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Internet of Things: Can we connect hardware startups in NYC to manufacturing resources in Japan to diversify global startup ecosystem?

I just finished reading Matt Turck’s great post on the IoT landscape in 2016 — Internet of Things: Are We There Yet? (The 2016 IoT Landscape). It is a very detailed, well-thought post. If you’re in this industry, you must read it.

It is probably time for me to explain how we participate in this industry and what we will do with these challenges he mentions.

Co-founded in NYC, FabFoundry is a community for hardware startups and creative makers. Our vision is to take part in the global startup ecosystem to help people create things that change our lives with technologies.

As a startup, FabFoundry focuses on areas we are excellent at: We are (1) building a cooperative community to help creative makers start up their own companies instead of contracting with clients, (2) to connect local hardware startups to resources in Japan to improve quality and accelerate time-to-market, and (3) to lead a disruptive change in logistics by introduction of digital fabrication and social production.

Let’s look into each of these.

True Innovation happens only from Startup Ecosystem

NYC has a great potential for hardware startups. For instance, NYC graduates more creative and engineering talent than any other city, according to NYC Economic Development Corporation (source).

But most of these creative people end up joining big corporations or becoming independent contractors dealing with large companies.

Although the success in the Silicon Valley proves that disruptive innovation most happens from startups instead of R&D department of big companies, world’s most talented people are swallowed and not fully utilized for future innovation.

There are already startup ecosystems available in NYC, so we are building a community to gather makers, engineers and entrepreneurs interested in hardware, via meetups and workshops such as our Monozukuri Saturday Meetup, to connect to startup ecosystems.

Connect hardware startups to skilled manufacturing resources

Building a community is just beginning. Our next challenge is to give them opportunities for better manufacturing. As this article (Nearly 1 in 10 Kickstarter Projects Fails to Deliver Rewards) pointed out, funding is no longer the only obstacle for hardware startups to survive. In fact, there are companies that help startups prototype and manufacture better, such as Dragon Innovation, Highway1, and HAX. These companies connect startups in the Silicon Valley to manufacturing resources in Shenzhen, China, to lower costs and improve time-to-market.

What FabFoundry is challenging is to give hardware startups in NYC alternative — ways to collaborate with Japanese maker communities and manufacturing resources to innovate production in a different way.

There are lots of skilled Japanese suppliers who have helped Japanese global manufacturers, especially electronics companies, lead the global market for decades. Unfortunately some of these Japanese manufacturers went out of business, but there are expertise and technology still available.

We want to be a catalyst to ignite some new innovation by connecting creative people in NYC to Japanese craftsmanship. One of our activities is Monozukuri Alley, taking place on April 11th.

Software Startup was Hard, too

In his post, Matt pointed out hardware startups still need more intensive capital, and therefore, tougher than software startups.

Hardware startups are much less capital intensive than in the past, but from what we see in the market, it still takes a solid $10M in combined financing for a hardware startup to truly get going (ship and get early sales traction beyond pre-orders), at least in the US

True, hardware startups need more resources even before it starts shipping first products, such as tools, spaces, materials, etc.

But we have more optimistic view toward future of hardware startups.

I used to manage a software startup called Six Apart (so I believe in hardware companies powered by software… Software is eating the world). Today, you can buy computing resources only as you use, from a variety of vendors such as Amazon and Microsoft. But when we started a hosted blogging solution back in 2003, such elastic computing resources were not available and we needed to buy expensive servers even before we start services on the web (servers could kill Facebook in their early days, according to the movie Social Network).

This disruptive change has significantly lowered the initial cost for web startups — which made the industry thrive. Another big change is invention of the smart phone and emergence of the app store, which lowers the distribution cost.

Digital Fabrication Disrupts Existing Value Chain

We believe one of the big changes for hardware startups will come through digital fabrication — such as 3D printing.

Digital fabrication technology has already succeeded in lowering cost of production and saving lots of time for prototyping. However, true disruption will take place when digital fabrication disrupts cost structure of supply chain.

Today, products are manufactured somewhere and then shipped to you. This means lots of costs and time are spent before revenue is made. Material cost, logistics cost and inventory cost still demand lots of initial investment for hardware startups.

But we imagine most of these costs will be eliminated as digital fabrication technology evolves. In several years, you may be able to buy a product at a store near by — where 3D printers print part for the product, portable electronic circuit machines like Squink create internal devices, and desktop assembling tools build a product for you. In this scenario, hardware startups no longer need to stock materials.

There should be more innovation happening in near future (probably more innovation than I imagine today). That’s why I believe hardware startups will enjoy better environment as software startups do today (I wrote about similarity of change in software to that in hardware. Please read if you’re interested: History you should know and what the “Maker Movement” really means for entrepreneurs).

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