more backing than you have• Minimum Viable Product: Good products to build and learn from• Consider crowd funding—proves some demand• Warning: Crowd funding is an obligation!

• Prototype Early – Collect Feedback

Minimum Viable

Hardware Startups• Everything a “software” startup has• But with Hardware as well

• Hardware is a double-edged sword• Prototyping is easier than ever!• Electronics: Arduino / Raspberry Pi / Sensors from Cellphones• Forms: 3d Printing, CNC• Interactions: Smart Phones• Infrastructure: Cloud

So uh, What’s lean hardware?• Build the right things• Build things right• Build things fast• Deliver value on top of things

How do I lean hardware?• Validate the problem• Be fast to market• Use money effectively• Avoid VC• Don’t build (on top of) crap

Someone is going to steal my idea!!!• If someone can steal your idea, then…• Your idea was obvious• Your execution was simple• It was never a good market to get involved in

• But I have a patent!!!• Patents are only as good as the defense• Do you have the time and money to defend your IP?

What do I need?• Problem & Solution• Skills -- Not just technical skills!• Team -- Resourceful, optimistic, persistent, persistent, persistent,

persistent• Market Approach -- Needs to be 10X better or different *not cheaper• Demand – proof it exists• Distribution• Plan for what to do next

Never just hardware• Stand alone products can will

be copied• Do something difficult• Take something complicated,

and by making it smart, make it simple—NOT THE OTHER WAY AROUND

• Hardware + ServicesCommunity, Algorithms, Buy-in

Beware:• Fun/Fluff• Easy Stuff• Solutions looking for

problems• Impossible solutions• Delivering too late• Unprofitable solution• No customer Attachment• Ahead of time• Local solution• I put a chip in it

How long does this take?Prototyping Production Scaling

3 months – 2 years 3 months – 1 year 1+ year

• Be realistic, some things take time• … but don’t let it get away from you, ask for help.

Four Rules of Retail1. Keep demand higher than distribution2. Your customers are your best investors3. Take your time and learn—retail is a marathon not a sprint4. Cash flow is the most important measure• Pre-sales are great• Credit from a supplier is pretty good• Financing purchase orders is okay• Credit from a bank is okay• Financing on future sales is okay• Venture capital sucks!

Warning: Hardware is not hard• It’s just tricky!• There are tons of gotchas, trivia, regulations, expectations, all of which will

tank your business• If you can avoid making bespoke hardware to solve the problem, by all means,

do so• Customize existing hardware• Partner with existing providers

• Double-edged sword: Risky, but if executed well provides a stable and continuous access to your customers• Prototyping is cheaper than ever, but production still has the same fixed costs

(NRE, Certifications, Logistics)

Petcube

Ideal Lean Hardware Startup• Solves a real problem, in a way no one has solved before• Opens up a huge market, or creates a new one• Makes a complicated thing or system simple• Isn’t a one-off sale, but an ongoing relationship• Does not push complexity onto your customers• Hardware development absolutely required• Awesome team of dedicated people• Funded by pre-sales and partners

Questions?