Kyle Ellicott, the Chief Labs Officer and founder of San-Francisco-based Readwrite Labs shares his thoughts on why Hong Kong and Shenzhen are the places to be for Internet of Things, the huge potential of smart cities, tips for Hong Kong-based IoT startups and how he would pitch himself.

Transcript of the Interview

So, Kyle, what is Read Write Labs exactly?

Kyle: It is the first and still largest accelerator built around the Internet of Things industry and my first, I mean we started this right after, right on the day Google Glass announced. There’s a whole other story to that which I’m happy to tell offline but after that we started working with more and more companies from around the world helping them understand the business of IoT and wearables and today we still hold that title as the first and largest and are an accelerator to help companies get  from point A to point B. To help understand how to go from one market such as, China to the US and vice versa, so from the US into China and how to raise funding. How to do crowd funding along with growing and scale your business.

So, Kyle you’re in the mothership of all things tech with Silicon Valley. What brought you out to Shenzhen and Hong Kong and what’s the big opportunity that you see there?

Kyle: Yeah, so we came out to Asia first to Hong Kong and what’s funny is we’ve actually been looking at Asia for quite some time and part of the reason is, if you build a company in hardware and even more specifically in IoT or wearables. It’s where you have to go to do business, maybe not just for manufacturing but also for some of the components, for supply chain, for partners, for fundraising. It’s a very diverse place, so many of our companies and so many of the companies within the community were going there and so it just made sense for us to also be there and for us to be a trusted and reliable source for companies that we work with and also the community in IoT.

And we picked Hong Kong to begin with because it’s the most centrally located, it truly is the gateway to Asia when you look at it on a map, it’s the most centrally located. It’s everywhere you need to be so it’s a quick hop from a lot of the great cities around the region and the next step was Shenzhen. We couldn't not be there and again with so many companies building and manufacturing in Shenzhen, we wanted to have a presence there. 

We wanted to have a presence so that when start-ups come to China for the first time and have to work with a manufacturer, have to build their first product that they know who to work with, they know who to trust and they know who can get the job done for them versus having to spend maybe three weeks or four on land and they’re just not sure if what they’re getting is correct. We’ve all heard some of those horror stories. 

So, we put ourselves in the middle of it to make sure they were true and find solutions to that. So, today that’s why we’re based in both those areas and at the same time I mean guys you’re both spending time in Hong Kong, it’s an amazing place, it’s an amazing place to do business, it’s a phenomenal ecosystem and just sitting there and watching it grow reminds me of the early days of Los Angeles when I was an entrepreneur there and seeing how that ecosystem just took off on its own and created its own identity, its own kind of place on the list if you will. 

We just couldn’t turn it down, we’re very long on Hong Kong if you will and we see great potential in that city for a very long time and then Shenzhen of course, has become an amazing place for start-ups in Asia. It’s again not just manufacturing but it’s a foot in the door when it comes to mainland China and it’s an easy place to get started.

So Kyle, a lot of people in Hong Kong kind of struggle with where the city is at today. Specifically from a technology perspective, Shenzhen is just around the corner, as you mentioned it’s the manufacturing capital of the world. If you want to iterate and develop your prototype products, it’s happening there multiple months faster than anywhere else in the world. So, from an IoT startup perspective, what’s the inherent advantage of being based in Hong Kong versus Shenzhen?

Kyle: So, being based in Hong Kong, part of the advantage on the IoT side is you have a city that is known for two very big things around technology. One fintech, two smart cities. There are several smart city projects that are happening all around this city and if anybody who is listening doesn’t know about them, feel free to send me a message on Twitter and I’ll tell you all, or reach out very easily to InvestHK who can give you tonnes of those insights.

So, when it comes to IoT these projects are ongoing and they’re not stopping. People are understanding, not just in Hong Kong but cities around the world that infrastructure needs to be more technically advanced and what they’re seeing is how IoT plays a role in that, how this new wave of technically advanced infrastructure will not just set the groundwork for the next 50 years but really will help optimise a city. It will help it run more efficiently, save costs and help people get ready to go and provide new insights that they had never seen before and with Shenzhen being so close by, start-ups are able to jump over the border, build what they need to quickly and come back and test it in a very real life environment which doesn’t happen in many locations around the world.

We’re very fortunate to have something like that happen here in San Francisco to a small, small scale but not nearly the scale that Shenzhen has with the electronics market and then Hong Kong has on the other side as a testing area.

And in what verticals do you see the most potential for growth in the IoT space?

