Hardware incubators are popping up like daisies in the Bay Area, so the launch of Highway1, a an incubator backed by Chinese fulfillment company PCH, doesn’t come as a shock. The newly-formed incubator plans to accept about 10 companies into the four-month program and offer participants office and machine room space, expertise and $20,000: all in exchange for 3 percent to 6 percent of equity, according to Brady Forrest, VP at Highway1.
The idea behind the incubator is to give hardware startups an expert lesson in how to build their products or get them manufactured. PCH International is a Chinese company that handles manufacturing contracts, shipping and even e-commerce for big brands. In recent years it has gotten interested in the burgeoning hardware startup scene, and in 2011 developed an accelerator program to help startups such as littleBits (see disclosure), Lively and MetaWatch take their ideas for physical goods and turn them into products.
The incubator is the next step at reaching out even earlier to companies, hopefully helping them design products that can be manufactured economically and offering PCH (it stands for Pacific Coast Highway, also known as California’s famous Highway 1) a pipeline into what might become the next hot company as well as a potential customer. Participating companies will spend a week in San Francisco learning the ropes of building a hardware company before flying to Shenzhen, China for two weeks of tours of manufacturing plants and learning about how products are made.
They’ll return to San Francisco — likely to redesign their product, Forrest said — and finish out their four months refining and getting something ready for a demo day held in January. The time spent in China learning about manufacturing is a big differentiator from other hardware incubators, such as San Francisco’s Lemnos Labs, Forrest said. However, HAXLR8R, another hardware incubator brings startups to China for three and half months before hosting a demo day in San Francisco.
Still, when compared with the array of incubators and accelerators in the Bay Area, having a few dedicated to hardware doesn’t seem like too much of a stretch. From my perspective, the more interesting questions about hardware startups have yet to be answered — such as what their general trajectory toward commercial success looks like and what type of exits they should expect.
It’s one thing to design a watch that raises more than $4 million on Kickstarter and another to become the next Apple. When asked about the likelihood of a hardware startup eventually filing for an initial public offering, Forrest offered up Sonos as a possible candidate. But Sonos is an 11-year old company that has achieved shelf space in Target, a far cry from the typical Silicon Valley startup’s seven-year exit goal.
I’m not saying it can’t happen, but I am curious how this generation of hardware startups will change the existing business models around funding and building out a hardware business, especially one in the consumer space.
Disclosure: LittleBits is backed by True Ventures, a venture capital firm that is an investor in the parent company of this blog, Giga Omni Media. Om Malik, founder of Giga Omni Media, is also a venture partner at True.