This wearables CEO shares the hard thing about hardware startups
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This article is part of Tech in Asia’s partnership with Disrupting Japan where we publish the revised transcripts from the show’s podcast interviews with Japanese entrepreneurs. This is heavily revised from the original transcripts. For the full interview, go here.
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Sometimes the most inspiring founders are those who come from somewhere you don’t expect. Takuro Yoshida of Logbar is one founder in that mold.
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When I first met him five years ago, he was trying to innovate bartending. Over the past few years, he and his team have run one of Japan’s largest Kickstarter campaigns and have been developing, releasing, and securing international distribution for two hardware products (Ring and ili).
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Let’s get right to my interview with him.
nTell us about your Kickstarter campaign.n
Before Kickstarter, we were able to raise angel funding—not a big amount, but enough for us to make the prototype. Once we were almost ready for mass production, we started the Kickstarter campaign.
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We raised over US$800,000 on that campaign, but the production wasn’t that smooth. Hardware is always hard to mass produce—a single change takes about two or three months. We were targeting to ship the product in July but we shipped in October instead.
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It wasn’t too bad, actually, but I think the delay was caused by our lack of experience in building hardware. It was my first time. We didn’t know the risks and the time frames.
nWhat would you advise hardware/internet of things startup founders to avoid such delays?n
You need to experience the hardware, and trust the factory all the time. It wasn’t the fault of our partner-factory that we experienced a delay in shipping the product. It was our fault. I was always like, “I want to do this. I want to add a new function.” And then they would warn, “OK, but it takes time. Is that OK for you?”
nWhy didn’t Ring get much attention?n
It was great during the early adoption stage, but there were no more consumers after that. One reason is that we can already do almost everything on our iPhones or Android devices.
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Another thing is that we tried to make it as small as possible. But there were limitations. We always said, “If we can use a smaller battery or smaller chips, we can do this.” We wondered whether people would use it if it were smaller with more functions.
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The Ring was an interesting device, but it’s not for everyone. When people see it, they always say, “Oh, it’s a remote control,” or, “200 bucks just for a remote control?” Most people don’t need it.
nWhen did you decide to focus on ili?n
We started developing ili about two years ago. I thought the Ring was very simple, requiring only gestures for it to function. But people found it very complicated.
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Moreover, people needed to worry about two things: a Bluetooth connection and gesture recognition. So I thought I wanted to make something that wouldn’t need a Bluetooth or internet connection. And then I remembered that I couldn’t speak English at all the first time I went to the US. So I thought that maybe I could make a translation device.
nYou created a video to promote it and it went viral. Were you surprised by the public’s reaction?n
I think we got a lot of attention. But some people criticized it even though it was an advertisement, not a real situation.
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When we think about marketing, we have two options: play it safe or get attention (which can be negative). It’s always hard to decide between the two.
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At that time, we needed a lot of attention and we wanted people to know about the real function of the device beyond translation. People always say, “How accurate is it?” But that’s not important, actually. If you can communicate with people, then that’s ili, which can also be a tool for making friends. That was the idea.
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We got negative feedback for the video, but some people liked it. The Japanese actually didn’t think of it as bad. I think it was successful, but we can’t always make that kind of controversial promos.
nDo you think Japan has fallen behind as the leading innovator in hardware?n
Yes. I think the main reason is that nobody thinks of new things. We do have a lot of great engineers (hardware and software), but we need more visionaries and product people.
nAre we going to see more interesting hardware coming out of Japan?n
I don’t think so. About two or three years ago, hardware boomed. But people realized that it’s costly and time-consuming. Some people still tried but they’ve given up. Sometimes people have ideas but they couldn’t face the reality. We were lucky to raise funds on Kickstarter, but most people couldn’t get enough funding.
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Moreover, because VCs had bad experiences investing in hardware businesses, they feel like, “Oh, hardware is so hard.” I also don’t think crowdfunding will increase as a result. Things will pretty much stay the same.
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Yoshida’s experience with Ring Zero was interesting. It was roundly rejected by investors but turned out to be one of the most popular Kickstarter projects from a Japanese maker.
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Ultimately though, the product ran into the same problem that plague so many hardware startups in Japan now and around the world. It’s extremely difficult to move from producing thousands of units to producing hundreds of thousands of units. That takes significantly more capital and supply chain management expertise.
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In a self-fulfilling prophecy kind of way, I think that’s one of the main reasons a lot of Japanese investors stay away from hardware startups. And Logbar’s decision to develop a business model based on B2B sales and rentals is a good approach to bypass this valley of death.
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Read more from this series here.