As I understood it, from having worked at a (successful) startup that sold hardware, the big problem with hardware isn't that it's hard to make. Rather, the two big problems are margin and, worse for a startup, inventory costs. Airbnb can add 1,000 new customers with no infrastructure changes, but for a hardware startup to take on 1,000 new customers, someone will have to finance the inventory, and someone will need to predict the amount of widgets to stock in that inventory, and that gets very expensive quickly.
I don't know how much the inventory issue is mitigated by the fact that YC companies with working offerings seem to be immediately able to conjure up 500k-1MM in funding.
Also, YC's major successes haven't been hardware companies, have they? The last essay I read before this one suggested --- in agreement with the conventional wisdom of VC's --- that a company needs to be Dropbox-successful to move the needle for YC. Not that YC isn't, I'm sure, thrilled to have hardware product companies with traction in their portfolio.
Let me just add a banal point: YC's business strategy is, obviously, "throw everything we can at the wall and see what sticks". If you're considering your first company, that's probably not your best strategy. Even putting aside the big-ticket problems like inventory and margin, there are a lot of other things that suck about hardware: lead times, managing supply chain, QA and managing defects, field recalls, shipping. These problems are so big that major hardware companies have people who don't just have one of those tasks as full-time jobs, but are also famous for being able to deal with them.
I'm talking about a new trend. The hardware companies we've funded haven't had time to grow into Dropboxes. But as I wrote, hardware companies are overrepresented among the most promising startups from the summer batch, as far as we can tell this early.
True, hardware involves lots of schleps. But that means good ideas of this type are often lying around in plain sight, while all the other would-be founders are fixated on making the latest mobile social commerce app. (http://paulgraham.com/schlep.html)
The company I founded has custom hardware and a custom OS (not, e.g. Linux or Windows -- closer to an embedded RT OS), and our "for sale" product is SaaS.
We actually have four different hardware systems, ranging in size from a 1U box that goes on site, to a full rack that's basically a turn-key cluster with no external configuration (just plug in ethernet and power, and assign static IP addresses).
All of our hardware is based on Intel motherboards and chips, especially the E3/E5 series. This eliminates the long prototype cycles, since we use off-the-shelf hardware. The only real prototype cycle for us is choosing components and the case (!), which we did with 3D CAD software and a machine-shop-as-a-service we found on the Internet.
We went this route for reliability and performance (especially, latency), and then getting those two at a reasonable cost. By only paying for the hardware we need, and configuring it to exactly what our product/service needs, we're able to meet our product and business needs while still maintaining healthy margins at a cost our customers can afford. I wouldn't change a thing.
We also face all of the problems you mentioned (how to deal with inventory -- our hardware has a comprehensive 3 week burn in time), how to deal with repairs/replacements in the field, etc, and how to get the capital needed to sustain startup-scale growth. They're real problems.
Like most hardware-based companies, we're able to do this only with outside funding, but at least in our case (the enterprise space), we don't need any up front funding to stay cash-flow positive with slow growth, and we developed a rather innovative way to get the funding that we do need to fund fast frowth (hint: not through VCs). This took a lot of effort at the business-design level, something I suspect most tech startups don't take the time to do. It's pretty much mandatory if you're going the custom hardware route and want to grow fast.
One major positive of going the custom hardware route is the elimination of competitors. No YC-backed company going the standard AWS route can possibly compete with us -- not on cost, not on performance, not on latency, and not on reliability -- not even close. Controlling the whole stack, from hardware to OS to software is why we can do what we do at the price we do it, and grow at the rate we expect to grow.
I'm not sure we could make our approach work in the consumer hardware space today, but in the enterprise market, it's ideal for us.
Inventory costs are a problem, but a bigger problem is production costs.
To create a PCB you need artwork. This includes the electronic files; the drill plots, the photoplots, the etch resist masks and the silkscreens. You then need the production tools for the PCB. You'll need a stencil for the screen-printing of the solder; a pick and place machine program (and you hope your PCB software can provide something that the P&P machine can read); if there's any through hole component you might want a cropping plate made.
A team goes through the prototyping process, using hand built small batch stuff. But then they need to convert this into production ready stuff. So the above costs happen when you hope -but are not sure- that you're ready to build a full scale batch. You get ten PCBs made for test, and discover a missing trace. That means you need either another set of stuff or to modify every board as it's produced.
Without very careful internal quality procedures and excellent engineering standards it'd be very easy for a company to burn through $10k before producing any saleable product.
Regarding your comment about inventory costs, it seems that if this trend for creating hardware items takes off, there might be an opportunity for a company that does volume manufacturing on-demand. Recently, most volume manufacturing of physical goods has happened in China because the labor costs there are much lower. But I'm thinking that a company which does mass production on demand, cheaply and _well_ would be very successful. It would be like an infrastructure company for physical goods.
No reason why this company couldn't be located in Asia as well, but having very close and accessible communication with the people who use its services might also turn out to be an idea that was stupid until it wasn't.
Margin is an issue when you are making just another router.
Cost of inventory is an issue, but there are several ways around it, including dropshipping and createing on demand. You can hire an MBA to optimize in this area (this is the area where they are supposed to do well).
Basically if you could honestly imagine your product doing well on kickstarter, you don't need to worry about margins.
If you can imagine your customers being willing to wait 3 weeks on the product you don't have to worry too much about inventory.
I very much doubt that YC will back a new factory to produce hardware for others.
I very much believe that YC will back a company that produces an alarm clock that makes you want to start the day, or a device to insert into your toilet that will analyze your urin and tell you if the measurements are out of whack.
