Today’s complex technology world is driven by the entrepreneurs and the inventors, the genius businessmen and the bright engineers, the Elon Musks and the JB Straubels. The ones who put existing technology together to create a new product and the others who create an entirely new technology.
Hardware and science go hand in hand just like entrepreneurship and invention do. When we talk about startups, however, it’s likely that one of the two takes more credit for making you the great startup that you are. This will undoubtedly define the development of your company from idea to market and further. Why? Well, it makes a whole lot of difference, and let me tell you why.
Say a ‘billion-dollar company’ and people think of a college drop-out who accidentally monetized his spare-time hobby. Yes, it is an American cliche and sometimes an exaggerated romantic myth that great minds start companies such as Apple in their garage. It has happened to some, but can it always be the case? We all know the answer is no.
If your idea is akin to a ‘hardware’ startup model, it will probably not take you long until you have your first prototype. Today you can access open IP, relatively cheap components, put them together, test them and if you find out that it doesn’t work or there is room for improvement, you can easily ask your suppliers for a little change.
New technology startups, on the other hand, need research. Research takes time, equipment and PhD expertise. And all these equal costs. What’s more, new technology can be risky; it’s not always fit for the market. A mind-blowing new tech may be way ahead of it’s time – too pricy, too early, or too innovative to be implemented on the market, which makes it a more difficult of a start.
More B2B or more B2C
Let’s put it this way: If you are a more ‘science’ startup, there is a greater chance that you become a B2B company. Hardware can also be B2B but Science will not soon be B2C. ‘Hardware’ startups make consumer goods and ‘science’ startups produce new technology that makes consumer goods cool. X will sell you an amazing computer but they needed Y’s graphic card to make computer games such an awesome visual experience.
B2B startups stay in the shadow of consumer companies, they are even outnumbered – 493 to 14629 according to currently numbers on AngelList. They are called unsexy, boring, difficult and all because they don’t enjoy consumer attention, because they don’t use glossy words to seduce a client, because they talk numbers and function and not cosmetics.
Consumer startups, however, can never beat the advantages of B2B like higher customer acquisition costs, which opens up acquisition channels not accessible to consumer startups; simpler market testing, and most importantly, the profit they make.
The best thing hardware focused startups enjoy is the chance to create a brand and a community around it. It’s not for nothing that B2C is no longer dubbed ‘business-to-consumer’ but ‘business-to-community’. It’s not just a hype in parlance, it’s the sweet fruits of creating an emotional brand story that can elicit people’s attachment.
‘Science’ or B2B startups are merely a separate chapter in the marketing book. Their community are the ‘hardware’ startups. So, don’t take advice such as ‘you need to enhance your customer experience’, it won’t work.
Funding or Crowdfunding
Although crowdfunding is all about the marketing these days, you’d better stay away from Kickstarter if you are a more of a ‘science’ startup. Because, what do you have to offer all these people willing to spend a buck on a cool new goodie or an exciting new movie?
Equity crowdfunding on AngelList and Crowdfunder, to name a few, might fit your model better, but do you really want to let so many people have the say? Are you willing to give equity away? Here’s a nice discussion on the subject.
Crowdfunding will not necessarily bring the money ‘hardware’ startups need to launch or to build their product. What it will do though, is bring customers, orders, production line suppliers, investors attention, and many other intangibles enough to convince an invest or a manufacturer.
The best part? It will validate your market. If you can sell thousands of your units, you have a proof of market.
What’s science got to lose?
You may ask. Well, nothing. New technology startups just have a different acceleration cycle and therefore need different VC approach. They tend to be spin-offs of universities, corporate research departments or research institutes, where they can stay long enough, backed by all the resources they need to end up developing a mind-blowing tech that will change the way people do and see things.
We @sbcHighTechXL know that business cannot survive without fundamental research and this is why we want to give high-tech hardware startups the help and attention they deserve.