How to

Building a consumer electronics company in six months [part one]

It’s six months since we launched LIFX on Kickstarter, and with production underway we thought it’d be great to start writing a two part series to document our journey and hopefully offer some lessons learned that might be useful for other entrepreneurs out there.

We truly believe that hardware is the new software and that platforms like Kickstarter and IndieGogo etc, together with open-source software and hardware allow for unprecedented democratisation of how consumer electronics are invented and brought to market.

It’s an exciting time, and we hope by lifting the lid on some of our processes that you find this post helpful as you launch your big idea. Here’s a warts and all lessons learned in our first six months, that we’ll follow-up post shipping with part two.

The Idea
It’s been said that an idea is worth about $20. I beg to differ. A bad idea may be worth $20 but a good one is worth a lot more. We all know that a good idea executed badly goes nowhere but a good idea will always generate interest and a following. A bad idea simply will not. A good idea will often come about in a moment, but the unseen forces at work here are that you need to think of a thousand ideas before you land on a good one. For this reason it takes a long time to come up with a good idea.

My rule of thumb, is you know you’re onto a good idea because good ideas get better the more you think about them. If over time your idea becomes uninteresting to you and the people around you its probably not worth building a business around. So test your idea and ask people who are naturally pessimistic what they think. You’re looking for feedback that exposes holes in your idea so you can either fix them or abandon it, rather than being encouraged to prolong the eventual demise of your precious baby – but if weeks later you find yourself thinking “Wow it could also do “X” and means “Y” to a heap of people” you could be on a winner!

Prototype
Get yourself a team of skilled risk takers to help prove or disprove the concept. You need technical, marketing and business expertise in your initial team. These people need to help grow the vision whilst bringing a sober viewpoint to all aspects of the product. No area is more important than the other, although depending on your product each area will carry different weight but you can’t have a successful product without all of these disciplines firing. Your first prototype is really a proof of concept to test whether it’s technically feasible and if people like your idea, it doesn’t have to be perfect, but it does need to work!

Andy working on one of the original prototypes, back in our first office nicknamed the bunker.

Andy working on one of the original prototypes, back in our first office nicknamed “the bunker”.

Crowdfunding

Crowdfunding, in particular Kickstarter and IndieGogo, have revolutionized an innovators path to market. Use these services and sink a serious amount of time and energy into presenting your idea to the world. Video is key. We made our own video relying on passion and story over super polished production values. I think the crowd funding community values the story almost as much as the product, but you need to get both right. It’s also worth noting that crowd funding your idea will not take the hard work out of your start up – in fact it’s quite the opposite. A successful crowd funded project will require you to work harder and smarter than you ever have before. You’ll have the pressure of making a product and a company in the public’s eyes, but on the flip side the support, ideas and encouragement are awesome. Treat this process with the utmost respect and you will be rewarded with a loyal and passionate group of backers who want you to succeed.

Map of LIFX Kickstarter backers, some amazing folks spread out across the globe! 

Customers 

When your customers are your backers there’s a deeper connection than just a transactional one. We see our backers as a driving force within the company, but more than that, having your customers involved improves your product and your company no-end. Listen, engage and be prepared to adjust, but also don’t over promise, or take every single comment to heart. Be prepared to analyse and sometimes say no to customer requests for additional features or bells and whistles. More important, don’t view your customers as something external. Backers are an intricate part of your business, and in crowd funding we believe you shouldn’t quietly build the product you should document the journey – keep them in the loop, be transparent about your decisions, share your learnings, and mistakes ask for feedback, and make sure that the experience of backing your project is a rewarding experience.

Design

Design is more than how pretty your product looks but we all know that by now. The design of your product and company should flow from your philosophy. Do you favor functional requirements over design aesthetics? Or a blended approach?  If your product and company are public facing, then a beautiful UI/UX is a must. A form follows function design principle applies to our product and our company and we do our best to adhere to that with every design decision. Also, everyone in your company, not just designers should have input into this. The way your firmware and circuit boards are designed is as important as your logo. Everything you do is designed so you might as well do it well.

Ben and Guy getting their arts and craft on in some packaging design.

Ben and Guy getting their arts and craft on in some packaging design.

Team

You’ll only create a truly disruptive product with a team of like minded people. You’ll get the full potential out of your team if they enjoy the process as much as the work. Work with each individual’s strengths and do whatever you can so their weaknesses are rarely seen.

My three rules for team, are work with people

1. that match the culture you are trying to create
2. that you like and can get along with, and
3. that are better than you in their chosen area of expertise

Don’t compromise, try and find people within your network (our just outside it) and avoid recruitment firms and job boards, as the entrepreneurial types you’ll want to join your team don’t like either.