Those are from the top of my head. Anyone from software who is jumping into hardware needs to stop and think: it's different, and that needs to be reckoned with. It's not impossible, of course. :-)
15 years ago I did a hardware startup, development was extremely hard and I woved never to do a hardware startup again.
Now I'm not so sure.
Our problem was twofold: First hardware development was not generally something you just did in your sparetime, it was for the big boys. This meant a lot of convoluted processes for dealing with suppliers, expensive and unreliable dev kits and tools, long lead times and all sorts of other hassles.
Second the turnaround time for a prototype was at least two weeks. If you made a small mistake you'd find out two weeks later when your prototype arrived. This adds up quickly and slows you down tremendously. Not because we made a lot of mistakes, but we had to be absolutely sure that something worked before sending it off to be prototyped. No testing a new idea in an afternoon or two.
These things have totally changed with the commodisation of hardware and the looming 3D revolution.
With a makerbot, a raspberry Pi, an arduino and a shelf full of components you're prety much ready to go and can hammer together a working prototype in no time. If you feel cheap you can buy a nice box for your arduino and call it a finished product.
(this is from a throwaway to avoid naming the company I worked for)
I worked at a startup with a hardware product in 2011 (nb: I didn't work on the hardware personally, but was aware of the difficulties we faced), and the issues you describe are all very familiar.
It may be the case that the technologies you describe allow you to push the problems to later in the product development cycle, but from what I observed, they all still happen once you try to transform that product into a consumer product that can be manufactured and sold at a viable price-point.
It's true for example, that the hardware engineer founder built a prototype relatively quickly using off the shelf components, but the resulting product was so large, the housing so ugly, and those components so expensive that it would never have been economically viable.
Once they were past the prototype stage, they faced all the problems you describe: parts manufacturers and suppliers only willing to deal in huge quantities and make sales well in advance; finding manufacturers who can make plastics that are of high quality and meet safety standards is surprisingly difficult and slow [1]; much of the tooling for small, cheap, low-power-consumption microcontrollers seems to be from the dark ages [2].
What made it even worse was that many VCs we spoke to seemed to be unfamiliar with or unwilling to take the risks associated with hardware startups: much higher up-front costs to scale the business, and much longer product development times. It's possible the company I worked for didn't take advantage of all the modern developments available to hardware startups, or that they had the wrong strategy (trying to scale too fast or seeking the wrong customers, for example), but I certainly have enormous respect for the challenges hardware startups must overcome, even in these times.
1: Some anecdotes I remember from the plastics saga: the first overseas manufacturers they tried in an early attempt to make the housings cheaper absolutely would not, and maybe could not produce a housing in the correct shape. We would send them models in a form designed to be structurally sound and aesthetically appealing, and they'd come back as basically ugly square boxes. We ended up using a much more expensive US-based manufacturer for a long time because of this. (IIRC, they were more expensive mostly because their facility was really meant for rapid development and not mass production.)
I also remember a significant delay at a crucial time because we couldn't get the fireproof coloring agent we needed in the right color.
2: One of the hardware engineers spent a grueling couple of weeks hunched over an oscilloscope looking for a particular pulse that would indicate that the microcontroller had found and booted our company's software on the chip.
> With a makerbot, a raspberry Pi, an arduino and a shelf full of components
From recent experience working on a hardware side-project: these are extremely cool and useful development/indie tools. But when you get to the stage of large scale production we are still lacking easy entry.
I've been working on an XBEE home automation project intended to be run from a Rasp Pi "server" (but designed to run from anything that can boot linux and has GPIO). It's looks great, has a nice enclosure and is something any hobbiest could get working with the right plug and play bits.
But.
Packaging this for mainstream, where a user can simply buy "black boxes" and connect them up is tough. Circuit design and fabrication on any scale requires both skill (i.e. in designing the layout - I am an Electronic Engineer but of the solder-stuff-together ilk rather than CAD) Admittedly places such as Batchpcb etc. make prototyping a lot easier, but the hurdles you mention are still there in many forms.
The maker/hacker collective is very well serviced nowadays. Next we need someone to disrupt the small-scale development arena: off hand, a community of PCB designers/hackers available to make bespoke PCB layout which links into a batch production system would rock! I've hacked together my prototypes, but have minimal confidence they will work first time :)
> Second the turnaround time for a prototype was at least two weeks. If you made a small mistake you'd find out two weeks later when your prototype arrived.
[Cue Four Yorkshiremen]
Try an fabless IC company: 8-10 week turn times on fabrication, each run was 6 digits $.
It's quite curious how hardware design lost its cachet.
When I was in Computer Engineering at Waterloo (class of '98), many of my classmates were vying for coop jobs in FPGA, ASIC or board-level design. I happened to be one of the lucky ones and it set me on a path to a career in ASIC verification.
Today when I look around at my industry, it's downright shocking how little young blood there is around. The youngest ASIC guy I've met in the last 6 or 7 years had a Master's and three years experience - and we all regarded him as the newbie.
Only in the last few months have we seen the occasional new-grad's resume cross our threshold. I'd not yet call it a trend, but I hope it becomes one. We have horrible languages, horrible libraries, horrible tools - a huge, shaky mess of infrastructure built on technologies stretched far beyond what they were originally built for - and it's so deeply entrenched that few of my colleagues seem to recognize it. We really need a new generation of fresh perspectives to shake us all up.
Let's hope it is indeed a new renaissance that Mr. Graham heralds.
I have a friend who has been trying to convince me that it is feasible to create a language that can let a general purpose programmer write useful software and "compile" it down to a FPGA to run really, really fast. (He has a lot of specific thoughts that I won't share about what such a language should look like.)
