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Summary:

Creating hardware not only means raising more funding than a typical app startup, but hiring manufacturing experts and building up infrastructure, according Nest founder Tony Fadell.

The new connected appliance and hardware startups emerging out of Silicon Valley are very different beasts than big software ventures that grew up over the last decade, according to Nest Labs founder and CEO Tony Fadell. While the maker movement and new platforms like Arduino and Raspberry Pi have helped fuel the same creativity in hardware as the iPhone brought to app development, at the end of the day these companies are manufacturing physical products, which require solving a lot more problems, Fadell said.

“To actually ship a product either online or in retail with customer support, with all the design things, all the apps that need to go with it and all the services — it takes really big infrastructure to pull that off,” Fadell said at Gigaom’s RoadMap conference Tuesday. “It’s typically not a small startup that can do it. You need a lot of funding.”

Today, for good or bad, VCs are focused on apps and they evaluate startups by metrics like downloads, page views and subscriber numbers–metrics that don’t necessarily apply to a new internet-of-things startup.  “When you do something that is atoms-based, not electrons-based, you need money to do that,” Fadell said. “You need to get things well sorted out before you can ship your first product to a customer.”

It’s not just that a hardware maker can’t go mass market on Kickstarter alone. These companies also don’t just need designers and coders. They need people with understanding of the manufacturing process, shipping and even federal and local regulations, Fadell said.

Since a company is ultimately selling a device, it can’t roll out a mere beta, fixing bugs and adding features as it goes along. It needs to have a complete product with accompanying apps and services, otherwise the product will wind up back at its maker’s doorstep, Fadell said. And a hardware startup has to think far ahead of an app startup, since devices like thermostats and connected lighting won’t be changed out every year like a smartphone. The devices they ship will be in homes for years and have to support the services the company plans to launch over that same timespan, Fadell said.

A lot of companies won’t be able to build that infrastructure and are doomed to fail, but others may build it but fail anyway because they haven’t properly thought out their products, Fadell said. Some internet-of-things companies are slapping connectivity on anything without thinking about how they’re changing the user experience around the objects they’re connecting, he said.

Fadell said Nest mandated an additional level of discipline when it selected the devices it wanted to connect: the thermostat and the smoke detector. Not only do customers interact with those devices in new ways due to their connectivity, but they’re also devices that every home has –- and, in the case of the smoke detector, they are required by law. Bottom line, said Fadell, you won’t see Nest building any connected sprinkler systems anytime soon.

Check out the rest of our Roadmap 2013 live coverage here, and a video embed of the session follows below:


A transcription of the video follows on the next page

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  1. Gary Dare (@GaryDare) Wednesday, November 6, 2013

    Hardware startups have evolved to the point of board-level electronic or mechanical device design. The next step (that a few have taken, such as Adapteva) is to move into creating higher performance and more complex systems, even defining their own silicon as FPGA or even small ASIC’s. Hardware startups that will be the next generation of established companies can take advantage of new C-based electronics design methodologies that have recently emerged (most people with technical background now know C/C++ while in the recent past, electronics engineers had to learn specialized hardware description languages such as VHDL and Verilog to design circuits).

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