This week, I caught up with Paul Berberian, one of our excellent mentors for HAXLR8R 2013. Having successfully manufactured the Sphero in China, Paul has quite a bit of wisdom to offer. If you're accepted to the 2013 class, then he is just one of dozens of mentors who will be able to help you realize your dream and get your startup off the ground. Apply now, application deadline is November 18th.
It's been a year since the last HAXLR8R. What have you been up to since then? Feel free to brag. :)
Sphero launched and we are now in Apple stores, Target, Barnes & Noble, Brookstone, Future Shop and dozens of other stores in the US and Canada. We also developed a new more efficient and less expensive product to manufacture for 2013.
Many have said that the hardware landscape is looking more like software with lower costs to entry, better prototyping tools, and faster turnaround times. Do you think this is accurate? What are the critical/important differences in your mind?
I disagree especially if your product will have multiple apps and be open for 3rd party development. Essentially you need to build a software team and an engineering team to sell product. While it is considerably cheaper than the past you still need capital, you still need to manage inventory, you still need to do all the work to build a great product. So while you can get to market on a few million bucks - you'll need much more to grow and expand the channels and build future generations of your product. For most of the innovative stuff in the HW landscape I think $10m in a min number to get to profitability if you plan to design, build and sell your product yourself to a large consumer base. Less if you don't have a SW component and less if you just plan to license your idea to another company for sales and distribution. More if you have motors and mechanics that need to work in conjunction with SW.
Can you tell me about a difficult challenge you overcame dealing with hardware (design, production, sales, distribution, etc?)
Making a robot ball has been incredibly challenging simply because a ball has a single and very small control surface. When we first showed our CM our design they said "It won't work." We said build the mechanics and we will plug in our electronics - and based on our special FW and use of some MEMS sensors we got Sphero to roll with a high degree of accuracy. It is this special FW and special handling of our sensors that give Sphero its unique capabilities. But getting it all to work took over a year and we are still improving things.
What has your experience with China been like? Do you have advice for new companies looking to manufacture using Chinese vendors?
We are really happy with our CM - they have been very reliable and straightforward - we also trust them to not sell our secret sauce or make counterfeit goods. So we have been thrilled with our China experience. We used a US firm to help us select the right CM and then used them to help manage the relationship as we got going- that was critical to our success. Now we have outgrown the US consultancy but for any startup I recommend they find a firm that can help them navigate the CM landscape and work with you until your product is shipping.
What do you think the most promising development in the world of hardware has been in the last year?
Advancement of MEMS sensors and the reduction of their price.
What is your opinion of open hardware and does it have a role in a for-profit company?
Haven't seen it work yet and I think it is a myth. Successful hardware is designed, perfected and then mass produced - open software can be fluid and change dynamically and released and re-released without much of a cost to redeploy. In hardware once you lock into a design any change can cost a lot and require all sorts of tooling and certification changes. An open design is about rapid iteration and a pseudo crowd sourced level of participation. Who pays for the tooling, the prototypes, the certs? Who gets to choose that this is the design that will sell in the market? I'm not saying it is impossible - just haven't seen it work.
Bonus question - soapbox. Is there something that bugs you about the hardware community? Elephant in the room? Buzzwords that people throw around?
Hardware sales is all about channel and distribution - it isn't like software - making that comparison is just wrong. The nice thing about a HW business is that if you have a hit product and you get it on the shelves you can truly skyrocket in just a couple of years - lots of software companies can be taken out by the 2 guys in a garage concept - not hardware - it takes time and structure. I think the upside in HW is better and less risky for a typical venture investor (it is still risky BTW) but the funding that is going to software is insane for stuff that is a lot easier to knock off or fizzle. Let's get some cash flowing to hardware companies - it has been forgotten for too long by the VC community - tons of innovation to happen in the coming decade. And the fear of a China knock off is just fear - product only sells if they get the brand awareness, distribution and have unique properties like software - at least you can see it coming.