
Who Invests in Hardware Startups? - roarden
https://medium.com/bolt-blog/who-invests-in-hardware-startups-d1612895a31a
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kickingvegas
Given that it's nice to see posts like this (disclaimer: I'm in one of those
HW startups listed) I'm reminded of an old ASIC joke:

How do you make a small fortune? Take a large fortune and build a chip.

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trsohmers
And I'm a startup hoping to disprove that joke, especially since I don't have
the large fortune to help ;)

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6stringmerc
Very interesting, and I appreciate the inclusion of hardware discussion. I'm
looking to compete in the Intel Curie challenge for an invention, but that is
just one of my projects dreamt up over the past few years.

Unfortunately, for my most prized invention, I still feel the best avenue is
to put my own capital at risk and secure the patent for myself. For all I
know, this is the pragmatic path before seeking investment?

I've had a good consultation with a patent attorney specializing in such
cases, and his fee appears reasonable, so unless I'm really off track here,
I've always thought of that as Step 1...Step 2 being the Business Plan /
Margins Caluclations...Step 3 being seeking partnerships / funding, and then
Step 4 is getting to market and hopefully growing the business to the point of
taking on a more limited role due to expansion requiring more company
infrastructure.

Guidance very welcome, and thanks again for posting this for review.

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tomlor
I've started a hardware company before and went down the patent route. What we
did, with success, was to file a provisional patent before raising money -
which is far cheaper and less time consuming. That satisfied investor
questions regarding IP protection and then we used investor money to file the
actual patent itself.

Regarding your proposed step four - if you truly intend to have a limited role
for yourself in the future, disclosing this to investors (as you should) might
make fundraising more difficult. If you are the visionary behind the
tech/company - they'll want to see your continued involvement.

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6stringmerc
Thank you for sharing your experience and thoughts, I truly appreciate the
individual contribution. My understanding of the patent system is still
limited, but I definitely follow the logic of How and Why your venture went
with Provisional. The goal of IP protection has, without question, been my #1
priority and testing of patience.

Also, I appreciate your commenting on Step 4, and can clarify: From a lot of
articles / testimonials through HN and other places, I've seen a lot of
caution regarding "Trying to do everything / be everything / resist giving up
control" in a Start Up environment. I'd love for my venture to breed more
ventures long-term. As in, if I could be successful once I'd like to use that
success to cautiously expand my portfolio (get back to work inventing things)
and participate in business management on a prudent level. I certainly don't
want to project a flighty here-today-gone-tomorrow type of attitude, because I
wouldn't want to invest in such an approach either. Thus, a big thank you for
noting the expectation within the field regarding ongoing involvement.

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avidanr
As the founder of one of the hardware focused firms listed (ROOT/VENTURES --
[http://root.vc](http://root.vc)) I couldn't be happier that the crew at
bolt.io wrote this article. I'm also a huge fan of HN, so if anyone has
specific questions to ask about the VC approach to hardware, lets hear em.

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6stringmerc
Hi there, I've been active in my own thread asking a couple questions relating
to a consumer device that I wish to pursue. It's one of several things I've
worked on, so I'd like to use this opportunity to toss out a question of
sorts:

For one project, an influence has been the Bloomberg Terminal. The concept
relates to aggregating large amounts of publicly accessible data, using a
proprietary system of sorting and arranging, and then present the customer
with a batch (folder?) of useful information relating to their business
pursuits. It's kind of like a business intelligence / lead generation
platform, but that's simplistic and misses the value of the concept.

Now, how this relates to hardware! As a musician I'm very familiar with the
iLok USB-key concept used for certain software suites (some of which have gone
cloud-based). This also gets back to the Bloomberg Terminal. Would pursuing a
"Subscription Service Requiring Desktop Box/Key" type design be an initial
Negative or Positive?

I do feel like this isn't exactly a hardware question, but with the amount of
data and investment that would be involved to build the system in mind, having
a physical, subscription component seems practical. I suppose that's about the
extent I can describe at this point without getting explicit about how it
works, what it works with, and who the target audience is/will be. My apology
if it came out as a bunch of jibberish. Please feel free to ask for
clarification or point out examples similar or drastically different. Thank
you for your time!

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avidanr
Ok. I think I understand. I'm gonna step right out there and show my bias. I
absolutely HATE the iLok. I bought myself a laser cutter for my wedding (she
got a ring, i got a 90watt), and it came with an iLok for the horrible
software that the chinese company built. It just takes up a USB port i could
otherwise use.

That being said, its a great tool for very big, old software companies that
have to protect from pirating.

I think that you have an entirely different play at hand. Because you are
building a platform, you dont care if people pirate. What you just want to be
sure of is that people aren't sharing logins. Soooo....just make the logins
tie to personal info. Back in the day, when I used to send sensitive PDFs, I
would just make the password on the PDF the recipients last 4 of their SSN. I
could basically guarantee they wouldnt send the PDF around. The equivalent in
your situation is to use Oauth with something like LinkedIn or Google. For the
users to share your account, they would need to create an fake LinkedIn or
Google account...and if you system is all about lead generation, that becomes
crippling.

Overall, i dont care about iLok vs another form of protection. For me, the
most important thing you are thinking about is can you create an amazing
amount of value for your customer. Can you get them hooked, and improve their
(business) life. If you can, then you can put a dollar amount on that
improvement. I used Bloomberg terminals many moons ago, and it was not the
best software in the world, but the data was immensely valuable. So we paid.

Good luck!

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6stringmerc
Great response and thanks for your time and input. You're not stepping on my
toes noting a dislike of the iLok - it actually finished off my interest in
ProTools and sent me deep into Ableton Live years ago. I think you definitely
grasp what I'm going for in concept, and parlayed that into useful guidance.

As you mentioned about Bloomberg, it's the data that's primarily of value, and
from what I've experienced, the communications platform limited access via
other terminals are two driving factors for why they're used.

Your point about value to the customer is good for me to keep in mind. The
whole idea I have is an intersection of publicly available financial
information, marketing, government business, and with a scope of service that
would span over several months to possibly more than a year. It could be
enhanced by arragements for data sharing with certain established industry
players (ex: Thomson Reuters). I'm reluctant to call it an SaaS platform, but
maybe I should just frame it as such for practical reasons.

On a different note, how interested would you be in a concept for a
recreational personal flight device?

It's what I'm going to submit for the Intel Curie contest, but that's like a
TV show thing and could go sideways on me. I'm pretty proud of my R&D thus far
on the concept and would probably like the challenge of putting together a
pitch for it (that I could also use in my contest entry). Just curious!

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avidanr
ill give you a great quote on building planes (or human carrier drones).

"When failure is not an option, success becomes very expensive" -chris lewicki

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hoopism
People who didn't already lose a ton of money doing it before... _rimshot_

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westpfelia
Not all hardware start ups are failures. Its like most start ups. Most of them
fail or manage to break even. A couple though blow up and that's what
continues to drive people to invest.

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archimedespi
Quite a few hardware startups have gained a (sometimes large) portion of their
series-A funding through Kickstarter or similar platforms.

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josephpmay
Could you provide a single example of a successful hardware Kickstarter that
has made it to production without a VC series-A?

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ajross
Formlabs shipped their first printers before VC money I believe. Wikipedia
tells me they've since taken $19M more via traditional channels.

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iammaxus
Not exactly. We raised a seed round of $1.8m a little less than 1 year before
the Kickstarter. We probably could have built and shipped the product off of
the crowdfunding proceeds, but we couldn't have had such a successful
crowdfunding campaign without spending some of that money to design the
product and market it well.

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minimaxir
Er, what's the data source?

