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The next big thing in hardware: Commoditizing production and distribution platforms

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From Jawbone to Pebble and Ouya, much has been written about the recent hardware renaissance. While investors and the press show renewed interest in hardware projects these days, taking a product from prototype to mass production is still an immense challenge. Innovation matters, but sometimes it’s the numerous logistical hurdles, from sourcing components at scale to quality control, and even shipping, that can make or break a product’s future.

Platforms are about to accelerate this hardware revolution in a big way – offering modular options at every step of the hardware process, from design to manufacturing. There’s a multi-billion dollar opportunity at play for a platform to sit on top of the design, prototyping, and distribution process. In many ways, these new platforms will do for hardware what Amazon Web Services (AWS) did for software and web development: take care of much of the logistical backend and free up those with big ideas to deliver on design.

pebble steel trio
The new steel watches from Pebble.

Hardware makers need more than capital

In the past years, crowdfunding sites like Kickstarter have aimed to spark innovation by providing easier access to capital. Likewise, Tindie lets sellers take pre-orders to help fund production. However, for hardware startups, once the barrier to capital is removed, at least ten new barriers pop up in its place. That’s why over 75 percent of hardware and product design projects on Kickstarter fail to deliver on time. The reality is that successfully commercializing a physical product takes more than access to cash.

From 10 units, to 100, to 1,000…

Over the past few years, design and prototyping have become exponentially easier, mainly due to platforms like Arduino and Raspberry Pi and design collaboration tools like Upverter and (which was acquired by Autodesk). Faster prototyping and cheaper manufacturing are empowering hardware experts to gain hold in an industry once dominated by multinational corporations.

New sites like Tindie offer a marketplace for these independent hardware makers to reach customers across the world. One Tindie success story is AirPi, a weather station for Raspberry Pi developed by two seventeen-year-olds in London. AirPi has made a healthy profit so far, with a running backorder list.

Eben Upton Raspberry Pi Foundation Mobilize 2013
Eben Upton, Executive Director, Raspberry Pi Foundation Mobilize 2013 (c) 2013 Pinar Ozger [email protected]

While Tindie’s ability to sell pre-packaged kits from hardware developers demonstrates the demand for interesting, niche hardware, it also emphasizes the difficulty in bringing product to market at scale. Currently, Tindie sells a lot of PCBs and prototype-like products. That’s because they’re easier to build and bring to market if you are an indie hardware developer. However, it’s inevitable that Tindie’s products will grow in sophistication, as long as sellers have access to sophisticated tools that help them find the right manufacturing partner to produce at scale or the right fulfillment company to help with shipping.

The mega-platform solution

Mega, ‘AWS-style’, platforms will give hardware designers with great ideas easier access to experts across the design and manufacturing industry. Quality control and shipping are complicated pieces of the manufacturing puzzle that require deep expertise and industry relationships, but they’re also incredibly easy to replicate and commercialize.

I envision a day where a hardware startup, even a hardware hobbyist, can pick and choose whatever production modules they need help with. Designers will shop for their components and sub-assemblies by browsing a universal online library of open source hardware designs. Then, the designer can one-click “order” the design from a global network of subcontractors who can address QA, manufacturing at scale, shipping, etc.

A 3D printed dragon head. Photo by Signe Brewster
A 3D printed dragon head. Photo by Signe Brewster

In this way, the long-term value and differentiation will lie in the design; the production and distribution will be commoditized.

In addition to marketplaces like Tindie, new crowdfunding sites are emerging that specialize in hardware. For example, Dragon Innovation connects hardware startups with high-tech manufacturers to help refine designs, determine the real costs of mass production, and set realistic delivery schedules. The smartwatch Pebble, which raised $10M on Kickstarter only to experience a slew of high-profile delivery problems, ended up turning to Dragon to solve its manufacturing issues (and have since raised $15M in funding).

At present, Dragon acts more like an advisor than a platform. It’s partners perform due diligence before accepting a hardware startup and plan to charge an initial $5,000 consulting fee before a startup can begin fundraising on its platform. As seen with Pebble, Dragon’s model will work for its hand-selected startups, but it won’t work at a level of scale like we’d see with an Amazon Web Services model.

The market needs a new platform to emerge that productizes all the major elements of the hardware process, so hardware designers can pick and choose the elements that they need from start to finish.

Unleashing a new wave of hardware innovation

What will you make with the right tools?
What will you make with the right tools?

By taking care of the manufacturing logistics, these new platforms will let inventors zero in on design without all the messy distractions of the manufacturing process. In many ways, this is similar to how much easier it is to build a website today with Amazon Web Services. Since web designers don’t have to worry about building backend infrastructure from scratch, they are free to be more creative on the front end. And, we get better websites and apps because of it.

The implications of bringing an AWS-style model to hardware will be huge, and not just for developers, but for all of us. A new generation of hardware products will help solve some of the biggest problems the world is facing today. For example, a product like BRCK can bring Internet connectivity to the developing world. Or specialized tracking devices can transform patient diagnoses in healthcare or monitor diseases that could wipe out an entire farm crop.

Easier hardware production will ultimately make the promise of the hardware revolution a reality…as long as the hardware platform goes beyond the design and prototyping phase to solve all the challenges of delivering hardware at scale.

This story was updated Sunday, Jan. 12 to clarify that 75 percent of hardware and product design projects on Kickstarter fail to deliver on time, as opposed to fail.

Boris Wertz is the founder of version one ventures and has invested in more than 40 early-stage consumer Internet and enterprise companies, including Indiegogo, Tindie and Upverter. Follow him on his blog and Twitter.

12 Responses to “The next big thing in hardware: Commoditizing production and distribution platforms”

  1. timechange

    Great article – completely agree. Pre-selling and exceeding a crowdfunding goal has nothing to do with ability to produce and ship a product functionally or on-time, and raising the money is just the start of your headaches: that “hardware” begins with “hard” is no small irony!

    Even if you can finally make and ship the product, a successful crowdfunding pre-sales campaign is also not a true indicator of sustainable demand without mega marketing spend, just like getting a few million downloads after being featured in the App Store is often a red herring for an app “taking off.”

    Full empowerment for next-gen connected device Makers will require innovation, virtualization and acceleration at every layer of the creation and post-shipment change: design (HW, firmware, SW, UI/UX, service, appstore), manufacturing, logistics, fulfillment, reverse supply chain, distribution, post-launch sales, support, services, SW updates, app store, community management, and so forth — particularly in the era of Connected Devices, Internet of Things, and “Device as a Service” business models.

    A good comparable evolution of an market landscape is what Li & Fung did for the textiles industry over the past several decades.

    PCH Int’l also started the movement as the world’s first large scale “Li & Fung of Electronics and Accessories,” and are a global gold-standard pioneer towards becoming “AWS of Hardware,” along with their accelerator efforts through HighwayOne.

    Still there’s lots more to do in virtualizing, organizing, and unbundling the rest of the supply chain, meaning many more great startups left to build! :)

    Tim Chang, Mayfield Fund
    investor in PCH, Ouya, Basis, 3Drobotics

  2. It’s going to be a great decade for manufacturing innovations. When hardware can be iterated nearly at the speed of software iterations, it’s going to have an incredible impact on both entrepreneurs and incumbents.

  3. Fred Wilson

    Boris, 75% didn’t ship on time. but that doesn’t mean they faiied. ouya, pebble, and occulus all shipped but not on time. that is not a failure. i would like to see you correct that in this post because it is just not right