2. Enabling tools

Even as little as two decades ago, starting a company, especially in the hardware space, was a huge investment. Much less investment capital was available, as well as much fewer tools to help create the actual products. The dot-com boom of the millennium brought a very different thinking for software startups (more capital, much better tools), while hardware-focused businesses went through a similar revolution in the last 2010s.

I growing reach of the Internet with more people and more regions being online now enable new business models, easier access to capital, easier access to knowledge and resources. The rise of open source hardware resulted in a proliferation of prototyping tools. A much larger section of the population can now have the opportunity to follow their ideas and passion in a form of creating tangible products.

While not all barriers have disappeared, the playing field is more level now. Previously the main skill of founders was to convince potential investors that their idea has merit. Nowadays people can create their working products and start talking to the potential customers directly, for example, through online communities. This direct communication with the customers lets businesses make more solid decisions that were mere guesses before, and can raise the funds required for large production through actual sales, instead of venture capital.

In this chapter we take a look at these tools and trends that facilitate the rise of hardware startups.

2.1 New Business Models

The startup and business community learns new business models as new tools are available. Wide access to the Internet and the acceptance of online retail have brought about a complete shift, enabling organizations to directly talk to their customers. This first hand feedback is expected in the software business, while hardware businesses traditionally relied on distributors that decoupled them from customer feedback to a large extent. Establishing such a direct connection has tremendous benefits for hardware makers:

• financial improvements
• shortening the time to market
• making long term planning, roadmaps more reliable
• externalizing parts of Research & Development

The two new business model we see to be increasingly utilized are crowdfunding and crowdfeedback.

Crowdfunding

Crowdfunding can be imagined as a team going public with a product idea, saying:

“We want to create this thing, we know it’s going to be amazing, please help us make it happen!”

As the name suggest, the aim of crowdfunding in the beginning was to raise funds required for the development of product in question. Hardware is expensive to create, takes a long time, and having more access to capital from, for example, 1000 excited backers, often makes the difference between a product launching or fading away.

There are very large variations in the amount of funds being raised from a few tens of thousands of US$ to millions. For example the Pebble smartwatch, originally aiming for $100,000 raised $10,266,845 in 2012¹, and then returned to raise $20,338,986 for their new Pebble Time model.²

This variation makes it possible for projects to raise the amount of funds that is appropriate for them instead of fitting some universal model. As the community gains experience, people uncover some general guidelines from the failures and successes of projects on the long term. For example, experts argue that $100,000 is not enoughto go from prototype to production these days.

Crowdfunding also have good side effects that can be more important for some organizations than the money being raised. This engagement with the community also provides:

• low cost market validation
• customer and community development
• R&D ideation by the comments received during the campaign
• attraction of potential distributors

These aspects can be utilized in all levels of business. The traditional crowdfunders are startups who are just establishing themselves. Small & medium enterprises can launch campaigns to grow their user base. Large, publicly traded organizations instead of focusing on the funds raised can seed internal innovation and improve their connection to the community (which usually money can’t buy) by crowdfunding.

One special case is equity crowdfunding, when the startup itself is the promoted product: people are funding the organization instead of anything in particular they make. It is a very new model that is actively developing due to changes in financial regulation. It is likely be more relevant for the software and service industries, as hardware startups have a more naturally attracting offer to promote (their “gadget” in question). Still the trends are pointing to more experimentation with this business model as well in all areas of the startup ecosystem.

Crowdfeedback

Crowdfeedback is a distinct model that is illustrated with the organization effectively posing this question to the community:

“Look all the great products we’ve made so far, obviously we know how to do things, tell us what other great things we should create?”

A hardware company’s portfolio often speaks for itself, but it takes more confidence in one’s achievements to openly invite the general public to new products. This especially works well for startups and companies that are trying to create a more robust ecosystem around their products. When done well, crowdfeedback can have the positive effects of:

• increased engagement in the community through discussion
• accelerated R&D within the organization
• building an image of innovator
• creating partnership opportunities

As an example, Seeed Studio in Shenzhen, China, is a hardware innovation platform that both produces their own designs, as well as enabling others to make their own. Their website’s Wish section is open for anyone to propose improvements and new products.

