This is Part 2/8 in our “Building a Hardware Startup” series about the time, team and money requirements for building your first hardware product. If you haven't yet, check out Part 1 to learn more about the Post-Screen Era.
Behind every great product are a lot of people who worked to get it on the shelf. When you buy a product at a store or online, the amount of actual development and effort that went into its creation is rarely a consideration for the end user. Craftsmanship is a concept we don't always associate with technology products, but truth is - there is still a lot of craftsmanship that goes into creating hardware.
Products don’t reveal their own development process when they reach the shelf. However, in order to share the knowledge we have about how to create hardware for our supporters and peer group we have written the following blog post about the nitty-gritty of what it takes to make hardware.
You need a lot of things to create your first piece of hardware — but to begin it takes three main things - Time, People and Money.
Each product is different, but our journey with the Nuimo is pretty typical for any wireless consumer electronic.
Generally speaking, to take an idea to a shippable product requires a little over a year if nothing goes horribly wrong. Over that year, there are five major steps that we (and any team) have to go through in order to ship a device. For the Nuimo, we are right at the beginning of Step 5: manufacturing, but can already make projections about the final tasks.
1. Idea and Problem Hypothesis
Every product starts with an idea — and if you can prove people will spend money on that idea, then you've got a product.
The number one reason startups fail is because they build something people don't want. This happens pretty often because really any idea - no matter how great - is just a set of hypotheses with assumptions about your user. It’s your job to prove or disprove these assumptions before you build something expensive and time-consuming,
To form our hypotheses we used a Validation board and then tested them with real people. We streamlined the process by making simple logical connections between our problems and solutions, with simple statements like the following:
I believe that User X has problem Y. I believe that solution Z solves problem Y.
Our users were people a lot like us, digital natives in the age between 20–40, but we spent time going out and finding them. We would find them at co-working spaces and cafes all over Berlin, by simply walking in and asking them to talk with us. Once a few dozen of them gave us feedback on our idea, we were ready to get into real prototyping.
2. Prototyping and User Testing (4 months -always)
Once you have proved a few of your hypotheses, you start with the exciting and nerve wracking cycle of prototyping, user feedback and iterating. In this process you have to go back to your workbench constantly and repeat the process of talking with people and building something new.
In this cycle experimenting is key. You must distill the functions down and iterate on one feature at a time. The prototypes will probably become Frankenstein-like hacked together concepts but steadily get you closer to your solution.
During this phase, it’s useful to only use standard components instead of customized parts. We used development boards like Arduino and Raspberry Pi wherever we could to build fast.
User Testing is equally important as building — this is one of the most important lessons we have learned. It doesn't matter how hard you work (efficiency) if you build the wrong things (effectiveness). Talk to your users constantly and iterate until 70% of them feel a new hole left by the product if you don't produce it.
We went through more than 10 of these cycles of building / users testing over 4 months. In the end, lots of our assumptions were simply wrong, but the feedback ultimately lead to a better product and enthusiastic first users.
3. Crowdfunding & Investment (3–6 months)
You might have been able to pull of the first few months of development by bootstrapping with your savings or side job but in order to take your product from a simple prototype to a mass manufactured product, you'll need some serious cash.
We discuss the overwhelming cost of building hardware later — but it’s more than most people have in their bank account. Thats why you need one of the following things:
1. Extreme personal wealth
2. The 3Fs: Friends, Family or Fools
3. Angel Investors, VCs
We launched two crowdfunding campaigns, one on Indiegogo and one with the improved version of the device on Kickstarter. There is a lot to say about crowdfunding and we will discuss this in detail in Part 7 of our series. In general, it takes 3–6 months preparing for the campaign (the only way to insure success) plus the 30 days it takes to run the campaign.
If you decide to raise money additionally from angel investors or VCs, expect to spend another 3–6 months on that - as your full time job.
4. Design for Manufacturing and Testing (4 months)
This is one of the most challenging steps for most hardware startups because they have created an Arduino-based product that is reliable. During this phase, the product must now become producible on real machines, at scale — and be used by thousands of people over a long period of time. It’s kind of like going from the kid’s pool to the high dive.