Fund raising
Lot’s of schools of thought on this but we recommend starting the fundraising process in parallel to your crowd funding campaign. Yes you could bootstrap and build a business from pre-orders alone but for LIFX having additional resources and finance has enabled us to fast track bottlenecks in development; not skimp on travel (factory visits etc) which mean the project gets to backers faster and without compromises.

We raised just over $2M from private investors that we knew well, liked a great deal, and who brought real skills to the company. Whilst we’re all for bootstrapping and really admire companies who have, we feel that it’s important to have 100% focus on your product when you’re delivering a crowd funded project.

Pro-tip: find a great lawyer, who has real exposure to startup valuations and company structure, and will defer fees till funds close!

Production Partner
We decided early on that the right production partner would save us months of miscommunication and redesigns so we consciously took our time finding the right one. In hindsight we would’ve gone to China and Hong Kong sooner, because interacting with potential partners face to face; seeing their operations, and getting to know their capabilities is so much faster in person. We visited potential partners in Europe too but felt that Shenzhen was the lighting capital of the world. So, pick clusters or regions that do your type of product at a world class standard. For us, this has been possibly the most important decision we have made for our product development because of the quality and professionalism is the best we’ve seen. It’s best if your production partner already produces excellent quality products for companies you have heard of. You do not want to put yourself in a position where your production partner is learning on the job. Our experience working with partners in Shenzhen – whilst there is a definite cultural divide, can always understand where we’re at and the potential of the innovation. If they “get it” you will navigate difficulties and unforeseen speed bumps with relative ease compared to if they don’t.

Getting organised 

We use a whole heap of tools internally that we couldn’t live without, and with so much information flying around (which you’ll no doubt experience) you’ve got to have a way to track and build your knowledge base – without weighing everyone down. For us, Basecamp is ground zero. We now have 18 people on payroll (across Australia, China, Canada and Singapore) and we’ve always got Basecamp open. We all now feel like we’re across each others activities; can weigh in on specific discussions and move ideas forward quickly. It also becomes a knowledge base; e.g. whenever someone new joins the team we give them a few days just to go back through basecamp and get up-to-speed with the business; the various discussions we’ve been having and the lists of tasks we’re working on. I might sound like a paid spruiker for them, but it’s so useful. We’d recommend setting it up (or some suitable alternative) day one!

We also rely heavily on Google Drive/Docs for all documents, legal agreements, logo files, designs, works in progress etc, and some neat things like Geckoboard that shows key metrics on TV’s throughout the office. Geckoboard in particular is great for team morale, and keeps us focused. Zendesk is also extremely helpful for tracking and responding to customers and ensuring questions are always answered promptly.

Some other tools we find helpful:
RightSignature: When fundraising whilst building hardware and software the last thing you want to be doing is spending hours collecting signatures.
Batchgeo: For quickly plotting a bunch of addresses onto a map for shipping and logistics.
Apple TV: For streaming/AirPlaying most new Apple computers and devices for group viewing onto TV’s around the office. As well as keeping the tunes pumping.
Shopify: Simple solution for setting up e-commerce, great API, plug-ins, and mobile app.

Whiteboards: We mounted 6mm glass onto the wall with the back painted white (similar to a glass kitchen splashback) we tried idea paint but it didn’t work so well for us.

PhilandJake

Free WiFi in Bryant Park means I can keep on spamming Basecamp even whilst on the road.

Factory Prototype

After your initial prototype you need your production partner to build a factory prototype that satisfies their manufacturing processes and all required certification. In our experience the two prototypes were similar in function but very different in form. The factory prototype is proof that your product can be manufactured at scale and sold on shelves. Once again if you have the right partner there should be no reason why they cannot take your original prototype and with your help turn it into a manufacturable product. This is what they are good at and you should take their advice when it’s given. If certain manufacturing processes change outcomes from your original vision find another way. Don’t settle for compromise but don’t be a dick about the difficulties your production partner faces. Work with your partner to understand their issues and try to help solve them for the best overall outcome. We decided early on that if we were going to have to manufacture LIFX light bulbs en masse we better get good at it. We have actually found that through this process new ideas and opportunities have presented themselves that we never anticipated.

Distribution
We certainly haven’t mastered this yet, although we’ve had over 400 distribution offers from around the world! The key thing we’ve learned is to triage these types of requests. Some distributors will be world-class, or retailers with a huge footprint, others will be one person start-ups that saw your idea and want exclusivity over the whole of Europe!

The key for us has been politely declining the majority of requests, and via a triage system working out who offers real opportunities, and has the credibility and deep enough relationships with retailers in their home region to make the best distribution partner.

Don’t worry too much about actively seeking partners, if your product does well, you’ll meet them in your travels, they’ll reach out to you and you start to get to know the ones you feel are the right fit.

