The hardware startup mentor who sent us wandering around Florentin
Two years before I wrote this, in Tel Aviv’s blazing heat, my former partner and I wore out our shoes looking for Helicoil threaded inserts to solve a mechanical problem that had “suddenly appeared” while developing our product. We had rushed into developing it ourselves after a hardware startup mentor sent us on our way without really understanding where we were.
We visited most of the suppliers and spent dozens of hours trying to find the right parts. However you look at it, the experience was difficult. We were fixing a product development mistake that had cost us dearly.
Rushing into development on the back of poor advice from countless consultants and experts turned the process into a long, exhausting exercise.
We should not have given so much weight to other people’s opinions or followed popular local methodologies, such as Lean Startup, so rigidly.
The advice was to release a product as quickly as possible, reach the market, and fix it if necessary: the language of fast mini-launches and the search for product-market fit.
We tried to apply that approach to our own startup. Because we were building hardware, doing so in that way was a mistake.
We developed quickly without enough rigor and ended up with a product that collapsed and did not function mechanically. Only weeks later did I realize we had made a mistake and should not have adopted the prevailing advice and methods so quickly.
Hardware is not software. Hardware is the part of a computer you can kick
Mentor and mentorship had become fashionable terms. At the time of writing, in late 2016 and 2017, the trend appeared to have fallen from earlier peaks around 2008.
The chart below shows Google Trends search interest in the Hebrew word for mentor from 2004 through the period when this article was written.
The widespread use of mentors, from the idea stage all the way to a hoped-for IPO, strikes me as somewhat puzzling. The chart shows peaks around 2008 and again in 2012, followed by a decline in the months before I wrote this. Perhaps there was a reason.
Experience certainly brings wisdom. But in my view, founders cannot simply learn from someone else’s mistakes, because the situation that person faced with their company is not the situation you face with yours.
The conditions are different. Consider Steve Jobs or Bill Gates. Do you think you should sit in your parents’ garage today, buying used electronic components to build the next generation of computers? Probably not.
The word mentor has been stretched beyond recognition in Startup Nation
Israel, a country associated with startups, entrepreneurship, and innovation, is full of businesspeople and founders who have tried, made mistakes, failed, succeeded, and tried again.
For the two years leading up to this article, I had stopped calling myself a mentor because I felt the term had been devalued. Everyone was a mentor, advising new and experienced founders on how to behave and offering a supposedly proven formula for success. Forgive the expression, but that is bullshit.
The area where advice, mentorship, or tips delivered over coffee in a 35-minute meeting can do the most damage is physical products.
That is especially true when the adviser lacks hands-on experience with hardware or physical products but is advising just such a venture.
Choosing the wrong advisers or professionals can seriously harm a digital startup. In a physical product startup, it can kill the venture and close the company.
There are fundamental differences between researching, developing, manufacturing, and selling physical products and digital ones. Digital startups generally benefit from reaching users quickly to test product-market fit, run iterations, and gather real market feedback.
Changes can then be made with a few clicks, lines of code, or adjustments to a digital strategy. A physical product, by contrast, cannot safely reach the market before it is sufficiently developed, tested, and ready.
Can you imagine the direct and indirect costs of recalling thousands or hundreds of thousands of physical products from around the world after discovering that they crack, burn, break, or do not work?
Imagine if we had shipped dozens of units with a mechanism that collapsed under a load of 15 kilograms or more. Image: our attempt to build a stronger mechanism that could withstand the pressure
Can a hallway conversation replace careful thinking about a future bill of materials?
Product cost structure offers another example. Many mentors and consultants without physical product or hardware experience do not appreciate the importance of unit manufacturing costs and the bill of materials, or BOM.
The cost of selling one additional unit of a digital product—a monthly software subscription, license, or digital copy of content—is often negligible compared with development costs.
For a physical product, even if manufacturing one unit is inexpensive, you still have shipping costs, retail margins, and fees charged by online platforms such as Amazon or Kickstarter. Thinking about the future BOM from the very first day of development is therefore critical and should be a founder’s priority.
“Hello, this is Lars from IKEA. We would like to order half a million units”
In 2006, Hagai, Eitan, and Zvika were working hard in their small office. Almost a year and a half earlier, they had left their jobs, invested their savings, and set a goal: sell the product they had conceived to IKEA.
That was their destination. They did not have extensive experience developing, manufacturing, or selling physical products. They chose to work through an uncertain situation together, giving equal weight to every partner and every opinion in the room.
Hagai came from architecture, Eitan from psychology, and Zvika brought the trio’s business and financial background.
Suddenly, Eitan opened his inbox and read aloud: “Hello, we would like to buy half a million units from you.” It was signed by Lars from IKEA.
Until then, they had sold tens of thousands of units of the product they had spent the previous year and a half developing.
Lars had seen their product “by chance,” but not really by chance. It followed a guerrilla marketing move requiring the kind of nerve and audacity often associated with Israeli founders. More on that below.
They began the long process of introducing a product developed outside IKEA into its stores worldwide. As Swedish representatives visited Israel and performed quality and standards checks, the order grew to 1.8 million units.
Four years after that email, in 2010, they saw the first imitation of their product, made in China.