The Little Bits, the prototyping platform where one can build a device by snapping together different electronics building blocks, created the bitLab where they showcase their new creations, as well as encouraging anyone to “start dreaming” and propose a new module for them to create. Since their platform is built on modularity, crowdfeedback is a great fit for speeding up development and empowering the community to become stakeholders.

LEGO is an example of a large company relying on crowdfeedback. Their LEGO Ideas platform lets anyone create an idea for a kit, then campaign around it to gain support. The company reviews the most successful designs, and choose which one of them make into reality. LEGO already has a large presence in the merchandise market, making custom designs for popular franchises such as movies and computer games. Crowdfeedback makes this merchandising use even more accessible, as any community can create their own, shared LEGO universe. Case to the point the very successful space adventure indie computer game, Faster Than Light creating LEGO models of the spaceships in the game.

Crowdfeedback also works very well for other organizations that are trying to cater for the ever-growing hardware ecosystem. For example Codebender is a cloud-based integrated development environment (IDE) for the very popular Arduino microcontrollers. Since there are practically uncountable variations of Arduino devices (originals, clones, variations), Codebender needs to make tough choices for which boards they will support in their software. Their support forum’s board requests section is a very effective place to gather feedback on which Arduino variations are popular and worth their time supporting.

We expect to see more hardware companies starting to use crowdfeedback, as successful products based on community-initiated designs become more common.

2.2 Hardware Tools

As people create more hardware startups, there are also more startups trying to cater for these hardware makers. It is a self-reinforcing process, where easier, cheaper access to hardware tools will create new hardware projects, which in turn will create easier, cheaper access to hardware tools. To show the extent of this development, the AngelList startup database currently lists 1,028 Manufacturing Startups.

In the last decade the biggest leaps in hardware tool development happened for electronics prototyping and 3D printing, now followed by all the other tools that are traditionally found in a well-equipped workshop.

Electronics Prototyping

Digital electronics is what puts the smart into objects, and the speed at which someone can go from an idea to a proof of concept makes a large difference. The faster, easier it is to prototype a gadget, the larger variety of interesting solutions will be created. We would like to mention a couple of platforms here that we feel did the most for lowering the barriers in electronics:

Arduino

Arduino is arguably one of the most successful hardware project so far. It’s a microcontroller board that enables digital and analog manipulation of physical objects, and building of connected devices, all based on open source hardware. The simplicity and openness enabled other companies to build “clones” and “variations” of the original hardware. Also, people can prototype with an Arduino board and later build in just the microcontroller into their final product. Arduino became a true household name in a large part of the world, almost as much as Lego did with their construction toys.

Raspberry Pi

Raspberry Pi is a single-board computer with the aim of teaching more kids about computer science. In many ways it did the same to computers as Arduino did for microcontrollers, and sparked a many-million strong following around the world. While both the Arduino and Raspberry Pi are not the strongest hardware in their respective categories, the build on their accessibility and the community around their platforms. Unlike Arduino, though, single-board computers are cloned much harder because of their complexity, and can’t usually be simplified to be used directly in products. Aware of these issues, Raspberry Pi themselves introduced their Compute Module in 2014, a hardware variation to be built into other products.

Little Bits and Grove

Little Bits is a prototyping platform where devices are created by snapping together circuit building blocks. Almost like a Lego kit for electronics, their mission is to “democratize hardware”. Creating working electronics devices doesn’t get much easier than this, and that powered their growth into areas that are not traditionally markets for electronics: kids even to a very early age, and people who were weary of electronics before. Their niche is to build people’s competence with making hardware, and in our opinion that also directly affects the number of people who would consider starting a hardware startup down the line.

Grove is a similar platform built by Seeed Studios, but targeting digital electronics. With its modular design it addresses some of the shortcomings of the traditional microcontroller systems like Arduino, which is that connecting external hardware to a microncontroller is not always straightforward or even follow the same pattern across devices. Grove has a large number of sensor, communication, and user interface modules available, and can significantly shorten the time needed for learning and prototyping.

