All in + Hardware

3X. Yes, that magic number that haunted all hardware companies and drove (most lazy) VCs away from investments in hardwares. The market is currently seeing Xiaomi as a pure hardware company. It will take time to see if the market will buy into Lei Jun's "Xiaomi is an internet company" in the future.

Unlike the lean-startup world where pure-play VCs dominate almost all early-stage investments, we have seen quite some corporate investors stepping into early stage investments in the hardware field. Usual suspects are large manufacturing firms such as Foxconn or Flextronics, as well as some consumer electronics brands.

I believe that a more complete hardware investment eco-system will take form in the next 2 to 3 years. However, before that happens, a hardware founder should, like any founder, really think carefully over all funding options. A dollar is never just a dollar. There could be a lot of good things and bad things coming with it.

Like many hot startup subjects, crowdfunding is an oft-misunderstood one. At the Hardware Club we have more than 20 startups that broke $1M on Kickstarter or Indiegogo. In our portfolio companies along we have 3. We consider ourselves knowing the art of crowdfunding better than most average investors.

However, I constantly run into hardware founders that have very distorted views on crowdfunding. This article is to share my opinions on this subject as an investor. 

Some entrepreneurs think that contracts with component suppliers, manufacturers and distributors would govern everything, which could not be further away from truth. When you work at a large corporate, you can rely on contracts. Your company has the resources and luxury to spend money and time to enforce the contracts, sometimes even by going to the court.

As an entrepreneur, sadly, you never have enough time and enough money.

The general feeling is that if you're working on B2C products, you don't have to interact with too many adults other than your investors or potentially your acquirers.

This is definitely not the case in the hardware space. The reason is very simple: to deliver a product to the consumers, the hardware entrepreneurs have to work with suppliers, manufacturers, distributors, stores, logistics partners, etc.

Locking oneself in a garage, even with a 240 IQ, won't get these things done.