Press
We often get asked, “What was your PR strategy before Kickstarter” the honest answer is there wasn’t one, or to be more accurate our plan was to put all our energy into the product and hope bloggers and journalists to write about it if they thought it was newsworthy. Hope doesn’t sound like a strategy I know, but bloggers and journo’s are smart, and have their finger on the pulse, if there’s a story they’ll find it.

My 2c would be create something that is newsworthy or part of a trend that is news worthy (e.g. internet of things) something that is novel and interesting enough to grab attention and make people either deride your idea (as our buddy Felix Salmon did), or celebrate it, as many other bloggers and journalists did.

The key is to find what’s newsworthy about your product; what barrier are you breaking down? What tired and boring old industry are you shaking up? What trend(s) are you part of? How will your idea affect peoples lives? Once you’ve figured that out, just ensure that you communicate it clearly, and have the video, imagery, text and (of course!) the capabilities to back up your big claim.

LIFX Times Square

Imho PR newswire isn’t great for press releases, but for a pretty small fee you can do this.

Logistics
This can mean a lot of things, and it extends beyond just shipping your product. The big areas of logistics for us are; sourcing (components), packaging (designing and testing), certification (CE, UL and FCC), tax (Import duties, VAT etc), warranties and of course delivery.

We’ll dive a lot deeper into this in part two of this post because there’s so much to explore, and part of it we’re still learning but the big lesson is that whilst all of these logistics seems daunting and overwhelming at first each of them is a discrete task; break everything down to bite sized chunks, put tick boxes next to them and tick them off one by one. Also there’s always experts in all of these fields willing to help you navigate the trickier aspects. e.g. Shipwire have been incredibly helpful throughout this process so we’d encourage anyone to reach out to them; and also fellow crowd funding alumni. You’d be amazed at how helpful other similar companies can be if you politely ask them for their time. The only other piece of advice for logistics would be worry about these things after your campaign is successful, don’t worry about your shipping before you funded, solve things sequentially.  I’ll go into the other aspects in post two, but hopefully this outline of our activities so far is helpful!

Build
This is the best part. If you’re not looking forward to this stage then stop what you are doing and reassess. Building a product takes time and requires a huge amount of focus. You refine your ideas daily, then lay awake at night thinking about how to make them better. With LIFX we are building a full solution, hardware, firmware and software with cloud support. No easy task, but it’s definitely achievable. The myriad of SaaS services and open source tech makes this more achievable than anytime in history. Combining all of these existing technologies into a seamless product is possibly the hardest thing to achieve. So management of the process is something you should strategize, talk about and think about constantly.

Seeing a vision come to life and shipping it to customers that can’t wait to use your product is for us the biggest motivator. This is why we get up every morning and stay up to ridiculous hours at night, and with our shipping date on the near horizon it gets even more exciting.

Scaling
Make sure you can do it. Don’t underestimate your eventual scale but plan for what you have in front of you. We initially capped our Kickstarter campaign because we were heading towards a level of scale in manufacturing and operations that we were uncomfortable with. It’s a balance that few get right but it’s something you need to. Our short cut for navigating this is again to have the right partner and constantly talk about the production expectations and min/max type conversations. Whilst the focus can be on scaling your product you also need to scale your team, hire smart, committed people who are as passionate about the product as you are (they’re out there!).

Travel
You can’t build a global company sitting behind your desk you need to get out into the world and see every aspect of your business. For us that means spending a lot of time in Shenzhen, with our production partner, then back in the US working with distribution partners, then in Europe working on similar relationships. Conferences form a good hub, and tech conferences like Tech Crunch Disrupt and LeWeb bring all the people you want to talk to into a central place which allows you to get more done.

Spending time on the road teaches you a lot about each country, and whilst you can do a lot of business over Skype nothing shows you care more about that region, than by actually visiting it. Since September we’ve been back and forward between Australia, SF, NYC, Hong Kong, Shenzhen, France, Belgium, Norway and the UAE with more trips planned this year, and all with the same objective get to know great people in the regions we want LIFX to be well known, and supported within. It’s also a hell of a lot of fun.

Three D’s of a startup
Discuss, discuss, discuss. Discuss everything until you don’t want to discuss it anymore. Never leave a conversation early. When the time comes to make a decision and you have discussed everything to the enth degree, you’ll be able to rely on your “gut feel” (in combination with data of course:). We figured out your gut feel is the summary of your experiences and discussions. It’s very different to guessing. To rely on it you must have already put in the hard yards of hours of discussion.

Laugh
We believe startups that laugh together stay together. Whilst there is a lot of hard-work involved, and a lot of rhetoric in startups about 14 hour days, the truth is you need to be enjoying every aspect to produce work you’re truly proud of. We’d encourage people to embrace that work-aholic aspect of your personality (it’ll serve you well!) but also to make sure there’s plenty of banter and mucking around. If you take yourself too seriously then you’ll miss the fun you can have building a great product with a great team.