Kyle: So, what’s really exciting is we’re in the process of reviewing applications right now for our next cohort here in San Francisco and also for Hong Kong and Shenzhen. So, it couldn’t be a better time to ask this type of question because we get to see the insight of what’s coming in. The next big verticals based on data. Ok, and then I’ll tell you what’s getting me excited. Our date points to transportation and automotive, it’s one of the fastest growing markets, it’s got some of the most money from venture going into it which is super exciting.

I mean, think about this, we have had vehicles act and work the exact same way for a very long time and now we’re getting to a point where travelling less is a thing. We are carpooling, something that was a concept years ago, used to do on the way to work and now today it’s common practise with things like Didi and Uber. That’s all beginning to change, the way we look at our vehicles. There’s still the desire to have some raw power, you know nothing is going to turn down a brand new Ferrari that you can see going through the streets but at the same time, the efficiency of having electric vehicle, getting from point A to point B, that’s all you need to do, doing it at a low cost and good for the environment.

So, auto transportation as a whole is definitely on the rise and the other one is energy, new energy, looking at advancements of how we can be more energy efficient as a society all the way from governments to cities to corporations and to us as individuals. How do we use energy and how can we be better at it? Whether it’s a battery, it’s fuel cells, it’s battery back-ups, energy storage to understanding how much energy we use and waste on a daily basis.

But what gets me the most excited of all of this is truly smart cities. You package all this up with a lot of other verticals and roll it to smart cities and idea that cities are going to become this living, breathing, organisms more so than they’ve been; I think is just fascinating. Our cars will talk to each other, you will know anything you need to know about a city, on the reverse, city engineers will know everything they need to know about people and how to build optimal cities for us to live in.

That’s actually super interesting. Any advice that you might have for home-grown start-ups in Hong Kong that are getting into this space?

Kyle: So, let me give you a few pieces of advice. So, one just for companies in Hong Kong first off advice, not in IoT or in IoT. My biggest piece of advice is get out and help each other. One of the things I’ve loved every time I’m in Hong Kong and it absolutely fascinates me is, you walk into a co-working space like the Hive or the WeWork, Paperclip or even Metta and you just see people buzzing, you see people communicating, don’t’ stop that. Push those boundaries. If you’re getting just into this world of being an entrepreneur, go to as many events as you possibly can until you see the same people 10 different times.

Just, you know if you ever get a chance to work with each other, help each other. I remember the days when Los Angeles was still a very young ecosystem, very similar to Hong Kong and there were about 20-25 that really supported each other, helped to drive and push each other forward and that group still exists today and some of them are very, very, successful whilst others have gone on to make multiple successes but one way or another everyone has continued to progress and grow the community. And so, for those in Hong Kong, do the exact same thing, get out, you’re not the first to have the problem you’re having, guaranteed. Talk to someone about it, learn from them, you know talk to guys like us and others in the community and just simply ask: Hey, what do I do here? How do I get above this certain hurdle? How are you doing? How can I help?

For those in IoT, of course pop in and say hi to myself or Raj or any of the team members always happy to welcome you and be part of Hong Kong IoT family. But, at the same time just as I mentioned in the beginning, look towards the community, look towards what is happening at co-working spaces and look at the type of events they are putting on. A lot of these events are free or cost five or 10 dollars, just go support the community, ask questions and learn. 

If it’s your first time and you want to learn everything you can online, shameless plug, readwrite.com. It’s what we all cover and at the same time, look at Tech in Asia, look at E27, look at these websites online to get your first foot into the door. When you get back on the ground, look at Jump Start magazine that’s circulated every couple months on the ground. You can look at Startup Hong Kong just to others the ecosystem.

But for IoT’s specifically go to some of the IoT events. Look at Cyberport, look at these resources you have locally to support you and anywhere else in South East Asia region, every country right now has some type of IoT initiative. All the governments around are pushing these things, with a simple search online or a quick notes through the community you can easily find where these projects are going and if not ask the three of us or ask my co-founder who will happily point you guys in the right direction.

Those are some great tips Kyle but at the same time and to the labour point of hardware is hardware, an old cliche but at the same time like when we were researching you a little bit and we looked back a couple years ago and one of the things we found on YouTube was an interview with you in 2013 where literally the biggest things in hardware that you were talking about were the Google Glass and Pebble Watch. Glass has obviously been a parked way and Pebble Watch has been acquired.  All of this  to say that obviously there's a ton of risk involved with being in hardware startup. So, how would you advise a new startup entrepreneur to deal with that?

Kyle: Yeah, so first and foremost let’s not glamorize entrepreneurship too much, it’s always hard starting a business, you know taking a hobby or an idea or a project to turning it into a company that generates revenue is not an easy path. It is hard, it will be one of the most difficult things you ever do in your life, at the same time it will be the riskiest and it will be the most rewarding, regardless of it’s turnout and you have to know that going into this business and on the IoT side in hardware side, you’re absolutely right.

