The video features Eric Migicovsky, former CEO and founder of Pebble, discussing his experience with Y Combinator and the challenges of building a hard tech company. He shares insights on naming a company, the manufacturing process, crowdfunding campaigns, and the importance of sales and customer interaction. Migicovsky emphasizes the need for perseverance, frugality, and adaptability in the face of constraints. He also discusses the definition of hard tech and the challenges of protecting intellectual property. Other topics covered include getting the first customers, starting on hardware, scaling a startup, choosing a business model, hiring, involving hardware in projects, demoing complex products, and the financing needs of hardware companies.
Introduction
- Eric Migicovsky, former CEO and founder of Pebble, shares his experience with YC and how Pebble went through the YC batch in 2011.
- The conversation highlights the naming process for Pebble and how they transitioned to a simpler and more effective name.
How did you end up with the name Pebble?
- The name "Pebble" for the company was chosen while lying on a beach, two years before the company was created.
- Keeping a list of good names for future use is important.
Quick story of when you came to YC? How big were you? What did you do in YC?
- In 2011, Eric Migicovsky's company applied to Y Combinator (YC) and was accepted.
- The company had been working on a product since 2008 and had shipped a few hundred of their first watch called "impulse".
- They had some early customers and had earned some money, but hadn't raised any investment.
- YC became their first investor, providing $15,000.
So $15,000 thousand dollars let you manufacture, was it the first 100 units?
The speaker discusses the initial manufacturing process of their first watch. They encountered issues with the signal and the electronics exploding, but were able to iterate and make improvements before mass production.
How many units had you sold before you actually went through the entire manufacturing process? 700 to 800 units
- Before completing the manufacturing process, the speaker sold approximately 700 to 800 units of their product.
- The speaker discussed the impact of moving their business on production.
What happens if I have to move my business to Mountain View? Its gonna interrupt my production process
The potential interruption to the production process when moving a business to Mountain View is discussed in this video. The speaker shares their experience of managing production remotely and emphasizes the importance of not letting the physical location hinder sales. The speaker also mentions their journey with Pebble and the challenges faced after joining Y Combinator.
Hardest part in the whole journey with Pebble?
The hardest part in the whole journey with Pebble was determining if they were working on the right thing and if their efforts would lead to success.
- It took them five years to go from the initial idea to a product that had market fit.
- They had to learn from their mistakes and redesign before creating what would become Pebble.
- Despite facing challenges and having limited resources, they persisted and had faith in their vision.
- They were naive about the difficulties of making consumer hardware products on a small budget, but they didn't give up.
- In retrospect, it may have seemed insane to continue for five years, but their perseverance paid off.
But now that you've done it do you think it's possible now?
The most profound aspect of the text is the importance of maintaining vision and making strategic decisions in the face of challenges.
Key points:
- Do not let others discourage you and embrace naivety in pursuing goals
- Be cautious with fund allocation and consider market changes
- Be resourceful and adaptable, even when faced with constraints.
It's often people get really creative with no money but forget once raised money
People often become less frugal and creative once they have raised money for their startup, even for successful companies.
- Frugality is vital, especially for industries without obvious network effects or first mover advantage.
- Pebble is mentioned as an example of a successful crowdfunding campaign.
- The right time to do crowdfunding and when to have a real and working product is discussed.
Advise on right time to do crowdfunding campaign, is a real product required and should it align with the campaign?
Crowdfunding can be used at two stages in a startup's journey:
- Early stage: to raise funds for a working prototype and test product-market fit
- Marketing and sales stage: to generate buzz and attract customers
- It is advised not to focus on a large-scale campaign at the start, as most campaigns fail to deliver the product
- Understanding different crowdfunding opportunities in the consumer product life cycle is important
- Differentiate between early phase platforms (Kickstarter, IndieGoGo) and niche platforms (Tindy, Crowd Supply)
- Have a clear timeline for product delivery before launching a crowdfunding campaign to manage expectations and ensure successful delivery.
In the first route, delivery of product within six months is unknown. Should I use crowdfunding platform only if I know I can deliver?
- If you are unsure about delivering a product within six months, avoid using crowdfunding platforms
- Consider other options instead
- It is recommended to go through the first cycle to assess production time and team skills
- Skipping this step and focusing solely on marketing can lead to disappointment
Sometimes there's a group (Facebook, Subreddits) before the early adopters on Kickstarter
Sometimes, before the early adopters on Kickstarter, existing groups on platforms like Facebook or Subreddits can provide credibility and initial sales for a product. When it comes to outsourcing, decision-making can be challenging.