In principle he thinks that it should be possible to compile such a language down to an ASIC representation, but that would only make sense for very high volume runs. (He's specifically interested in software to run financial models, so those would not be high volume runs.)
He makes sense to me, but I have no idea what practical difficulties there would be. But does something like this sound doable in principle from your point of view?
"We have horrible languages, horrible libraries, horrible tools - a huge, shaky mess of infrastructure built on technologies stretched far beyond what they were originally built for - and it's so deeply entrenched that few of my colleagues seem to recognize it. We really need a new generation of fresh perspectives to shake us all up."
I have somewhat recently transitioned from embedded software to verification, and you have hit the nail right on the head. We should talk.
I'm in Comp Eng. at the University of Ottawa right now, and I'm having a hell of a time getting any hands on experience with FPGAs or board-level design. I worked for one company on Co-op which was good enough to let me try to layout a simple board, but I'd simply never seen the best practices at work, and nobody really had the time to teach. I found VHDL really interesting, but I've only had about two classes worth, and I haven't really has a hobby project. I've though about picking up an Altera dev board and emulating an old computer architecture; is that the kind of practice you think would be worthwhile? Do you have any tips about learning board design and what kinds of projects/hardware are good to get started on?
"And in particular, don't be deterred from applying to Y
Combinator with a hardware idea, because we're especially
interested in hardware startups."
How are you planning on funding hardware startups? From your site:
"Usually $11,000 + $3000 per founder. So $17,000 for two
founders, $20,000 for three or more. Occasionally we
invest more. The goal is usually to give you enough
money to build an impressive prototype or version 1,
which you can then use to get further funding."
A real hardware startup would require at least an order of magnitude more money than this. Unless they walk in with all the required tools, you could burn $20K just in software licenses (Solidworks, Altium Designer, Xilinx Foundation, Keil, etc.) and not have much left for other stuff. Heck, my DSO alone cost me about $20K. The computer I am typing this on probably has $50K in hardware and licenses on it.
I could personally consider the idea of presenting a hardware startup to YC, but I would need to know that this is not about (with the utmost respect) finding a few starving 20-year-olds that will kill themselves for a $20K investment. From my vantage point, if you are not throwing $250K+ into a hardware startup it just isn't going to happen. Of course there are exceptions to every rule. Then again, this ain't my first rodeo.
Now, if the idea is to throw some money at a project to cobble-together a smoke-and-mirrors prototype and then go raise a few million, well, for the right project this could work.
Again, I say the above with respect for what you do. I have done a lot of hardware/software/multidisciplinary development. It's very different from pure software web/mobile startups. Very different.
This is an important point and needs to be addressed. $20k doesn't go very far at all in the hardware startup world.
That said, it is possible to be frugal--to a point. My team and I try to use inexpensive solutions where we can. We're using Rhino instead of SolidWorks (OK until we need the hardcore simulation functionality), KiCAD instead of Altium (same, until we need the simulation), MikroElektronika's C compiler for ARM rather than Keil, MeshCAM rather than Mastercam, a cobbled together kit CNC mill rather than "real" mill, a Chinese-made laser cutter rather than an Epilog, and a wide array of machine shop equipment sourced from Craigslist.
Our product also touches biotech, so we have outrageous reagent costs too. We still have shell out for antibodies, fluorescent probes, proper biosafety lab space, etc.
I'd love to see YCombinator comment on accepting biotech/healthcare companies.
As another poster said, there are starting to be alternatives to these expensive and hard to learn software tools for the early prototyping work. I'm the founder of Tinkercad and we offer a web based solid CAD tool that is significantly quicker to get started with than Solidworks. There are similar tools emerging for circuit design.
A lot of our users are working on hardware startups. Once they converge on a working prototype many move forward to more traditional packages to optimize the product for larger production runs. The cloud based offerings are also developing very fast, simulation is a good example of a problem that benefits greatly from being run in a large cluster.
I'm not sure if hardware hackers want to be Steve Jobs... they want to be Woz!
"Woz soon followed with the machine that made the company, the Apple II. He single-handedly designed all its hardware and software—an extraordinary feat even for the time. And what's more, he did it all while working at his day job at Hewlett-Packard"
If pg is correct and hardware startups are making a renaissance then we can expect to see startups soon that sell shovels for hardware startups. For web startups we see shovel-style products that help with customer support, A/B testing, virtualized servers and so on.
In the same way we can expect startups to pop up that make life easier for hardware startups. For instance startups that make prototyping hardware easier. Or that simplify shipping goods all across the globe. Or startups that make it easier to find the right suppliers and get good deals with them.
Don't know why hardware is suddenly rising like a phoenix? One word: Apple.
Apple used to talk about ease of use and "computer for the rest of us", and they still throw some of that into every presentation, but it's no longer the lead. After Steve Jobs rejoined Apple, it was all about the look and feel of the hardware, not ease of use of the software. "Look, candy colors!" "Look how small! Feel how light! Look at those curves! Oooh, you can never be too thin. Did I mention thin? I meant thinnest!"
Then the small, thin, candy-colored devices emerged, and they made Apple the most valuable company in the world, with the media hanging on its every move. And what are they talking about, the software? No, silly, a Windows machine can do anything a Mac can do. Apple wouldn't be so successful without the full package of hardware, software, and services, but it's the HARDWARE more than anything else that everyone talks about.
This has given Google, Microsoft, Samsung, and other big companies serious Apple envy, which shows up in their "strategies". How can it not affect small startups as well? It's the environment these little companies are born into.
And in particular, don't be deterred from applying to Y Combinator with a hardware idea, because we're especially interested in hardware startups.
