Playing the Hardware Game: The Ground Rules

By February 4, 2014No Comments

If you thought hardware was big in 2013, The Economist urges you to think again. 2014 will be off the charts. It’s not a big surprise that China’s ecosystem offers perfect conditions for the awaited explosion – and entrepreneurs from all over the world can profit from that.

The Economist recently devoted an entire 14-page special report to Tech Startups arguing that “an entrepreneurial explosion” is imminent. Digital startups are now fuelling this "global movement" due to the rise of “platforms” that allow startups to cheaply set up and scale. Ranging from services that let startups host (cloud web services) their “offerings”, distribute (app stores) them and market (social media) them. Well, no big news so far. But one section was actually striking – The Economist points out the development that is most imminent: The rise of hardware startups. Especially Shenzhen in southern China is “the best place in the world for a hardware innovator to be”.

“It is called Hardware for a reason – it is hard”

Marc Andreessen summarized the problems in this field of the industry in an interview not so long ago: Hardware is called hardware for a reason – it is hard. Sure, The Economist tells you that you have to get your foot on the ground in China to be part and profit from the recent developments, but in terms of learning and how-to’s the magazine’s feature leaves many blind spots. But perhaps we can help.

Cyril Ebersweiler, founder of HAXLR8R and deeply involved in the current development in the digital hardware industry in Shenzhen, already stated in his keynote at Pioneers Festival 2013: "2014 is going to be the year of hardware!"

Aaron Levie backed this claim recently by tweeting:

If we take a look at Cyril’s keynote and our most recent interview with him here’s what can be learned from Cyril’s years of experience to really be involved in the hardware startup explosion:

Lean Hardware: from prototyping to manufacturing

First, Cyril explains why Shenzhen is so exciting.

In 2000, China was known for:

  1. Low labour cost
  2. Low/dubious quality
  3. Pirated electronic goods

But things changed – for the good! In 2013 Shenzhen has become really high-tech and produces:

  1. Fast
  2. At scale
  3. Flexibly
  4. Cheaper

The point being that hardware can be produced anywhere in the world, but startups for the most part
a) lack time and money
b) need to scale quickly, and
c) need to operate quickly and be agile,

All of the points above clearly speak for having a team sitting in Shenzhen. One of the secrets Shenzhen bears is that you can get any part within minutes compared to days or weeks that it would take to get delivered in the west.

And what is most important in producing hardware? Cyril breaks it down to 5 learnings:

Rule #1: Design with the right components

When you want to start production at scale in China, you may realize they are actually not using the same components as you. A) this may lead to a painful redesign of everything and/or B) you could bring the cost of goods down dramatically.

Rule #2: Design with your factory

Visit your factory early, because ideally you want to be designing with your factory – a prototype is only ready when it can be manufactured.

Rule #3: Your factory is your most important partner

Your factory is the one who will push your product to market so select it carefully, “not every single product can be made by Foxconn.” Do not have a middle man between you and your key suppliers (i.e. your factory). The reason: When you face a problem you better have direct access to the head of the factory so you can solve it quickly.

Rule #4: Branding: Be memorable

Brand is everything you represent, so don’t let yourself get “outbranded”. People trust brand – it’s important to be memorable.

Rule #5: Pick the right business model

Don’t sell standalone hardware. If you for instance build a sex toy [real use case], don’t just let your smartphone control it, build an experience around it – say, something like a market place where you sell stories.

To get the big picture check out the full keynote:

Cover Image: Susan Stockwell, World