That same year, after five years of partnership, the three decided to separate and divide the business activities between them.
It was an amicable separation that left them good friends.
A post I wrote about an opportunity to join an IKEA bootcamp prompted Hagai to contact me with a wonderful story I had not heard before: three founders who did not follow other people’s advice and sold an Israeli product to IKEA, where it had been selling for 11 years by the time I wrote this.
“If I put sweat into a product, I want it to sell for a long time”
“Early on, after the product succeeded in Israel and significant overseas sales began, many people told us to hurry up and find the next thing. We believed that going far meant staying focused on our goal,” Hagai Strauss, cofounder and CEO of Vazu.
Ignoring much of that advice, they invested their first substantial product revenues in developing a version suitable for mass markets and major global retailers, especially IKEA.
An Israeli success story few people know: millions of units sold to IKEA
Tempting offers soon arrived. Many proposed using the product as a promotional item in exchange for significant revenue.
The founders turned down the money to protect the product from becoming advertising merchandise, which they believed would substantially shorten its commercial life. Hagai generally prefers well-designed, carefully considered products that can sell for years: “trendy enough, but not too trendy.”
Few, if any, privately developed Israeli products had been sold to IKEA worldwide. That was why Vazu’s story fascinated me enough to write about it.
Beyond perseverance and a good founding team, the biggest lesson for me was their focus on a single product.
They spent an entire year developing only that product until it was complete and ready. This was genuine innovation in a low-tech product. Few people realize how hard it was for them, and others, to reach production in Israel. At the time of writing, it was still entirely Israeli-made.
Many experts told them that planning to be a one-product company made no sense. They did not panic and stayed focused on that one product. Some advisers presented themselves as hardware startup mentors, but fortunately none influenced the founders too much.
At the same time, they conducted serious market and financial analyses, approached investors, raised about $100,000, and began patenting the product.
“Despite all our effort to create a perfect product, we were still inexperienced. We forgot to put a logo or name on the first production run of 3,000 units. We had to add 3,000 little stickers afterward.”
Success and failure are collections of extraordinary real-life stories
The founders were inexperienced, and Israel’s market also had limited experience in home product design and manufacturing at the time.
All three traveled to Ambiente, the major trade fair in Germany. They always did everything together. There, they absorbed the atmosphere and learned how to build an exhibition stand.
Back in Israel, with about 3,000 units, they built an elaborate German-style stand, painted entirely black, for the Kelim Naim exhibition in Tel Aviv.
It was the most conspicuous stand at the event. Buyers from homeware chains and museum shops approached them. Golf & Co also loved the product and agreed to an exclusive distribution arrangement across its 40 stores at the time.
With revenue beginning to come in, they manufactured a second run, this time with the logo embossed, and realized they had something powerful in their hands.
They continued filing patents internationally, refused consignment sales, and made further production runs, improving the product while reducing unit cost.
Feedback soon arrived from around the world. Museum shops, visited by many affluent Jewish travelers from abroad, became ambassadors for the product overseas.
The founders neglected no market segment or sales channel. They invested in displays and point-of-sale solutions that could be shipped worldwide, recognizing that the product alone was not enough without the right retail presentation.
“The product sold steadily and organically in Israel and abroad. It worked without us spending a shekel on advertising, and we had zero returns, because we did not rush and worked thoroughly during that year of development,” Hagai said.
When the door closes, come in through the window
As sales grew, they continued their business development efforts. One day, they went to the Israel Export Institute and paid NIS 200 for an hour of guidance intended to help them export the product.
They left feeling that the session had offered little added value. Spontaneously, they called the institute to express their disappointment.
The representative listened courteously. During the conversation, she offered to introduce them to IKEA buyers whom she happened to be accompanying on a visit to Israel.
On the day of the meeting, she called to apologize: the schedule had changed, and the IKEA representatives could no longer meet them on that trip. Suddenly shut out through the door, the founders did what resourceful Israeli entrepreneurs do: they came back through the window.
They learned that the IKEA group would spend the evening in the lounge at the David InterContinental Hotel and managed to get two product samples to the Export Institute representative between meetings.
At the same time, they hurried to the hotel lounge and asked to place their vases on its tables. Over drinks, the IKEA representatives noticed the innovative vases and received the materials from the Export Institute representative. Months later, the email from IKEA arrived. From there, there was no going back.
Listen to others—have you found your hardware startup mentor yet? ?) But stay true to yourself and your product. Learn to filter advice
I wanted to share Vazu’s story in this series on entrepreneurship and design to show new founders that dozens of people will tell them to do things one way or another. They say a room with three Jews contains five opinions. A room with three mentors contains ten.
I am not trying to suggest that founders should ignore mentors or consultants. I want to hold up a mirror and ask you to look carefully at yourself and your product. Does the advice fit where you want to go? Does it feel right for your situation?
Ask whether the adviser truly understands your product, the research and development methods, manufacturing, marketing, and sales in your market. Do the conditions that existed when they succeeded also apply to you now?
A trustworthy, experienced, multidisciplinary, available, and accessible hardware startup mentor is worth their weight in gold. Find a good one and keep them close.
Stay true to your own judgment. I wish you and your next product a very long life on the shelf.