Hardware Startup focusing on a mass market
Many projects must go from 1 unit in testing to 10,000 units in first manufacturing. Manufacturing 1,000 units costs similar to 10,000 so there’s no real option. This means with only 1 unit you must validate everything, and that’s not easy.
This is happening with cheap products going to a mass market, usually B2C. And the big problem is that the quality of the prototype is very different than the real product, for example: 3d printing vs injection molds. So you can test it but not in a very accurate way.
Because you’re in a mass market you need more validations (around 100-200) and you don’t have enough product. If you’re going to manufacture 10,000 units, you also need B2B validation because you’ll need massive commercial channels: retailers…. and you can’t try it immediately, because you don’t have the final quality product and of course, again, not enough units.
Nevertheless, validation is the key more so than usual, because it’s all or nothing. There’s no way to do middle steps: so you should find a killer application that everybody loves, before going through the craziness of mass production. To be honest if you don’t know what to do with 1 unit you won’t know it with 100 units in your hands. You should find the solution before creating 100. I’ll talk about testing in future posts.
Where to start the manufacturing: many times these mass market products are not really expensive. For 20€ retail price you should do it in China, for 50€ maybe, up to 100€ you can consider creating it locally, at least the first run. This mass market usually means manufacturing in China, so you have no direct experience with the manufacturing. So by doing it locally, your team would be near to the manufacturing team and learn faster. That will be relevant for the next steps.
Another option is to move directly to China. Some experts consider that the really special ecosystem around Shenzhen gives more opportunities than anywhere around the world. For sure in this place you would have access to more components and producers, which could get you moving faster. You would also gain knowledge about how to work and produce in China, a very useful skill if you have plans to manufacture there in the future.
Location is a really critical and difficult decision. I think starting locally is possible at least for the initial validations, it’s easier to work, find the contacts and start a community in your space. When you start making “real” technology you should consider where to go.
Thinking about business is always important, but even more here because mass markets usually mean big budgets, and planning is mandatory.
Using the business model canvas there are two different main areas: right and left. The right one is about customers and market and the left one is about your own company and how you create value. Usually I encourage projects to be more focused on the right one, thinking that with customers and sales everything could be done if you have the correct pricing (that means you have problem-solution and customer-product-market fit).
But in hardware how to do things is not obvious. Manufacturing is a complicated topic that requires expertise, and where mistakes or surprises could compromise the success of the project. Hardware entrepreneurs know Lean Startup but usually they prefer to create things. So it’s needed to encourage them to consider the right part of the canvas and also think about the customer, not only about the product, from the very beginning of the project. When they do this, they realize that it’s useful.
Many project teams think about business, but they don’t do it. That could generate problems in the future when business is the key and you encounter badly designed strategy.
Crowdfunding is always around: many have had success, but it didn’t save the company. I’ll talk about it later.
Steps to consider: something very important to highlight is that B2B also involves B2C. Alone you can check B2C (maybe crowdfunding), but then you must check B2B too. Going directly to B2B is also possible, but I’m not sure if there is a validation or not. Many believe in this, but you also have many retailers open to accept any kind of product for first time, only to check if it sells or not. Time for B2B is long, difficult and usually involves “old economy management,” so a specialist is needed and they are hard to find.
So B2C (crowdfunding) validates the market, B2B success validates relationships, and commercial deals validate the company’s future. To succeed you will need to pass and overcome all these phases.
