Finding the Right Path
For several years hardware startups from all over the world have been trying to launch their business following practically the same path which unfortunately has proven to be rather disordered and unstable. However, the situation can be changed for the better with a new incubation model originating from China, and to be more exact, OEM’s - China’s global hardware manufacturers.
Speaking of the drawbacks of the common approach to launching a hardware business, it happens quite often that after making prototypes and raising capital, startups turn to China where they start a time - consuming and exhausting process of identifying and trying up multiple logistic companies, suppliers and manufacturers. Needless to say that the outcome is not always the desirable one: not having any valuable experience in the industry, many startups have to face multiple fraughts and deal with miscommunication. However, even after choosing their partners, there are many obstacles ahead, as there is a fundamental misalignment of goals concerning the production volume on the supply side and quality, brand equity and sustainable development on the startup side. Startups are unable to command quality from the supply chain without pushing large volumes. And in case the final product is brought to market, it might not always be the original design.
Kickstarter campaigns can serve as a good example to illustrate the drawbacks of the typical Silicon Valley hardware startup’s approach. Statistically, among the successfully launched campaigns, almost 85 per cent have difficulties with shipment time, not to mention the fact that many more never come to the mass production stage. Even some hot brand names struggle and sometimes lose in the hardware game.
In the meantime, the capabilities of the Chinese manufacturers are incredible. It is a well-known fact that nowadays more than 90 per cent of the world’s electronics at some point during their production process moves through China. At Pozible.Tech we believe that there are at least two good reasons why this country’s reputation of the world’s assembly line should be reconsidered:
- China possesses advanced, best - in - class industrial production know-how;
- Chinese companies have achieved impressive reality - based expertise in the field of engineering.
The key to success
Nowadays, many of those Chinese manufacturing giants are eager to be more than a hired labour, thus enabling startups to avoid dealing with all the barriers that continually plague companies that follow the traditional Silicon Valley VC approach. The key to success, in this case, would be achieving the suppliers' genuine involvement in the games, indeed, an alliance of several interests can be achieved as the potential profit - sharing in case a startup project succeeds can significantly exceed a nominal manufacturing margin.
In that case, there is a chance for startups and manufacturers to agree on low - cost production, achieve the IP protection, quality control and reasonable production schedule.
Moreover, a successful allegiance of interests with the supply chain partner, startups are able to leverage the partner to lease the production capacity needed at below-market production rates.
In addition to that, in case the created product has been engineered using high - quality materials and know-how, startups can create a unique product that hasn’t been introduced to the market before.
The success of some Chinese startups prove the existing trend in manufacturing-capital intensive industries: China’s biggest consumer battery pack manufacturer, Sunwoda, has invested in Anker and JieDien, and SCUD(the second largest manufacturer in the battery pack space), has invested in LaiDian and Xiaole. These companies might turn to VCs to raise funds, however, secured by manufacturers, their products are already on the market. Such a scenario seems to be much better than bargaining with manufacturers on R&D costs and raising VC money to bridge cash flow gaps at early stages of production.
Global startups are following the trend
Some successful startups begin searching for the right supply chain partners even before finishing or sometimes even beginning their new product’s design. That seems reasonable - these suppliers turn from just manufacturers to founding members at the very first steps of the product development.
Another good example of building a successful partnership with a supplier is a pioneering start-up company Gi Fly Bike – an Argentinian e-bike company, who took their designs to Yadea Technology Group right after launching a successful crowdfunding campaign. Holding a leading position in the e-bike manufacturing with more than two decades of history, Yadea Technology Group has almost 15 per cent of global market share and sells more than three million e-bikes to five continents. At the present moment, The Gi FlyBike R&D team is entering its first mass production stage as its team is based inside the Yadea Technology Group manufacturing plant.
The New Era in the Hardware Production
To sum it all up, at Pozible.Tech we believe that the world now is at the beginning of a new era for Chinese and Chinese - Western startups to strike the market. Those companies are changing, so are their needs - they have already developed the ability to leverage the resources of the Chinese manufacturing centres backed up with the profound knowledge of the supply chain and the market.
Besides, at Pozible.Tech we agree with those experts who claim that even though this OEM incubation model can and should be applied all over the world, yet the Chinese OEMs are the readiest to engage today as this country can hardly be beaten when it comes to the cost, speed niche specialization and production scale.
So join us and lets hit the market together!