The cliché goes that hardware is hard. Not just hard, but building an IoT startup is supposedly so much harder than launching a software startup. How do you deal with distribution and manufacturing as a small business? Do you need to be in China to be relevant in IoT? Bay McLaughlin, co-founder of Brinc.io, one of Hong Kong’s premier hardware accelerators spoke to GrowthKungFu co-founders Wai Hoi Tsang and Pritish Sanyal about some of these hardware myths.
Building a hardware company requires stamina
Bay: The thing about IoT that I always try to impress upon people when they think about building these companies is that with software, you can launch an app in the app store and either you take off or you get hidden among the 10,000 others in your category. You fail privately.
In IoT, when you launch and then you go through the production process, you deliver and then you start retail; you don't know from that day when you apply to Brinc for at an earliest point, about two years [whether you will survive]. But, when you look at the numbers for most IoT investments, it's about the three year mark, when you realize whether you're at a velocity and trajectory where you can stay alive long enough to compete with the big guys or whether you need to sell quickly and to shut down.
For most founders, they think it's starting a company with the click of a finger and IoT is awesome, but you've got to be the type of person who's ok with not knowing for about two to three years if you made the right bet. That's a different personality type than a software personality type. For software, you get instant gratification of knowing whether you can hack this together and whether your social hacking metrics are working or not. You don't get that gratification with IoT for a really long time.
So, is hardware hard?
Bay: It's challenging of course. The way we kind of spin that is yeah, obviously, but there is a certain type of person that thrives off of challenges. There is a certain person that rather takes the hard road, they just like to work on more complicated, challenging problems. There are the type of people -- no offense, right - that should make a software company. There's a type of person that thinks they should be a founder that should really be an employee and should never be a founder. Because being a founder is super, stressful all the time because there's nobody to blame, right?
I think it's more about an understanding of what you're getting in to. For us, we really love people that have this emotional connectivity with a physical object, realizing that when you have a physical object or when you buy something physical, there is this instant visceral relationship.
Now, people still chuck stuff, right? I have a whole box of consumer electronics. But for those, that really hit it right, think about all the fond physical things you can think of in your life. There's dozens and dozens. And they have the chance of a connection long term that software apps in the folder on the third home screen don't.
Again, the risk and reward ratio is just different. But it's definitely worth it, once you do it.
What are the main challenges? Why is it hard?
Bay: Couple of easy ones, everyone hits the same things. First one is absolutely, I never manufactured something at scale before. There are makers and they are the lifeblood of this system. These makerspaces and arduinos, making people able to tinker, that's critical.
But, the leap from that to scale and manufacturing, which nine times out of ten is going to put you in the PRD, the Pearl River Delta. Some people say they're going to try it in Mexico and then you find them here. Or I'm going to try South Korea; that works sometimes. Or I'm going to try Montreal and then you find them here.
It's one of those things that you can't get away from. That's actually a big reason why [Brinc.io has] chosen Hong Kong and why we believe you can't get away from the PRD. It's a weird moment where -- what other vertical or type of business actually kind of requires you to be in one particular geographic region on the entire planet?
There are very few types of companies that require you to be in one place. As the world, we've consolidated our electronics and mass scale manufacturing into one place on earth. Fabrics are in other places, right? Vietnam or whatever.
I think that's an interesting opportunity and almost any founder that's made it will tell you, I should have come to China and Hong Kong earlier. That's sort of the constant response. It's faster and it's not as scary as they think it is. So they believe they should have gotten here faster.