Hardware Startups Look to China

Shenzhen, China, is a long way from Silicon Valley. But for startups that want to create the next iPhone, it may be the best place to get their businesses off the ground.

That’s the thinking behind Haxlr8r, a new hardware-focused startup accelerator that is about to begin its first round of incubation by investing in nearly a dozen startups making hardware ranging from electronic toys to a device that manages household energy usage. Created by venture capitalist Cyril Ebersweiler, the program will provide seed funding along with a three-and-a-half-month program that will introduce startups to factory and industry contacts and offer guidance.

Most of the Haxlr8r program will take place in China, since access to local factories should make hardware development cheaper and easier, though the tail end, which includes a demo day to show off the companies’ products to investors, will be set in the Bay Area.

Haxlr8r’s launch comes at a propitious time for hardware entrepreneurs. Traditionally, creating a hardware company is very time-consuming and expensive, and startup incubators have mainly focused on software development, which is typically far cheaper and faster. But cheaper electronics components, crowdsourced funding platforms like Kickstarter, and the popularity of 3-D printers and DIY electronics kits like Arduino and Adafruit make the idea of building a physical electronic product seem more within reach. “I think we’re at a very exciting moment,” Ebersweiler says.

Ebersweiler is a partner in the venture capital firm SOSventures, which already runs a China-based startup accelerator, Chinaccelerator, out of the northeast Chinese city of Dalian. But Chinaccelerator focuses on helping Chinese founders build nonhardware companies. Ebersweiler feels that China’s position as a leader in electronics manufacturing makes it the perfect place to start a program that concentrates on hardware startups.

And so the country that produces everything from iPads to earbuds will gain a few new startups on March 1. Ebersweiler won’t give many specifics about the companies chosen for Haxlr8r’s first session, but says they’ll come from the U.S., Europe, and Asia. Projects will include a device from a Tokyo-based company called Sassor that shows people how much energy they use at home, some electronic toys, and an electric motorcycle.

“We decided to be pretty open-minded, and I think it’s going to reflect pretty well the entire spectrum of what a hardware startup is about,” he says.

Each company will receive $6,000 in funding per founder. Haxlr8r will shepherd them through the process of building a product, give them access to an office and equipment such as a laser cutter and 3-D printer, and help them learn the nuts and bolts of the production process.

The program was organized with Seeed Studio, a Shenzhen-based company that provides electronic parts for makers and produces its own products. Participants will meet mentors that built their own successful hardware startups, such as Dave Merrill, cofounder of Sifteo, a company that makes interactive cubes, and Ben Rubin, cofounder of sleep monitor company Zeo.

Working with local factories while in China could make the production process cheaper for the startups involved in the program. And under Haxlr8r’s guidance, says Ebersweiler, participating startups could cut the time it takes to bring an electronic device to market from 12 to 18 months to just three months.

That doesn’t mean companies will produce hundreds of thousands of their devices by this summer. But they should have a scalable product and a manufacturing partner that can produce it—something that may attract potential investors, since it would cut out much of the research and development usually required in such a process.

Sifteo cofounder Merrill hopes the experience will teach other hardware founders insights it took his company years to figure out—such as how to find a manufacturing partner, and what makes a good manufacturing contract. And as more people realize they can make electronics products into businesses, he believes, the category will get more attention from investors and consumers. “It’s kind of a rising tide that lifts all boats,” Merrill says.