This is also the phase where all of the tools suddenly change. Arduino becomes a PCB, Rhino Models become CAD and software must undergo a total rewrite. Companies like Dragon Innovation or PCH that do that work for you in China. Otherwise you need to hire people with that expertise (if you don't have them already) and work in close proximity to your manufacturers.
Once you have redesigned the product to manufacture at scale you generally produce a small batch of devices called a “Zero Series” to test if the machine handling works as expected. These first devices than get tested again and go through the certification process. This process is expensive and will take 3–6 months if things go smoothly — more on that in Part 5 of this series.
5. Manufacturing (1 month)
Once the zero series has been completed, final minor changes have been made and the certification has been finalized then it is time to make the first production run. For the Nuimo we decided to manufacture locally in Germany. This decision made sense for us because we have worked for companies with a tradition of electrical and mechanical engineering like Volkswagen and Audi.
In our first production run we will manufacture 5,000 devices. All the components come from different places and are assembled in one city in the southwest of Germany where a few of us grew up. From here, the products then get packaged and shipped to our backers, taking about a month for the entire process.
Total Time (~1 Year)
The total time it takes to manufacture a hardware project varies a lot from product to product. We can only speak from our experience. As a ballpark figure— most small teams can expect ~6 months from idea to prototype and another ~6 months from prototype to manufacturable product.
This estimate of required time is — of course — assuming that you have a dedicated team willing to work about 12 hours a day 6 days a week, only minor things go wrong and you have the right people for the job.
In any startup — but particularly with hardware… the distribution of skills among the team members if very important. In the excellent series Hardware by the Numbers by Ben Einstein, he suggests that 8 people is about the right number to ship a product.
For us it started with three co-founders as the core team — Tobias, Felix and Philip that covered the skill sets of Electrical Engineering, Industrial Design and Business / UX Design, with everyone working to cover the gaps. Currently our team operates with 6 core team members and a handful of freelancers who are brought on as needed for specialized tasks — particularly during crowdfunding for photography, video, illustration and more.
Even the simplest electronic products require years of experience in different fields. The code for the microcontroller of Nuimo includes several thousands of lines. Likewise, to create a circuit board for a device like Nuimo takes several hundreds of hours, even for engineers with experience building quantum computers and electronics for the automobile industry. To get a product out you need to have a lot of experience among your team members — or hire people who have done it before.
To estimate cost of building a hardware product is extremely difficult, it depends on a few hundred factors including what you’re building, who is building it and how many things go wrong along the way. Our projected expenses for the development, manufacturing and shipping for a small, wirelessly connected consumer electronic look something like the following:
Now you might get an idea why you actually rely on additional funding. Hardware is expensive develop and make.
Even if the founders pay themselves the minimum to live — which most startups including ours do - you still have to budget for salaries and services. Additionally, fixed costs like certification and tooling must be paid before even a single unit is manufactured.
Per unit cost it varies a lot, product to product. When you see a 100 USD product at a retail store, it’s likely that the average production cost of the device is around 33% of the retail price (~33 USD). This may seem like a large margin but not when you account for the fixed cost of development. Likewise with either crowdfunding or retail, 10% of the offered price goes to the crowdfunding platform fees or up to 40% of the cost to retailers.
Developing and manufacturing hardware is not only a long process and requires a large breadth of skill, it’s also very expensive. This is the main reason crowdfunding really is a revolutionary concept for small teams. Until recently, making hardware was something only big companies could do and now it’s democratized hardware development and made it accessible to all. We're really passionate supporters of crowdfunding because we know just how hard it is to make a product.
We understand why everyone is sick of the phrase “Hardware is Hard” but it’s an all-too-true statement and that's why we love it. Building physical products and taking them through this process is time consuming, expensive and sometimes painful but the challenge is absolutely worth it in the end. The best thing you can do if you plan to build hardware is learn as much as you can about this process, build a great team and get ready to ask for a lot of help along the way.
In the end, there is nothing greater than holding the physical embodiment of your own idea in your hands.