- Existing groups on platforms like Facebook or Subreddits can provide credibility and initial sales for a product before the early adopters on Kickstarter.
- Decision-making regarding outsourcing can be difficult.
What's the right call in terms of outsourcing the various components?
Outsourcing the various components in hard tech requires flexible technical people who can handle different skill sets. Challenges arise when working with contractors or consultants who may not have the same motivations or alignments as full-time co-founders. Hardware should have a software component for scalability and potential subscription services.
Belief in “hardware without software (subscription instead of one off)” and thoughts on people who say that?
Belief in "hardware without software (subscription instead of one off)" and thoughts on people who say that:
- The importance of having the right business model for long-term growth is discussed.
- Subscription-based business models in the hardware industry, such as Nest and Dropcam, are highlighted.
- Some companies struggle to make subscription models work.
- The speaker reflects on their own experience with subscriptions and the challenges they faced.
- Being frugal and low-budget in product development could have resulted in a different outcome.
- The need to question whether a subscription model is what customers want is emphasized.
- Potential problems that can arise from forcing a subscription model are mentioned.
- The definition of hard tech or deep tech is discussed, including areas such as quantum computing, self-driving cars, 3D printing, agriculture technology, nuclear fission and fusion, aerospace, and space exploration.
How do you define hard tech, deep tech? What does that really involve?
Hard tech or deep tech refers to companies that focus on hardware or fundamental technology development. These companies face longer iteration cycles due to hardware constraints, regulatory constraints, or the need to develop new technology. Despite these challenges, advancements in hardware technology are helping to decrease the time required for each iteration cycle.
Crazy rocket idea but have no money, where do I even start? What do I do?
- Participating in startup school to get free money for investment
- Using MVP (Minimum Viable Product) as a starting point
What will be an MVP in this case?
The MVP in the case of hard tech devices is a combination of peer-reviewed science, regulatory clearance path, and customer interest. Investors value integration of science and a specific use case. Founders should be technically competent and act as salespeople. Paid contracts and technical validation should be showcased by demo day.
What do you encourage startups accomplish by demo day?
- Startups should prioritize sales and customer interaction over perfecting their product before demo day
- Engaging with customers early on helps startups identify and solve real problems
- Building a better product and gaining confidence in their direction are key benefits of customer engagement
Sales and talking to users gives more confidence that your on the right track
Sales and talking to customers are crucial for commercializing hard tech products. A startup's success story highlights the importance of shifting focus from technology development to sales and customer interaction. This shift resulted in millions of dollars in sales within three months. The advice for scientists and engineers considering commercialization is not mentioned.
- Sales and customer interaction are vital for commercializing hard tech products
- A startup's success story emphasizes the importance of shifting focus from technology development to sales and customer interaction
- The startup achieved millions of dollars in sales within three months after making this shift
Advice to scientist in Ph.Ds. at school who want to make the jump and commercialize their product. What should they consider?
- Get out of your comfort zone and engage with potential customers
- Attend conferences, talk to people, and gather feedback
- Generate interest and momentum for your product
- Show investors that there is a market for your product and it is worth investing in
Users interested in your product but need lot of money. What do you need to show to investors?
Attracting investors when users are interested in a product but it requires a lot of money to develop.
- Most companies don't necessarily need a huge amount of money to develop their product.
- Examples of Magic Leap and Oculus.
- Importance of iterating and going through a process of painful iteration to achieve success.
- Meeting the founder and understanding their vision can turn a crazy idea into a possibility.
What's an idea that sounded so crazy when you heard but when you met the founder you were like this is totally possible?
An idea that initially seemed crazy but became possible after meeting the founder is the concept of 3D printing rockets. Relativity, a company that started with building a 3D printer, demonstrated their first 3D printed rocket during Y Combinator and raised early funding. Despite limited experience, they pivoted their company to align with customer needs and recently raised their Series C. This story highlights the importance of pivoting and customer alignment in a groundbreaking technology.
- Founder pitched the idea of 3D printing rockets, claiming it would reduce integration time to zero
- Demonstrated their first 3D printed rocket during Y Combinator and raised early funding
- Raised more money and recently raised their Series C
- Founders had limited experience but people believed in their vision
- Initially focused on building the printer and then found the application in space
- Highlights the importance of pivoting a company to align with customer needs, even with groundbreaking technology
Q1 - How do you get your first customers? How do you get 1-50?
- Infiltrate the community of potential customers by finding online platforms where they discuss and review products
- Form personal relationships with influential bloggers
- Attend conferences to pitch your product
- Hustle and self-identification from potential customers are key factors in gaining traction
Q2 - Bunch of software engineers, we have an idea that includes software and hardware, how do we get started on the hardware?
