COMMENTARY | COLUMNISTS | PHIL BAKER

Innovations in building and funding hardware tech

Hardware technology products have undergone a renaissance, with scores of new companies developing products ranging from drones to connected devices to gadgets of all kinds. It’s a big turnaround from the past 20 years or so, where investors took pains to avoid hardware investments, preferring to focus on software.

Hardware’s resurgence has been driven by access to new development and manufacturing resources in the U.S. and China, 3-D printing and electronic chipsets that simplify and speed design, and new sources of funding.

But it’s also driven by the innovative spirit of young entrepreneurs who prefer to create something themselves rather than take a less risky job with a large corporation.

While development is still complex, and hardware consumes a huge amount of cash, the opportunity to innovate is driving entrepreneurs like never before. They’re motivated by the success of other hardware companies such as GoPro, Pebble and Apple, and the lower barriers of entry.

So suppose you have an idea. Where do you start? In the old days, you would try to find investment from venture capitalists. But few VCs have been willing to fund innovative hardware development from start-up companies, and they still remain reluctant. Many consider development too costly and are simply not willing to take the risk.

Crowdfunding sites such as Kickstarter and Indiegogo have funded thousands of hardware products. The sites are simple to use and let you create a funding campaign in which you ask for donations from the online community.

You pitch your product, introduce your team and perhaps create a video, all in an effort to get the community to donate money, in return for getting your product at a discount.

The pitfalls are that if you do not reach your projected funding goal, you get none of the money that’s been pledged. Or if you do reach your goal, the product development could cost a lot more and you run out of money, or the product might never be made to work at an affordable price. In fact, a majority of hardware projects on Kickstarter have never shipped.

Since contributors are pledging support rather than buying a product that doesn’t exist, your obligation is to do your best, but you’re not obligated to refund the money or even ship a product.

But there is another way to get started. Hardware incubators are a recent phenomenon that provides an opportunity to develop your idea further, test out its feasibility and help you come up with a business plan in order to raise more funding.

Examples of hardware incubators include Highway 1 and Lemnos Labs in San Francisco, and Hard Tech Labs, EvoNexus and Qualcomm’s Robotics Accelerator in San Diego. There are hundreds of others in cities across America.

In spite of a successful incubation process, one of the major hurdles that hardware companies face is raising enough capital to be able to complete the development, tooling and manufacturing. This can amount to hundreds of thousands of dollars to as much as million.

Much of that money goes toward finishing the design, staffing, building the tooling to manufacture the product in volume, and paying for the product’s components well in advance of production.

Here are a few examples of products that came from these incubators. Many are truly innovative and resulted from an entrepreneur willing to take the risk. Disclosure: I provide occasional support to some of these incubators, although I have not been involved with any of the products mentioned.

• Navdy is a head-Up display that projects information from your smartphone as if it’s floating six feet in front of you in your car. No service plans required. (navdy.com)

• The Cinder Sensing Cooker makes it easy to achieve exceptional results every time, so you can focus on the creative parts of cooking. Using precise temperature, Cinder makes it virtually impossible to overcook or undercook meat, vegetables and other foods. (cindercooks.com)

• Mashgin is building a scanner for cafeterias that identifies multiple items within seconds. The scanner is up to 10 times faster than an average cashier, thanks to computer vision and machine learning. (mashgin.com)

• ecoATM’s eCycling Stations automate the trade-in and buy-back process for mobile phones and other used consumer electronics, electronically and visually inspecting devices, and recycling these products to others. (ecoATM.com).

• Lagoon makes it easy to track home water usage. Using an innovative sensor that easily wraps around a home’s main water line, paired with Lagoon’s free companion app, Lagoon detects and measures water consumption from major point-of-source appliances. Lagoon provides near real-time views on water use, identifying behaviors and appliances that may be wasting water. (golagoon.com)

• Thimble Bioelectronic’s C?r is the world's first smart pain-relief wearable. It senses pain to deliver TENS therapy for optimized and sustained relief. It’s small and discreet enough to be used anywhere on the body. Effortless to use, all you have to do is place it and wait 5 seconds for effective relief. (thimblebioe.com)


Baker is the author of "From Concept to Consumer," published by Financial Times Press. Send comments to phil.baker@sddt.com. Comments may be published online or as Letters to the Editor.

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