This is great news. I felt a bit old and stupid at Startup school, because I want to make hardware (albeit for a niche rather than a mass market), but anyone I talked to seemed to find the idea weird and most of the concepts from the stage were along the lines that software - particularly internet software - was, is, and ever shall be the sole basis of a successful startup. It was a relief at the end of the day to hear Joel Spolsky discuss the viability and possible desirability of building a nice little $10m company in just as much detail as building a $1b one.
I'm still struggling to understand the logistics of starting a hardware company.
Let's say I have an idea for a portable mini-fridge. What kind of engineers do I need to contract to design it? Where do I find them? Do I need approval, testing? What kind of regulations do I need to follow? And finally how do I get it manufactured? Do I actually need to go to China and meet with factories?
I wish someone would put together a step by step guide for these kinds of questions.
Regulations differ across different industries and most have an industry association that you can become a part of to do research. Manufacturing is very old-hat in North America.
Truly rapid prototyping is bringing costs down, like a great dev framework cuts dev time down.
There are many possible paths to succeeding in manufacturing, one size does not fit all. It largely depends on A) what you're trying to build; and B) who you're going to sell it to.
For example, if you're going to sell to consumers you're most likely going to have to come up with capital to cover your manufacturing costs before you have a single unit sold.
If you're selling to businesses you might be able to get a Letter of Intent or a Letter of Credit and then get a bridge loan to cover the costs. If I were building a manufacturing company, this is probably the route I would take.
Like software though, you need the right people. Good mechanical engineers are as rare as good software engineers and the programs they use in their craft are far more expensive (SolidWorks, etc.). You'll also probably need an Electrical Engineer. It's kind of like the difference between front-end/back-end devs.
The simple answer is that it's no different than a software-only startup: spend 10 years learning how to build [software/hardware], then the logistics are straightforward.
The trend towards more hardware-product startups in the sf bay area is real and there is more evidence than just the increase and quality of yc hardware companies that pg wrote about. There are new hardware focused incubators (like Lemnos Labs), more hardware hackathons, and there's been growth in the sensor and hardware meetups for the past couple years.
However, it's possible that innovation in hardware technologies is out of reach of startups. I'm differentiating here between hardware-tech and hardware-product startups. Of course there are hardware startups that are attempting to bring new technology to market (go Integrated Plasmonics, and 3Scan!). Interestingly, a good indicator of whether a startup is developing an innovative technology is that Peter Thiel is invested in it--many of his fund-ees are slaving away in labs scattered around SF. The failure modes of these hardware-tech companies will be more interesting than the hardware-product startups. These companies may take a much longer time to develop tech, then the product using that tech, and then fail, because the market they try to disrupt with their technology may be disrupted by other technologies with better economics--energy tech is full of these sorts of baby elephant skeletons. Still, successful investment in real hardware innovation that wins leads to companies like the next GE, Intel, or AT&T so it makes sense for investors with deep enough pockets to aim for these.
Hardware products that simply integrate existing commodity components (like Blossom Coffee) have a pretty well understood binary risk profile, they either they hit or they don't. The new hardware renaissance PG is observing is based on the reduced cost of production, and new ways to crowd fund these sorts of companies: things you might prototype in TechShop (shared tools space) and sell via Kickstarter.
I'd suggest that there is a huge opening for a startup that does manufacturing process. This company could earn money by selling its process to others, and dogfooding its own product in a few lucrative niches.
For example, the company might start by pulling all the open source EDA, CAD, CNC, and similar, software into a cohesive whole. It would then bring in one of the open source ERP systems and integrate it with the engineering toolchain. Keeping on doing this for every part of the process: ordering, inventory, manufacturing/robotics, testing, sales, distribution, support, financials. The idea is to (as nearly as possible) completely automate the process of scaling hardware based business from a prototype to a product. Achieve this goal and hardware becomes as easy to scale as software.
I've been building hardware for the last 30 years, and invariably most of the work goes into making the process run smoothly (ie. designing the process) rather than designing the product.
I think it's fascinating how much money people are willing to pay for hardware compared to software. It's hard to convince people to pay anything for software, but these kickstarter projects are getting lots of people to pay hundreds of dollars for hardware.
it's fascinating how much money people are willing to pay for hardware
-- Sometimes there are social resons for this.
Tangibility. Evident complexity. Somthing to show off/talk about. You can sell art-work to hang on the wall for a much higher price than a digital file only, etc. (Software's intangibility and ease of replication in these cases are not per-se advantages.)
> It's hard to convince people to pay anything for software,
If that software is for "entertainment" (e.g. games, social networks, cool email clients), yes. But most companies and professionals will gladly pay for software that makes them money or, equivalently, saves them time.
Patents. That is what is stopping hardware. Go ahead and try to have something listed in Best Buy without having an army of lawyers breathing down your neck.
Every. Single. Hardware. Startup. I know, has either gone bankrupt due to lawsuits, or hasn't ever reached product market fit.
* the ability to construct circuits as part of 3D printing
* a much wider range of materials available.
Essentially, you'd need to be able to ship hardware as a digital good. Which raises the huge question of DRM. The recent years of software startups side-stepped that by going the SaaS approach. (You'll notice desktop software is pretty much dead. There are no major new projects in that area since probably ~2008 or so.)
HaaS is going to be much more difficult. (Not necessarily undoable. Minds on too much coffee have suggested going a biological route, where devices just decompose after a certain time)
I'm a software guy at a hardware company so I know a little about this. From my perspective I think there's room for a startup that acts as a kind of project manager for the actual "making the physical stuff" part of a hardware company. A group of people that knows the companies who do make circuit boards, design the enclosures, produce the plastics, get FCC/UL/etc. signoff if needed, all that kind of thing. It's all well and good to have a great idea for some piece of hardware but you're going to get screwed on price and timelines if you don't know the right companies to make the stuff for you and it's a pretty complicated process.
