A lean hardware company getting to beta

There is no true manual for starting a company, let alone a hardware company. With the Apples and Samsungs of the world, most would say that hardware is hard. That you have to have deep expertise to even start or know where to start.

As for me, I am an idealistic visionary. I believe that with hard work anything is possible, even though deemed as hard. Initially, when I started this venture I thought what resources do I have that I could leverage to build a hardware product. Similar to my past experience in startups, I knew that in order to build the best business I had to learn to become a full stack engineer from front-end design to back-end infrastructure and architecture. I knew that without having all of these pieces I wouldn’t be able to build what I needed to support my vision. From learning this, I was positioned to do it again but for hardware. So I started with my software skills and built Arduino products than found people to help with others and so on.

Initially, I thought this part was going to be hard but I quickly found it that hardware isn’t hard. People assume it’s hard because it is a black box and is unknown how all the elements fit together. Once I learned that it’s all about people, I was set to find the best most intelligent people I could to help me execute my vision and take me from proof of concept to mass production.

From a number of meetings, a lot of research and a lot of investigation I found my two options laid out:

1. Hire a team of engineers that work for my company. An ID EE ME and FW and SW guys each needed for the solution
2. Hire a product development firm to do the same thing.

That was it, I had to choose one of the two options. The message I was getting from my advisors was to build the product as quickly as possible with as little resources as possible in order to prove out your assumptions. This message was said when I started and still exists today. So that was the goal that I set out to complete.

After analysis of all the factors, I decided that what made the most sense for me was to hire a product development firm and I could not be happier (in retrospect) about my decision. Below is my analysis of both options:

Option 1: Hire a team of engineers – Insource Model

Pros

• You are in control of your destiny, of every little detail and part.
• If it succeeds you get all of the success, if it fails you get all the failure,
  • You have 100% of the responsibility and accountability for the success of the product
• Future development or iterations can happen quickly in the beginning stages of product development
  • Until you need big machines to build better/higher quality prototypes

Cons

• You have to find, hire, manage, and pay your engineers
  • Salaries for engineers – $70k each?
• You need at least 1 of each of these ID, EE, ME, RF, FW, SW, and a few technicians for help.
• You may only need the ID guys for the beginning but need everyone else, or could be staggered
• If you hire everyone individually, you have to build up the relationships between people in order for them to work well together.

 

Option 2: Hire a product development firm – Outsource Model

Pros

• Quick to market
  • Can go from napkin idea to manufacturing in 9 months, if you have the capital and timing to go straight through without testing or many updates
• Support of firm’s experience, not just individuals on the project
• Can leverage the relationships the firm has built up such as preferred vendors of chips or manufacturers
• Often know the pitfalls of product development and can avoid them
• Are looking to stay competitive in the market, so the better you do the better they do = free marketing and PR
• You don’t have to manage their every move. Typically they have a project manager or an engineering lead. You have to stay involved and make important decisions, but those are laid out on a silver plater compared to being the project lead and making all the decisions.
• If someone on your project team, gets fired or let go, you get a replacement for free
• Everyone is under 1 roof if any questions arise they can go from desk to desk to get things resolved.
  • Engineering is a very collaborative game, where the ID guys are continuously pulling at the ME guys for this that and the other and there is tension between the RF and the EE guys. Without these people 1) knowing each other and how each one works 2) being in close proximity of each other, nothing would get done efficiently or productively.

Cons

• Expensive
  • From my experience prototypes can cost up to $300k and full products up to $500k
• If you don’t evaluate the firm up front, you could set yourself up for failure due to not setting clear expectations or not reading the contracts well enough or just the firms quality isn’t what you were hoping for.

 

 

Update:

This topic of insource vs outsource as come up again and again over. In almost every prospective investor meeting lately, this question has been pounded into me. Every single investor has said something along these lines:

“I love what you are doing; great growing market, great product, great technology.

BUT

Your hardware is outsourced

You have no one on your team with hardware experience

And you have put too much money into the company”

= You are doing it wrong.

 

I have taken each conversation to rethink everything I am doing. After enough people tell you something, you start to doubt yourself and your plan (regardless if it has been working). Its like since someone with a lot of money is telling you something, you automatically assume its right. The crazy part about all these conversations, because I am in the Midwest, none of these investors have even built a hardware company before, so they have no clue what goes into it.

If I had the confidence or it was the right place and time, I would rebuke these statements.I would ask, “What would you have done in my positions? How would you have executed an idea to build hardware product being a student at Indiana University, if you had never built a hardware product before in a time where saying IoT and wearable was just a buzzword.”

Most people, I would bet, wouldn’t have even a clue where to get started and no chance of getting to where I am today. Most people would have given up 2 years ago when they learned that hardware is hard and moved on to working for someone else.