To get started on hardware, software engineers with an idea can follow these steps:
- Find an off-the-shelf product similar to what they want to build and purchase it.
- Modify the product by adding technology or repurposing existing components.
- Utilize platforms like Alibaba to find suppliers and connect with factories.
- Avoid building everything from scratch or hiring an industrial design firm.
- Instead, find a factory that produces a similar product and ask them to make the desired changes.
- Consider changing factories based on the stage of product-market fit.
Q3 - Pre product market fit, do you recommend move closer to suppliers?
The most profound aspect of the topic of Q3 - Pre product market fit, do you recommend move closer to suppliers? is the importance of reducing iteration cycles to find product market fit.
Key points:
- Moving closer to factories or customers can help reduce iteration cycles.
- Moving closer to factories is recommended if sales channels are already set up.
- Moving closer to customers is recommended if there are not many customers yet.
- An example is given of companies iterating on their drone product in a motel room.
- The topic also touches on the importance of IP protection and patents.
Q4 - Do we have to protect (IP/Trademark) our products or how can we protect?
The most profound aspect of the topic is the discussion on how to protect intellectual property (IP) and trademarks for hard tech products.
Key points from the text include:
- Building a strong network effect or data lock-in to make it difficult for competitors to replicate the product.
- The option of obtaining patents, but the challenges and costs associated with enforcing them.
- Building a great product as the most effective way to create a competitive advantage.
- Patents being more relevant in biotech industries.
- The importance of securing patents and trademarks early on to prevent copying or infringement.
- Protecting IP can attract investors and increase the value of the company.
Q5 - Building Hard-Tech and solving a long term problem but first problem looks too small? Marginal markets are great
- Starting with a small market in hard-tech offers advantages such as cheaper customer identification and quicker feedback on product viability.
- Easier to determine if a product solves a problem for a small group of people.
- Provides a roadmap for growth, which is important for investors and personal motivation.
- Example of a company offering an electronic treatment for reducing sweating and exploring different business models.
Q6 - Should I pick a recurring business model or just sell the product?
When deciding on a business model, it is important to consider various factors such as the type of product or service being offered. Here are some key points to consider:
- Different tracks to choose from, including hardware as a service, consumer models, hybrid models, insurance models, and advertising-driven models.
- On the enterprise side, determine how much money the customer will save or make with the product and price it accordingly.
- Price the product as high as possible while still allowing the customer to experience some savings.
- The choice between upfront payment or a hardware as a service model depends on the specific customer.
- Talk to customers and experiment with pricing to find the right approach.
- When scaling and hiring, have a strategic hiring process in place.
Q7 - How do you do hiring, especially when you're scaling?
Hiring for trust and reliability is crucial when scaling a startup. Here are the key points:
- Look beyond traditional sources and tap into personal networks on platforms like Facebook and LinkedIn.
- Reach out to trusted friends and acquaintances who may have tangential involvement in the project.
- Make a clear offer to potential hires and ask for their commitment.
- Working with friends can have both challenges and benefits.
- Recommended reading: "The Hard Thing About Hard Things" by Ben Horowitz.
Q8 - For some project problems, they can be solved exclusively by software, how do you know when to involve hardware in it?
Knowing when to involve hardware in a project problem depends on whether it solves the problem effectively.
- Off-the-shelf hardware like cameras, microphones, or Raspberry Pi can be used.
- Custom hardware may be necessary if the off-the-shelf hardware doesn't meet specific needs or desired form factor.
- Test and hack something together initially to see if it almost solves the problem.
- Determine if the problem is worth solving or if custom hardware is necessary.
- Consider the whole product and its impact on user experience.
Q9 - How do we demo really complex product or how do we convey it to people?
- Creating a software version or using off-the-shelf devices like Hololens or Magic Leap are recommended approaches to demo or convey complex products.
- Spending more money in the early stages to get the first test done, even if it means going above budget, is advised.
- Understanding why hardware companies need financing is emphasized.
Q10 - Why hardware companies need financing?
Hardware companies need financing for two main reasons: R&D and inventory.
Key points:
- Raising funds for R&D can be challenging, as banks do not typically provide loans for this purpose. Companies often seek funding from investors or potential customers.
- To minimize expenses, companies should focus on prototyping and determining their target market before seeking R&D funding.
- Managing inventory can be difficult and costly. Companies can overcome this challenge by getting customers to pre-order their products and using the pre-order funds to finance development.
- Another option is to reduce lead times in production, which allows companies to turn inventory into revenue more quickly.
- Examples of successful implementation of these strategies include Xiaomi and OnePlus.