Software can be remade by reloading the page on your dev server. Hardware has to be rebuilt. You'd need to provide a tighter iteration loop on designs.
I suppose a startup could make it easier for other startups to access contracted design and manufacturing, but I think there's a lot more regulatory barriers too.
As soon as you're selling hardware, you're dealing with customs, FCC (or equivalent) regulations, a lot more safety regulations, etc.
Actually, I did bootstrap a hardware product: www.growguard.net. Agree, it's not the best looking product, but engineering, designing and puting it in manufacturing cost less than 5k!
A couple of years ago, I was the CTO and cofounder of another hw startup (FTTH space), we did get this thing off teh ground for less than 300k and it is now doing very well and one of the top-3 in it's niche
I think Shenzhen is more the hardware SV than the bay area. Or more "Designed in California, Made in China". Look at this article by bunnie huang illustrating this fact:
I find these essays really refreshing not only because of their content, but because they're evidence of someone searching for points of uncertainty and investigating them. PG seems to be always looking for what does not make sense and trying to figure it out.
[+] [-] tptacek|13 years ago|reply
I don't know how much the inventory issue is mitigated by the fact that YC companies with working offerings seem to be immediately able to conjure up 500k-1MM in funding.
Also, YC's major successes haven't been hardware companies, have they? The last essay I read before this one suggested --- in agreement with the conventional wisdom of VC's --- that a company needs to be Dropbox-successful to move the needle for YC. Not that YC isn't, I'm sure, thrilled to have hardware product companies with traction in their portfolio.
Let me just add a banal point: YC's business strategy is, obviously, "throw everything we can at the wall and see what sticks". If you're considering your first company, that's probably not your best strategy. Even putting aside the big-ticket problems like inventory and margin, there are a lot of other things that suck about hardware: lead times, managing supply chain, QA and managing defects, field recalls, shipping. These problems are so big that major hardware companies have people who don't just have one of those tasks as full-time jobs, but are also famous for being able to deal with them.
[+] [-] pg|13 years ago|reply
True, hardware involves lots of schleps. But that means good ideas of this type are often lying around in plain sight, while all the other would-be founders are fixated on making the latest mobile social commerce app. (http://paulgraham.com/schlep.html)
[+] [-] erichocean|13 years ago|reply
We actually have four different hardware systems, ranging in size from a 1U box that goes on site, to a full rack that's basically a turn-key cluster with no external configuration (just plug in ethernet and power, and assign static IP addresses).
All of our hardware is based on Intel motherboards and chips, especially the E3/E5 series. This eliminates the long prototype cycles, since we use off-the-shelf hardware. The only real prototype cycle for us is choosing components and the case (!), which we did with 3D CAD software and a machine-shop-as-a-service we found on the Internet.
We went this route for reliability and performance (especially, latency), and then getting those two at a reasonable cost. By only paying for the hardware we need, and configuring it to exactly what our product/service needs, we're able to meet our product and business needs while still maintaining healthy margins at a cost our customers can afford. I wouldn't change a thing.
We also face all of the problems you mentioned (how to deal with inventory -- our hardware has a comprehensive 3 week burn in time), how to deal with repairs/replacements in the field, etc, and how to get the capital needed to sustain startup-scale growth. They're real problems.
Like most hardware-based companies, we're able to do this only with outside funding, but at least in our case (the enterprise space), we don't need any up front funding to stay cash-flow positive with slow growth, and we developed a rather innovative way to get the funding that we do need to fund fast frowth (hint: not through VCs). This took a lot of effort at the business-design level, something I suspect most tech startups don't take the time to do. It's pretty much mandatory if you're going the custom hardware route and want to grow fast.
One major positive of going the custom hardware route is the elimination of competitors. No YC-backed company going the standard AWS route can possibly compete with us -- not on cost, not on performance, not on latency, and not on reliability -- not even close. Controlling the whole stack, from hardware to OS to software is why we can do what we do at the price we do it, and grow at the rate we expect to grow.
I'm not sure we could make our approach work in the consumer hardware space today, but in the enterprise market, it's ideal for us.
[+] [-] DanBC|13 years ago|reply
To create a PCB you need artwork. This includes the electronic files; the drill plots, the photoplots, the etch resist masks and the silkscreens. You then need the production tools for the PCB. You'll need a stencil for the screen-printing of the solder; a pick and place machine program (and you hope your PCB software can provide something that the P&P machine can read); if there's any through hole component you might want a cropping plate made.
A team goes through the prototyping process, using hand built small batch stuff. But then they need to convert this into production ready stuff. So the above costs happen when you hope -but are not sure- that you're ready to build a full scale batch. You get ten PCBs made for test, and discover a missing trace. That means you need either another set of stuff or to modify every board as it's produced.
Without very careful internal quality procedures and excellent engineering standards it'd be very easy for a company to burn through $10k before producing any saleable product.
[+] [-] marvin|13 years ago|reply
No reason why this company couldn't be located in Asia as well, but having very close and accessible communication with the people who use its services might also turn out to be an idea that was stupid until it wasn't.
[+] [-] tomjen3|13 years ago|reply
Cost of inventory is an issue, but there are several ways around it, including dropshipping and createing on demand. You can hire an MBA to optimize in this area (this is the area where they are supposed to do well).
