Simon Barker tells us more about how to launch a hardware-oriented startup. We could be living in a golden age, so take your courage and your open-ource hardware in both hands.
In the first part of this series, we covered how to pull together an inexpensive prototype and pull in that oh-so-valuable seed stage money. Next up, we look as steps 3 and 4
3. Build your product. With the money you need in the bank, it is time to double down and design/build your product with a view to volume sales. Your careful manufacturing planning (step 1) will help you avoid the problems that have plagued some high-profile Kickstarter efforts. The key thing here is to keep your backers up to date and informed. They invested in you and now have a long time to wait before they see you launch. Treat them just like any other investor, and be open about how you're getting along. Delivering what you said -- on time and on budget -- goes a long way toward creating a fan base of backers who will promote your product for you. That is the best form of advertising.
4. Raise the money to scale production. With a successful crowdfunding campaign under your belt and some initial sales and market traction, it will be a lot easier to raise money from private investors or venture capitalists should you need it. Scaling hardware is expensive, and poor payment terms can leave a financial chasm that often can be bridged only with some serious investment. So long as the plan is strong and the crowdfunded launch was a success, this phase should be on an even keel for even the scrappiest of software startups. The Pebble e-paper display watch and the Ouya Android games console followed this trajectory and closed venture funding rounds of $15 million each. They began with crowdsourced funding rounds that blew past modest goals and went on to multimillion-dollar amounts themselves.
Three big leaps
I see three big leaps forward from five years ago. The first is the arrival of open-source hardware platforms that give beginners and hobbyists access to sophisticated software-programmable electronics without the need for an expensive developer program or developer kits. This has been fuelled significantly by the growing maker movement, which brings together engineers, craftsmen, and artists to make fantastic systems without corporate backing or guidance. SparkFun, AdaFruit Industries, and XBee have helped tremendously in this regard.
The second leap is 3D printing. Though it's not all that new, the cost of parts and the quality of prints have been improving steadily to the point where 3D printing is now a reliable, inexpensive way to produce one-off parts and very small manufacturing runs without committing to expensive tools.
The third leap is crowdfunding. Kickstarter didn't set out to become the home of soft launches for hardware startups, but it has certainly proved popular as such. It has made noises about tightening the rules on hardware startups, but I can't see it cracking down too much while the makers of things such as the Pebble, the Ouya, and the ElevationDock are raising millions through the portal -- of which 5 percent goes straight to Kickstarter.
I expect Kickstarter to launch a hardware-specific portal with stricter terms and conditions, rather than implementing an outright ban.
If you're thinking of starting a hardware business this year, it makes sense to leverage the power of the crowd and make the most of the work others have put in before you.
Simon Barker is chief technology officer of Radfan in Newcastle-upon-Tyne, England.