DIY: 5 ways disruptive component startups can win over OEMs

Creating a disruptive hardware components startup can be quite exciting. Few things can compare to the joy of physically interacting with your creation as you design and build it from scratch.

But hardware startups are challenging. Think of it as the business version of the age-old question: “Which came first, the chicken or the egg?” You have to figure out which comes first: The components you’re creating or the devices that are designed to use those components.

This may sound like an easy question to answer, but it isn’t. For example, our company built a new way of delivering long-range wireless electricity using infrared light. In order to “catch” those beams of electricity, though, devices would need to have the receiver chips built in, and product designers would need to substantially change their devices to power them wirelessly.

We hoped that manufacturers would be excited for our system and move quickly to update their products. We got positive feedback, too, but most simply had no bandwidth for disruption as they grappled with their burdens of running a business and worrying about earning calls. They liked the idea, but they put it on the back burner.

So we began to build devices with the necessary receivers built-in to showcase how they work. Here are five things you should do if you’re on a similar path:

Start with just one

Let’s be honest. The chances are quite low that you’ll have the world-changing success of cargo containers or Qualcomm SoCs. So there’s no point rushing when building a hardware startup. Instead, start by making just a single prototype that you can use to show OEMs.

Don’t worry about making this first version of your device perfect or packing in all the features you’ve thought up. Think of it as a relatively crude demonstration that can give people a glimpse of what’s possible.

For example, we made a small digital display device for a supermarket shelf that could be powered wirelessly. We 3D printed it and actually used some tape on the inside to keep things in place. The only goal was to show potential buyers a proof of concept that validated our idea.

While you’re showing off your first device, gauge people’s responses and ask for both initial impressions and constructive feedback. Would they use it? Would they want more? What might make it work better?

You might get effusive reactions, as we did, with people saying they would buy tens of thousands. But be careful to not rush and count your chickens before they hatch. It’s important to take it slow at this stage and iterate.

Create up to 10 prototypes

Now that you have feedback from your first proof of concept, incorporate those insights to build a maximum of 10 prototypes. You might want to make a few different versions (three of one kind, four of another and so on), but keep the overall number small.

This will help you save lots of time time. Engineers tend to over-engineer, and they want to keep adding features before showing devices to potential customers. But you need to focus on creating a minimum viable product.

At one point, we made three different versions of our device. We were especially proud of two of these and less enthusiastic about the third. But when we returned to potential customers with these new prototypes, they liked the version we were least proud of, and it made sense when they explained why. It was fortunate that we did not waste months and burn lots of cash to add more features to the versions no one wanted. Early feedback is extremely valuable.

Often, the versions that are rejected might include some features that customers previously thought they wanted. But sometimes, the user needs to see and physically interact with the device to discover what they really want.

Build in small increments, but do so rapidly

Use your newly acquired feedback to make up to 50 devices incorporating what you’ve learned. Again, build the minimum number required so you can move quickly to ensure the updates are ready in a matter of weeks, not months. Get feedback from even more potential customers, then make 100 of these and sell them to these customers. Make sure people want to buy them.

Rinse, repeat and work your way up to 200 devices, then 400, and so onward. Keep gathering feedback and make sure you sell your full supply. Soon, you’ll be selling thousands.

This system requires more steps than you might want to follow, but don’t give into the temptation to rush into mass production. In the end, this is the faster process because of all the time it prevents you from wasting.

Get customers to finance you

Part of the solution is to charge interested clients an onboarding fee. Tell them your team is going to build devices to their specifications, and they’ll get to buy these devices before their competitors. Their fee can cover some of the devices they’ll receive.

We found that clients had no problem paying this fee in order to be a part of the process early on. That helped us finance the entire effort and validate that the customer is really interested.

It’s important to price your devices high at each stage. What you’re offering is a completely new idea; it’s disruptive, so you don’t actually know how much people will be willing to pay for it. You’re testing the market and want to ensure it solves a critical issue for your customers. It may be easier to get customers to commit to low-cost devices, but then is it a real commitment or just a nice-to-have?

Hire quickly

As you transition to building a device that uses your components, your startup will evolve from being a component provider to a consumer- or customer-facing business with a turnkey product. It’s a big change, and navigating these new waters requires a different skill set than engineering a device.

Hire for such skills, and bring on people who know how to handle this kind of change and sell products directly.

To be clear, none of this means you have to give up your original mission. Your company will continue to sell what you set out to sell in the first place: the hardware component itself. In our case, we’ve found that companies are so happy with our devices that they’re now investing in wireless power and building products with our components. Creating your own devices does not mean giving up on your original goal of providing components for other manufacturers to use.

When people see use cases in action enabled by your components, it encourages others to start using your solution. That gives you a repeatable growth cycle where more and more chickens lay new eggs.