Basically if you could honestly imagine your product doing well on kickstarter, you don't need to worry about margins.
If you can imagine your customers being willing to wait 3 weeks on the product you don't have to worry too much about inventory.
I very much doubt that YC will back a new factory to produce hardware for others.
I very much believe that YC will back a company that produces an alarm clock that makes you want to start the day, or a device to insert into your toilet that will analyze your urin and tell you if the measurements are out of whack.
[+] [-] pnathan|13 years ago|reply
- supply chain & associated quality management
- manufacturing (this is an entire discipline, btw)
- shipping
- board design
- packaging of device
- QA is intense
- hardware engineering culture != software culture.
- continuous deployment can't exist
Those are from the top of my head. Anyone from software who is jumping into hardware needs to stop and think: it's different, and that needs to be reckoned with. It's not impossible, of course. :-)
[+] [-] unknown|13 years ago|reply
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[+] [-] jpdoctor|13 years ago|reply
You know there was a time long long ago where those were considered barriers to entry, and that barriers to entry were considered a good thing?
[+] [-] mixmax|13 years ago|reply
Now I'm not so sure.
Our problem was twofold: First hardware development was not generally something you just did in your sparetime, it was for the big boys. This meant a lot of convoluted processes for dealing with suppliers, expensive and unreliable dev kits and tools, long lead times and all sorts of other hassles.
Second the turnaround time for a prototype was at least two weeks. If you made a small mistake you'd find out two weeks later when your prototype arrived. This adds up quickly and slows you down tremendously. Not because we made a lot of mistakes, but we had to be absolutely sure that something worked before sending it off to be prototyped. No testing a new idea in an afternoon or two.
These things have totally changed with the commodisation of hardware and the looming 3D revolution.
With a makerbot, a raspberry Pi, an arduino and a shelf full of components you're prety much ready to go and can hammer together a working prototype in no time. If you feel cheap you can buy a nice box for your arduino and call it a finished product.
[+] [-] hn_ta_acct|13 years ago|reply
I worked at a startup with a hardware product in 2011 (nb: I didn't work on the hardware personally, but was aware of the difficulties we faced), and the issues you describe are all very familiar.
It may be the case that the technologies you describe allow you to push the problems to later in the product development cycle, but from what I observed, they all still happen once you try to transform that product into a consumer product that can be manufactured and sold at a viable price-point.
It's true for example, that the hardware engineer founder built a prototype relatively quickly using off the shelf components, but the resulting product was so large, the housing so ugly, and those components so expensive that it would never have been economically viable.
Once they were past the prototype stage, they faced all the problems you describe: parts manufacturers and suppliers only willing to deal in huge quantities and make sales well in advance; finding manufacturers who can make plastics that are of high quality and meet safety standards is surprisingly difficult and slow [1]; much of the tooling for small, cheap, low-power-consumption microcontrollers seems to be from the dark ages [2].
What made it even worse was that many VCs we spoke to seemed to be unfamiliar with or unwilling to take the risks associated with hardware startups: much higher up-front costs to scale the business, and much longer product development times. It's possible the company I worked for didn't take advantage of all the modern developments available to hardware startups, or that they had the wrong strategy (trying to scale too fast or seeking the wrong customers, for example), but I certainly have enormous respect for the challenges hardware startups must overcome, even in these times.
1: Some anecdotes I remember from the plastics saga: the first overseas manufacturers they tried in an early attempt to make the housings cheaper absolutely would not, and maybe could not produce a housing in the correct shape. We would send them models in a form designed to be structurally sound and aesthetically appealing, and they'd come back as basically ugly square boxes. We ended up using a much more expensive US-based manufacturer for a long time because of this. (IIRC, they were more expensive mostly because their facility was really meant for rapid development and not mass production.)
I also remember a significant delay at a crucial time because we couldn't get the fireproof coloring agent we needed in the right color.
2: One of the hardware engineers spent a grueling couple of weeks hunched over an oscilloscope looking for a particular pulse that would indicate that the microcontroller had found and booted our company's software on the chip.
[+] [-] ErrantX|13 years ago|reply
From recent experience working on a hardware side-project: these are extremely cool and useful development/indie tools. But when you get to the stage of large scale production we are still lacking easy entry.
I've been working on an XBEE home automation project intended to be run from a Rasp Pi "server" (but designed to run from anything that can boot linux and has GPIO). It's looks great, has a nice enclosure and is something any hobbiest could get working with the right plug and play bits.
But.
Packaging this for mainstream, where a user can simply buy "black boxes" and connect them up is tough. Circuit design and fabrication on any scale requires both skill (i.e. in designing the layout - I am an Electronic Engineer but of the solder-stuff-together ilk rather than CAD) Admittedly places such as Batchpcb etc. make prototyping a lot easier, but the hurdles you mention are still there in many forms.
The maker/hacker collective is very well serviced nowadays. Next we need someone to disrupt the small-scale development arena: off hand, a community of PCB designers/hackers available to make bespoke PCB layout which links into a batch production system would rock! I've hacked together my prototypes, but have minimal confidence they will work first time :)
[+] [-] jpdoctor|13 years ago|reply
[Cue Four Yorkshiremen]
Try an fabless IC company: 8-10 week turn times on fabrication, each run was 6 digits $.
[+] [-] unknown|13 years ago|reply
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[+] [-] jgw|13 years ago|reply
When I was in Computer Engineering at Waterloo (class of '98), many of my classmates were vying for coop jobs in FPGA, ASIC or board-level design. I happened to be one of the lucky ones and it set me on a path to a career in ASIC verification.