Hardware is hard, if anyone tells you differently they’re lying to you and feel free to call them out on Twitter.

We'll tell them Kyle sent us.

Kyle: Yes and you can cc me on the tweet and I will happily favorite it and also comment it but it is very hard and very difficult. With software, coming from my technology background, it’s code, you’re putting design on top and it can work. 

With hardware, you have to put components together physically and not just once but multiple times over and you have to put layers on top of that, multiple layers of code plus the design, multiple layers of design and then hope you didn’t spend too much money and you can still make a profit off of it. And where it’s difficult is marrying all that together, you know when you create a piece of software, parts boil down to nuts and bolts. Software code is free, it’s just us pressing keys. On hardware, you have to pay for components, components get cheaper at scale, they don’t always start off cheap so your initial prototypes can cost a lot of money. That’s ok. If you are truly invested, you accept the risks, understanding the potential reward. Put a little bit of money into making a real prototype and once you get one, find the components that you need that will make it a little less expensive to make a couple more.

So, that when you go out to talk to press, talk to partners, talk to investors, you can show these things off and not just have the one and only demo. With the companies that you mentioned, Glass and Pebble, it is hard because there’s a new element when it comes to these types of products and that’s us as consumers.

We have a very big opinion as to what we want and what we don’t want physically held in our hands and with something like Google Glass. Part of the reason why that didn’t work at the time and why you're starting to see a little bit of these companies come back now. Is because at the time the entire culture shock, no one was fully ready for that. As tech guys, for us,  that’s so cool, let’s put a camera on our face, let’s do all kinds of stuff, that’s awesome. But for the general public, there was just a psychological thing that did not click and we’ve seen it from all the technologies we have in our life.

From, you know the wearables we have on our wrist, to the cell phones we have all of these different pieces of technology have a hurdle to get through and with poor Glass that was one of the biggest. You’ve got a camera that faces someone else directly and you don’t know if they’re recording, not recording, you know if they’re taking a picture, what’s happening? You don’t know what’s going on and unless you have a pair that was hard to understand.

Now, the other reason Glass had an issue is because they went a very exclusive route, $1500, you had to be in the US, you had four or five places you had to go to pick it up. It’s very difficult.  Where pebble made their mistake which I guarantee you’re going to hear more about in time is the economies of scale. It’s supply versus demand.

The idea of the wrist watch, it’s a big question right now, do people want to wear watches? Do they not? What was being delivered, was it valuable or was it not? And Apple is seeing some of their largest growth but is that because they’re delivering value or because it’s a trendy product? And what happens in the near future with the version two versus version one? So, to wrap it all up because I’m rambling on here. Hardware is hard but understand your costs, understand what you’re getting into and I can tell you the reward is definitely worth the risk and the very last point is focus on the platform you’re building on top of for hardware. Get it to a point where the hardware is not merely the value, it’s software, it’s the data you’re generating that gives something back. So, actionable insights, give something back to the user at the end of the day. That’s what’s going to have people coming back to you.

Excellent, Kyle. Just speaking back to that last question; let’s say you had an amazing IoT product idea and you want to go pitch yourself today, as an incubator, how would you approach it?

Kyle: Yes, so shameless plug. Reach out to me on Twitter but now in all seriousness, one, be prepared, have a website and even if it’s just a page that says: “Coming soon!” with your logo, have something. It’s US$8 per a month on Square Space, it’s you know a whole US$12 to have a domain, make sure you look legitimate.

At the same time, put together a pitch deck the best you can, you know we understand myself and others who are in this industry that not everyone’s perfect at creating a pitch deck and that’s what you’re coming here in part for, is to learn how to build those types of things, to learn how to pitch, to learn how to raise and to learn how to grow and scale your company.

So, come in with a website, come in with a presentation and be ready for due diligence. If you’ve got financial projections, if you have partner relationships, so a large corporation has invested in you or is doing a partnership or has a PO. Make sure you have copies of those things, you know we’re going to want to see that stuff and we want to make sure that what you’re telling us is valid and at the same time, you know show that you care, show that you’re excited to take advantage of the resources about to be given to you.

Lastly, ask questions, you want to understand what you’re getting into, you need to understand that this is a commitment on both sides, not just the accelerators and incubators but also yours. You have to commit your time and your resources just as much as they do and so when you get into that interview, you get past that application, ask as many questions as you want, that’s what we’re all here for, ask us questions for days and that way it won’t be a problem that way you can get all the things you need cleared up and be able to join the program stress free and excited and ready to dive in versus having questions last minutes and getting yourself like second thoughts.