Last year we launched Startupbootcamp IoT – a startup growth program aiming to make the journey of building a connected hardware startup clearer, shorter, and more successful for entrepreneurs – and ran our first 3-month program. Between now and then we’ve seen a pattern in the main issues facing ‘internet of things’ and hardware startups today, and learned a lot about what entrepreneurs need in order to grow their business. The below acts as a summary of this… Ten things that we feel hardware startups need to consider when developing a connected device:
1. Establish your brand and ‘why’ early on, and make sure it runs through everything you do as a company (Why do we exist? What do we do? How do we do it? etc.). This isn’t just for marketing purposes. It will help you design your company, your product, and most importantly the category you’re in. Write this all down in one document so that there is no ambiguity amongst your team and you have a reference point for every piece of communication you create or action you take.
2. Category design is crucial for hardware startups. How are you ‘different’ from others ? Note: it’s not always about being ‘better’. What is your customer’s ‘aha’ moment when they realise they need your product? What does your customer’s journey look like when they go from a place where they realise there’s a problem, to knowing you’re the solution? You need to really understand this so you can create a point of view that defines a new category. Build your category up, then sell your product and dominate the category.
3. When assembling the first prototype of your device try and keep production close to your team, both geographically and with hiring. You’ll need to retain a lot of control over it and that is difficult to do when the development is taking place in a different country, particularly across time zones. Try and keep the process in-house too, on-boarding a good CTO as a co-founder if needed.
4. Think carefully before manufacturing your product in China. Below are some (of the many!) things to take into account:
- Going for the lowest price is usually at the expense of quality and in the long term you’ll be worse off.
- It is vital to establish a systematic approach in the communication with manufacturers. Cultural differences make effective communication very difficult.
- If you have an important IP component in your product then approach Chinese manufacturers with caution and have measures in place to ensure there is no misunderstanding between you and them. As a start: pick your factory carefully, file the IP in China, and explicitly state ownership of the product and tooling.
- Account for the delays that the Chinese New Year – which takes place in the middle of January – can cause.
5. Focus on product essentials, not ‘nice to haves’. Despite how much has been written about talking to potential customers before going into development, it’s an area still widely overlooked by hardware startups. There is a temptation to over-develop a device, adding features to it that really aren’t needed or wanted. Doing this causes headaches for both your marketing team and customers, and rarely creates products that are 10 times better than your competitors.
6. A hardware startup’s manufacturing timeline and go-to-market strategy need to be synched. Things go slower than you expect so be conservative with customer promises and financial runway. For example, if you’re working on a consumer device and want to be on shelves at Christmas, any retail deal should be done by Spring with production finalised by Autumn.
7. However brilliant your device, things do not sell themselves. You will have to market ferociously and continuously. Get comfortable with that. The same logic applies to searching for, and securing, investment. For investors you are the product.
8. Securing investment for a hardware company is the ultimate catch 22. You need to show traction, yet you can’t show traction until you have the money to develop the product. There are of course ways around this from an MVP / customer development point of view, but it’s also worth exploring pilots with corporate partners. Such partnerships can generate early revenue and traction.
9. Unless the IP is exceptional, your piece of hardware is rarely your USP. The entire solution is what matters, and it’s also what protects you from copycat devices. The data, analytics, and use of the device via an interface or machine learning is what creates real value. This is what investors will be looking at. Yes they’ll like seeing your prototype in an initial meeting to give them something tangible to look at and feel, but the real value comes in everything behind the hardware.
10. Know what showcases your company best. Pitch decks, one-pagers, company overviews… There are plenty of guides out there on what their structure should be and what they should include. Read them, make sure you have included the essentials, and then do whatever you think presents your company best. If a standard one-pager isn’t in keeping with the brand you’ve established then find your alternative. People, investors included, like different. Be comfortable giving it to them.
Armed with these lessons we’ve now opened applications to our next program which begins in London this October. We’ll be focusing on supporting startups that are using IoT in high-impact areas such as the environment, sustainability and society in general. Find out more, or apply, HERE.