Indian Startups Rise to the Hardware Challenge [Rise of the Machines]
In Belgaum, a city where automotive foundries work round the clock to crank out thousands of tonnes of ancillary parts that go into cars and other vehicles, a tiny startup is developing its own smartwatch. In Cochin, the southern city in Kerala, known for its backwaters and tourist attractions, a group of engineers are trying to turn the human hand into a gesture control device, which they hope will change the way humans interact with machines. Back in Bangalore, India’s software export hub, Bahubali Shete and his team have raised over $100k on crowdfunding platform Indiegogo to commercialize Gecko, a bluetooth based device which will make your smartphone smarter.
These startups are part of a growing tribe of hardware based companies trying to target the consumer market in India and overseas.
“Countries which innovate and build products lead and rule this global economy. They hire resources from other companies to do the repetitive, mundane and copy-paste work ensuring that the core remains with them. India’s youth is right now doing this repetitive, mundane and copy-paste work, as it comes with debatable job security,” says Rohan Shravan, the founder of Notion Ink. Adam, a tablet built by Notion Ink was hailed as the iPad killer at the time of launch in December 2010.
Although Notion Ink didn’t match up to the early praise, the company did a great job of keeping themselves afloat and growing to dozens of employees, despite the challenges posed by the nascent Indian hardware ecosystem.
India has over the time has been a global leader in the software and services industry and major center for chip design generating $2 bn annually through chip design alone. But it has been a difficult space for hardware product startups to survive, especially with production, experience and funding challenges.
Inspite of these challenges, there have been quite a few hardware product startups that made it through with their own products.
Consumer tech consumptions in India has gone up in India over the years especially in the mobile segment. Many international brands have been able to cash in on this trend, be it in the smartphone segment, tablets or other consumer technologies. There also have a few Indian entrants into this segment like Micromax, Lava etc. But most of these devices are not manufactured in the country.
Production and R&D Is A Biggie
One of the main problems most hardware product startups in the country seem to face is that of experience and speed of product cycles. In a country that has traditionally taken to the services company’s space, where returns are much quicker, it is much more difficult for hardware product companies to catch up in terms of speed, as product development cycles take much longer.
“There is also a huge lack of product development experience here,” says Shravan who feels that the services culture has ensured we have experience in packets or one specific domain like only prototyping, only design or debugging.
Another challenge affecting product development is the logistical cost and daunting business environment with varied duties, taxes, tariffs, registrations of different types to different authorities awaiting to stop you at every turn.
Mumbai based Biosense Technologies develops hardware products for the healthcare segment. The first medical device they developed, was to to test hemoglobin levels which costs just as much as a low cost mobile phone would cost.
Myshkin Ingawale, Co-Founder of Biosense Technologies says, “In India we see demanding customers who are used to ‘readymade’ products from West, well on their way down the adoption and commercialization curve, but have never sponsored innovative early stage products locally.”
Where Is The Money?
Funding is one space a lot of startups find challenging, but in the case of hardware product startups the challenge gets even bigger. Investors and venture capital firms are more comfortable investing in services and commerce startups, and is where a majority of the investments are going right now. But there are a few exceptions and the trend is slowly changing with the coming of more hardware product companies with successful products.
“Funds are available now in India to ideas that can be validated,” says Myshkin.
He adds, an idea by itself, whatever the idea, is not fund-worthy (although there are many who will find investors who get sold!). Some amount of validation from the market, as well as technical validation is necessary from the entrepreneur.
Earlier in 2013, Biosense secured a funding of $500,000 from GSF India and Insitor. GSF had initially invested $150,000 in Biosense.
In hardware product companies, a major chunk of the investment is required for R&D, and getting this can be difficult, especially at the early stage. Notion Ink tried to circumvent this problem by spending smartly on R&D costs. They managed to reduced the prototyping costs substantially by using 3D printers and virtual environments.
“When we started there were no tablets. Then it was about building one, getting into the market and presenting a good balance sheet. Now we have all this, and hundreds of competing products from firms like Samsung, Apple, Lenevo, etc. Big company’s strategy of investing heavily on marketing and a good product resulting in good sales, doesn’t work for a start-up’s pitch,” adds Rohan.
Is Crowdfunding The New Angel?
Some startups have started seeing good results with crowd funding on platforms like Indiegogo. Others are taking cue from them and trying to raise funds from crowd funding sites. Bangalore based Connnovate Technologies, which developed Gecko, took to crowdfunding and successfully raised more than $100,000 on Indiegogo. Gecko, a low powered bluetooth device, caught the attention of Apple co-founder Steve Wozniack on Indiegogo and their campaign was fully funded in no time.
Biosense Technologies also took a crack at crowdfunding. .
The Indian Context
“In the Indian context, a hardware product with B2B focus is easier to develop, produce and fund,” says Rohan.
Startups developing products for companies or industries will give investor the confidence, product developers a fixed product/specification to work on and not much costly-consumer centric marketing. Since products would be designed based on the specifications signed off, both (maker and buyer) have vested interests and both would share the losses, he adds.
This statement is true. One such example is Gurgaon based Grey Orange Robotics (GOR), who have developed a robotic warehouse management solution called the’ Butler System’, that is saving e-commerce companies precious hours and money.
In January 2013, the company raised Rs 3 crores from a group of investors lead by Blume Ventures, BITS Spark Angels and other angels.
Even as far as accessibility is concerned things are changing in the ecosystem.
Myshkin says, “Fundamentally, an understanding of, and distance to, the customer, both international as well as domestic ones, are now more accessible to Indian entrepreneurs.”
The wave is rising, but to to keep the tide strong India needs more hardware firms. With new technologies like 3D printing and indigenous hardware products coming into the market, we will be seeing a lot more hardware startups from India.