Today when I look around at my industry, it's downright shocking how little young blood there is around. The youngest ASIC guy I've met in the last 6 or 7 years had a Master's and three years experience - and we all regarded him as the newbie.
Only in the last few months have we seen the occasional new-grad's resume cross our threshold. I'd not yet call it a trend, but I hope it becomes one. We have horrible languages, horrible libraries, horrible tools - a huge, shaky mess of infrastructure built on technologies stretched far beyond what they were originally built for - and it's so deeply entrenched that few of my colleagues seem to recognize it. We really need a new generation of fresh perspectives to shake us all up.
Let's hope it is indeed a new renaissance that Mr. Graham heralds.
[+] [-] btilly|13 years ago|reply
In principle he thinks that it should be possible to compile such a language down to an ASIC representation, but that would only make sense for very high volume runs. (He's specifically interested in software to run financial models, so those would not be high volume runs.)
He makes sense to me, but I have no idea what practical difficulties there would be. But does something like this sound doable in principle from your point of view?
[+] [-] krupan|13 years ago|reply
I have somewhat recently transitioned from embedded software to verification, and you have hit the nail right on the head. We should talk.
[+] [-] alanctgardner2|13 years ago|reply
[+] [-] robomartin|13 years ago|reply
I could personally consider the idea of presenting a hardware startup to YC, but I would need to know that this is not about (with the utmost respect) finding a few starving 20-year-olds that will kill themselves for a $20K investment. From my vantage point, if you are not throwing $250K+ into a hardware startup it just isn't going to happen. Of course there are exceptions to every rule. Then again, this ain't my first rodeo.
Now, if the idea is to throw some money at a project to cobble-together a smoke-and-mirrors prototype and then go raise a few million, well, for the right project this could work.
Again, I say the above with respect for what you do. I have done a lot of hardware/software/multidisciplinary development. It's very different from pure software web/mobile startups. Very different.
[+] [-] tomkinstinch|13 years ago|reply
That said, it is possible to be frugal--to a point. My team and I try to use inexpensive solutions where we can. We're using Rhino instead of SolidWorks (OK until we need the hardcore simulation functionality), KiCAD instead of Altium (same, until we need the simulation), MikroElektronika's C compiler for ARM rather than Keil, MeshCAM rather than Mastercam, a cobbled together kit CNC mill rather than "real" mill, a Chinese-made laser cutter rather than an Epilog, and a wide array of machine shop equipment sourced from Craigslist.
Our product also touches biotech, so we have outrageous reagent costs too. We still have shell out for antibodies, fluorescent probes, proper biosafety lab space, etc.
I'd love to see YCombinator comment on accepting biotech/healthcare companies.
[+] [-] kaib|13 years ago|reply
A lot of our users are working on hardware startups. Once they converge on a working prototype many move forward to more traditional packages to optimize the product for larger production runs. The cloud based offerings are also developing very fast, simulation is a good example of a problem that benefits greatly from being run in a large cluster.
[+] [-] xilei|13 years ago|reply
[+] [-] austinlyons|13 years ago|reply
I'm not sure if hardware hackers want to be Steve Jobs... they want to be Woz!
"Woz soon followed with the machine that made the company, the Apple II. He single-handedly designed all its hardware and software—an extraordinary feat even for the time. And what's more, he did it all while working at his day job at Hewlett-Packard"
http://www.foundersatwork.com/steve-wozniak.html
[+] [-] kbutler|13 years ago|reply
[+] [-] jd|13 years ago|reply
In the same way we can expect startups to pop up that make life easier for hardware startups. For instance startups that make prototyping hardware easier. Or that simplify shipping goods all across the globe. Or startups that make it easier to find the right suppliers and get good deals with them.
Pretty exciting!
[+] [-] SiVal|13 years ago|reply
Apple used to talk about ease of use and "computer for the rest of us", and they still throw some of that into every presentation, but it's no longer the lead. After Steve Jobs rejoined Apple, it was all about the look and feel of the hardware, not ease of use of the software. "Look, candy colors!" "Look how small! Feel how light! Look at those curves! Oooh, you can never be too thin. Did I mention thin? I meant thinnest!"
Then the small, thin, candy-colored devices emerged, and they made Apple the most valuable company in the world, with the media hanging on its every move. And what are they talking about, the software? No, silly, a Windows machine can do anything a Mac can do. Apple wouldn't be so successful without the full package of hardware, software, and services, but it's the HARDWARE more than anything else that everyone talks about.
This has given Google, Microsoft, Samsung, and other big companies serious Apple envy, which shows up in their "strategies". How can it not affect small startups as well? It's the environment these little companies are born into.
[+] [-] anigbrowl|13 years ago|reply
This is great news. I felt a bit old and stupid at Startup school, because I want to make hardware (albeit for a niche rather than a mass market), but anyone I talked to seemed to find the idea weird and most of the concepts from the stage were along the lines that software - particularly internet software - was, is, and ever shall be the sole basis of a successful startup. It was a relief at the end of the day to hear Joel Spolsky discuss the viability and possible desirability of building a nice little $10m company in just as much detail as building a $1b one.
[+] [-] tocomment|13 years ago|reply
Let's say I have an idea for a portable mini-fridge. What kind of engineers do I need to contract to design it? Where do I find them? Do I need approval, testing? What kind of regulations do I need to follow? And finally how do I get it manufactured? Do I actually need to go to China and meet with factories?
I wish someone would put together a step by step guide for these kinds of questions.
[+] [-] kerryfalk|13 years ago|reply
Truly rapid prototyping is bringing costs down, like a great dev framework cuts dev time down.
There are many possible paths to succeeding in manufacturing, one size does not fit all. It largely depends on A) what you're trying to build; and B) who you're going to sell it to.