LinkIt ONE

LinkIt ONE targets the first step of the hardware making process by being the most comprehensive prototyping platform: their kit integrates GSM, GPRS, Wi-Fi, GPS, Bluetooth into an Arduino platform, enabling both special accessories and the large ecosystem of Arduino accessories to be utilized.

It was designed in a collaboration between Seeed Studio and the chip maker MediaTek, which also shows the growing trends of partnerships between large companies and smaller teams of experts. The companies bring their IP, institutional knowledge, and customer base, while the teams can move quicker, can be better at integrating many different technologies, and know better what makers need in terms of features and support.

Particle

Particle stands out in their approach by aiming to address both of the two stages of hardware development: prototyping and production. For that they have created a combined hardware and software stack, targeting a specific niche of Internet of Things products, and partner with other hardware makers that create devices that could fit their platform, such as Digistump. This full stack, comprehensive thinking from the customer’s point of view is a good trend that we think will have a lot of followers in the near future, even though it is a tough task to create a successful platform like this and it is likely not everyone will make it.

3D printing

3D printing is one of the great success stories of hardware in the recent year. The basic ideas were available at least since the 1990s, but recent converging trends made it into the $4.1 billion industry with over 30% year-on-year growth that it has now become:

• expiry of 3D printing related patents
• very easy availability of powerful microcontroller platforms
• establishment of crowdfunding
• much wider access to internet to share information and ideas
• explosive growth of open source hardware

These are not unique to 3D printing, other technologies benefited from similar trends, such as electronics mentioned earlier. The explosive growth was also due to the fact that while people could do electronics before, albeit it was a bit more difficult, 3D printing puts a completely new tool into the hands of everyone, that most people couldn’t have imagined possible even a few years ago.

3D printing made a fundamental difference to prototyping:

• creating complex shapes and structures can be done without any external help
• increasing the speed of prototyping to even multiple versions in the same day
• enabling test-driving mock-ups for more sophisticated products, raising the quality of devices
• making hardware design shareable digitally, and thus available everywhere in the world

On one hand many hardware startups use 3D printing for prototyping, and for the final products move to more scalable production processes such as injection molding. On the other hand, now there are many platforms that are working on bringing great improvements to the 3D printing process in the form of better quality, and larger number of available materials (besides the traditional plastic, for example metal, porcelain, sandstone, castable wax). This in turn allows traditionally hardware businesses to become effectively software business (designing hardware in software), with many of its benefits. One example is the Shapeways 3D printing platform, which is also home of many jewelry, accessories, arts, games, miniatures projects.

Open source hardware greatly benefited the development of 3D printer making startups, and we are expecting large gains in the next few years in quality, reliability, speed, software support of 3D printers, as well as further innovative growth of the ecosystem around them.

One example is MakerBot, which went from a small hardware project in a hackerspace to a company whose products are maybe the most well-known brand of 3D printers. Their open source design inspired a large number of followers, and “MakerBot-compatible” is one of the key features of many other 3D printers.³

Other prototyping

3D printing was maybe the first “workshop” tool that has left the workshop and managed to get into people’s home, and now many other machines follow as well.

Desktop CNC routers are computer controlled cutting machines built on the hardware development of 3D printers (many new CNC prototypes were built on 3D printer frames, for example). At the time of writing there are at least 10 different CNC router projects on the crowdfunding site Kickstarter.

One trend we see regarding these tools is that while 3D printers were single-use tools, many new devices are built modular, providing multiple functionalities. As an example, Voltera is a circuit board prototyping machine, capable of printing circuit boards, dispensing solder paste, and doing the reflow process. The only thing it still needs is the capability of pick-and-place components on the circuit board. In its current form it can already replace an entire supply chain of electronics manufacturing with automatic tools, bringing the time to create a working prototype from 1-2 weeks (board printing and shipping from a factory to the user) to 1-2 hours.