How difficult is it to build hardware for a startup?

My gosh… I’ve always been a software guy but since I’m young I like to build things. It starts with lego, even “Mecano” (ok I’m not that young anymore and I have played with Mecanos as a kid..) and last year I though it would be really fun to try to build some kind of hardware and see how that works. I was inspired by the Makers movement and all the Arduino’s projects and thought to myself: I can do this!  So I did..

Here was the plan:

  1. Find a good idea (I had one already)
  2. Build a prototype
  3. Put it on Kickstarter and raise some funds
  4. Sell it and potentially expand the product line

That sounded about right.. My initial goal was to learn about hardware making and prototyping.. All those Kickstarter projects were pretty fascinating and the advent of 3D printing allows you to go pretty far. Hoping to help (or warn) other entrepreneurs about going that route, here is what happened:

The context:

I watch TV and I have kids.. I can never watch a good action or sci-fi movie without the risk of waking up the kids or annoying my neighbors so I wanted a device to wirelessly transmit sound from my TV to my ears. There are plenty of them out there already but without going into the details, they SUCK! The only ones that work very well are the Sennheiser, which will charge you an arm for them and force you into a single type of headset.. I have my headsets, some nice Bose QC15 that work perfectly and I wanted to use those instead.

The Idea:

Have a very small device on which I could plug my own headset to listen to the sound of my TV wirelessly.

The constraints:

Wirelessly transmitting sound is not easy when combined with TV: It cannot suffer any delays (latency) between the image and the sound otherwise it would look like a horrible foreign language dubbing! And it cannot use too much bandwidth because there are a lot of interferences with existing wifi networks already. Wifi is out, Bluetooth is out, regular RF is out and the only really good solution I found was the KLEER chip (also used by the high-end Sennheiser system)

The easy part:

Get a name: Soundora.com was available..

Get a quick website up and running www.soundora.com

Get a Logo (I have some really talented friends there)

soundora_high_transparent

Get a twitter account, an email and a facebook page

Barely any costs there.

Building the first prototype:

I found who built the KLEER chip, and luckily they were in the Silicon Valley so it was easy to contact them. They send me all the specs of the chips some reference designs, and all the surrounding hardware.. That’s where the nightmare started.. My electrical engineering skills are about 15 years old and those chips cannot be soldered by hand.. Half of the surrounding component I had no clue what they were, some had different options I didn’t understand either..

So after a bit of research I reached out to companies that built prototypes for you. They know their stuff! Great conversation but the initial investment was at minimum around $10K to have a single prototype, and probably around $50K to get a first low volume batch.. No go.

The fun part is that I initially did some designs without hardware constraints, and had a good idea of what it would look like, but as soon as you add: Battery, Connectors, and all the other stuff around the device, you realize the amount of magic required to build something as small as an iPod Shuffle is! Man, Apple is good.. So all my initial designs went to the toilet. I had to start from the inside and work my way out.

So I bought a couple of low end Sennheiser headset (which use the same KLEER chip as the high end) and tore them apart . I took the board and put it inside small box I bought at Frys.. What I didn’t expect is that buying components such as a 3.5mm jack plug, flat batteries, etc.. would take so much time. I also didn’t realize that they were never exactly the right format, the right length, etc.. Amazon doesn’t have a lot of it so delivery would always take 5 to 7 days to realize it wasn’t what I needed.. In the end I did get all my part and a bit of soldering later I had a working device:

First prototype of Soundora

When I say working, it’s partly true.. The button in the front for power and Volume were iphone buttons that are way to thin to work with.. I could not really change the volume or turn on and off the device.. I had to design my own box (which was fun).

Here you go a few days later I had my 3D model:

3D model or Soundora receiver

I used Shapeways.com which had the cheapest 3D printing service I found and got me the box. Very existing but another few weeks to get it..

1 IMG_8225  3D Printed receiver open

 

At this stage I realized that 3D printed is not really there yet.. Anything under 0.8mm space will be filled.. That means that my button did NOT work (again!!). I was starting to get frustrated with this, buttons are really tough to design, it’s just amazing!

Anyway, I got the circuit in and kicked it up

2 IMG_8228 2 IMG_8233

 

huh… That orange light wasn’t supposed to show up that much.. I even had build a little deflection inside the box to let the light come out through a small hole.. Interesting surprise.

Anyway, it worked! I had to have another batch of buttons from Shapeways to solve my issued and it now looks pretty cool.

I also found another battery pack that is flatter and should work as well so I was in good shape. I’ll have to do another box (thinner) though.

But here is the main issue: Ripping out a Sennheiser device for my personal use is fine but I can’t really do that commercially so I still needed to find a way to get my own circuit built.

Getting my own:

By total chance, I stumbled upon a small business that is building systems around KLEER for different customers.. They built the Dr Dre wireless headset.. so I contacted them. Very cool guys and they had small circuits (smaller than sennheiser) that I could use to get an even better device. Very exciting.

But then we talked about production batches.. The Kleer chips are bought by batches of 2000, pretty expensive per unit cost.. Building the box (transmitter and receiver) would probably cost about $4K to $5K to get the mold and get it ready for a batch. That doesn’t even count for prototyping the real thing..

Basically I need to raise at least $100 to $150K to get the project going, and it would mean a sales price in the $150 to $200 a system (1 transmitter + 1 receiver). You can add more receivers (up to 4 total) but it cost about as much as the transmitter.. So the economics barely work for small batches of a few hundred devices. They would for larger batches though.

I am currently kind of stuck there, I don’t want to do a Kickstarter project with a prototype that doesn’t look like a finished product (maybe I’m wrong in thinking that by the way), and I am honestly having a hard time with anything touching the electronic of the device.. I’m a software guy. Also I want to keep it lean as much as possible but I realize that the lean startup model of software doesn’t apply that well in the hardware world.

Other things to consider:

Even if I get to a point where I do have a working prototype there are other things to think about when building a hardware startup:

  • This one is a wireless device and requires certifications about the lack of danger of the transmitted wave. There are a bunch of certs you need to get for the device that will add costs to the project.
  • Designs should be turned from the current Patent pending status to a real patent in some way even though it’s using only existing technologies.
  • Packaging is another good one: Getting a nice box that is cheap but looks good and conveys the experience you want to provide to the users
  • Power plug adapters for distribution in Europe and North america, including different voltage and frequency
  • Documentation in several language
  • Distribution network: initially direct as done through kickstarter, but eventually through stores like Best Buys and others. This will hit the margins.
  • Shipping costs between China (or wherever the device is manufactured) and the destination
  • Maintenance and defects management: Some devices won’t work, some users will be unhappy, and you have to determine who is responsible, what’s your return policy, what costs can be projected around those issues, including shipping..
  • Potential competition from Sennheiser or others.. Roku came out with a similar device and even though it is limited to one listener and to sources from the ROKU box, it still is a fairly tough competition.
  • Unsold devices: If you create batches of devices, what if you don’t sell them all?
  • Delays in production and shipping..
  • etc..

Conclusion

I didn’t give up. I still would like to get to a point where I have a very nice looking prototype, but when I compare this to any of the software project I have done, I realize that it is a totally different world.. Fun in a way as you can touch and feel something, and as you are effectively building something, but the initial cost and technical skills required are really larger.

I have learned so much along the way and I now look at all those Kickstarter project in owe of the complexity I lived through. Some of those guys are really good.

I hope you you entrepreneurs out there will find value in this experience and maybe make you think a bit more before going into hardware. I also welcome any help from someone with electrical engineering, manufacturing, hardware engineering to get this through a first finish line 😉

Cheers, and keep making stuff!