For example, if you're going to sell to consumers you're most likely going to have to come up with capital to cover your manufacturing costs before you have a single unit sold.
If you're selling to businesses you might be able to get a Letter of Intent or a Letter of Credit and then get a bridge loan to cover the costs. If I were building a manufacturing company, this is probably the route I would take.
Like software though, you need the right people. Good mechanical engineers are as rare as good software engineers and the programs they use in their craft are far more expensive (SolidWorks, etc.). You'll also probably need an Electrical Engineer. It's kind of like the difference between front-end/back-end devs.
[+] [-] davidcann|13 years ago|reply
[+] [-] amirhirsch|13 years ago|reply
However, it's possible that innovation in hardware technologies is out of reach of startups. I'm differentiating here between hardware-tech and hardware-product startups. Of course there are hardware startups that are attempting to bring new technology to market (go Integrated Plasmonics, and 3Scan!). Interestingly, a good indicator of whether a startup is developing an innovative technology is that Peter Thiel is invested in it--many of his fund-ees are slaving away in labs scattered around SF. The failure modes of these hardware-tech companies will be more interesting than the hardware-product startups. These companies may take a much longer time to develop tech, then the product using that tech, and then fail, because the market they try to disrupt with their technology may be disrupted by other technologies with better economics--energy tech is full of these sorts of baby elephant skeletons. Still, successful investment in real hardware innovation that wins leads to companies like the next GE, Intel, or AT&T so it makes sense for investors with deep enough pockets to aim for these.
Hardware products that simply integrate existing commodity components (like Blossom Coffee) have a pretty well understood binary risk profile, they either they hit or they don't. The new hardware renaissance PG is observing is based on the reduced cost of production, and new ways to crowd fund these sorts of companies: things you might prototype in TechShop (shared tools space) and sell via Kickstarter.
[+] [-] femto|13 years ago|reply
For example, the company might start by pulling all the open source EDA, CAD, CNC, and similar, software into a cohesive whole. It would then bring in one of the open source ERP systems and integrate it with the engineering toolchain. Keeping on doing this for every part of the process: ordering, inventory, manufacturing/robotics, testing, sales, distribution, support, financials. The idea is to (as nearly as possible) completely automate the process of scaling hardware based business from a prototype to a product. Achieve this goal and hardware becomes as easy to scale as software.
I've been building hardware for the last 30 years, and invariably most of the work goes into making the process run smoothly (ie. designing the process) rather than designing the product.
[+] [-] macrael|13 years ago|reply
[+] [-] 001sky|13 years ago|reply
-- Sometimes there are social resons for this.
Tangibility. Evident complexity. Somthing to show off/talk about. You can sell art-work to hang on the wall for a much higher price than a digital file only, etc. (Software's intangibility and ease of replication in these cases are not per-se advantages.)
[+] [-] jiggy2011|13 years ago|reply
[+] [-] nandemo|13 years ago|reply
If that software is for "entertainment" (e.g. games, social networks, cool email clients), yes. But most companies and professionals will gladly pay for software that makes them money or, equivalently, saves them time.
[+] [-] zackzackzack|13 years ago|reply
[+] [-] Kilimanjaro|13 years ago|reply
It's all about toys!
I want to see iPhone controlled toy tanks with cameras and laser sensors, so me and my brother can kill each other without moving away from our desks.
I want to see usb telescopes, microscopes, thermometers, stethoscopes so my kids can play scientists.
I want to see more e-toys so kids grow more interested in technology.
[+] [-] 3pt14159|13 years ago|reply
Every. Single. Hardware. Startup. I know, has either gone bankrupt due to lawsuits, or hasn't ever reached product market fit.
[+] [-] follower|13 years ago|reply
It's linking to <http://ycombinator.com/apply>; instead of <http://ycombinator.com/apply.html>.
[+] [-] waterlesscloud|13 years ago|reply
So what kind of startup can facilitate that change?
[+] [-] groby_b|13 years ago|reply
You'd need:
* Significant improvements in 3D printing
* the ability to construct circuits as part of 3D printing
* a much wider range of materials available.
Essentially, you'd need to be able to ship hardware as a digital good. Which raises the huge question of DRM. The recent years of software startups side-stepped that by going the SaaS approach. (You'll notice desktop software is pretty much dead. There are no major new projects in that area since probably ~2008 or so.)
HaaS is going to be much more difficult. (Not necessarily undoable. Minds on too much coffee have suggested going a biological route, where devices just decompose after a certain time)
[+] [-] MattGrommes|13 years ago|reply
[+] [-] benmathes|13 years ago|reply
3D printing could do this, in theory.
There's a company trying to do this for life sciences: https://angel.co/transcriptic
[+] [-] mmagin|13 years ago|reply
As soon as you're selling hardware, you're dealing with customs, FCC (or equivalent) regulations, a lot more safety regulations, etc.
[+] [-] ippisl|13 years ago|reply
2. Making in easy to do testing and verify reliability, both at the development stages and at the manufacturing stages.
3. Making it easy to port the arduino to other platforms or porting it to other interesting platforms(full porting including good library support).
[+] [-] hansc|13 years ago|reply
A couple of years ago, I was the CTO and cofounder of another hw startup (FTTH space), we did get this thing off teh ground for less than 300k and it is now doing very well and one of the top-3 in it's niche
[+] [-] mahyarm|13 years ago|reply
Akihabara, Eat Your Heart Out http://www.bunniestudios.com/wordpress/?p=147
[+] [-] state|13 years ago|reply
[+] [-] guelo|13 years ago|reply