Why building an IoT product isn’t like anything else
Dataconomy has joined forces with Alexandra Deschamps-Sonsino, one of the world’s leading IoT entrepreneurs and influencers, to run an exclusive, 3-day IoT workshop in Berlin, February 24-26, 2017. Alexandra will host an intensive course where she will provide guidance and share everything she knows about how to build a business that offers software and internet-enabled product experiences.
Building an IoT product isn’t like building software nor is it like building a product. It’s also different in terms of fundraising. Here’s how it breaks down:
An IoT product isn’t like software
The biggest difference with software is that you actually have to physically ‘ship it’. And it makes no difference if it’s a friday :) The other difference is that software is easily updatable and you can decide how many users you wish to consider valid users to your potential investors. With #iot, you’re talking about sales numbers (there’s no such thing as an ‘active’ customer in that sense), use is secondary. That’s why wearable companies sell you stuff they know you will stop using witting 3 months and don’t remind you to use it or build return-reuse systems. They shipped you a thing once and that’s it. They’ll collect data for as long as a customer actively uses the device but he/she will always be a sale, a customer. To deploy entirely new features, you probably have to try to convince them to buy the product again. The changes are sometimes so important, a simple firmware update won’t do it. An #iot product simply doesn’t behave like software.
An IoT product isn’t like a product
When you shop for a sofa you don’t have to worry about setting it up, connecting it to your wifi service or seeing if you have connectivity in the living room. The unboxing experience of a connected product is much longer and that can affect the use and acceptance of the product. The reliability of the connection will also affect how someone feels about the product. There might be batteries to replace too, or to recharge, or a plug adapter to buy. It’s much more faff than a regular product. So it’s important to understand that user experience and making sure it’s not so painful as to become a barrier or even a deterrent. You have to remember that if you get a single complaint, chances are 100 other people may have had a bad experience.
So what do these two differences have to do with raising money? Well, plenty. When I first looked for funding in 2013 I noticed some patterns in my (sometimes) short meetings with investors:
- They didn’t have experience shipping physical products but had experience shipping software
- They were intrigued with #iot but hadn’t invested yet
- They thought about products in traditional terms (you have to have minimal protection for your product through a patent or other forms of IP) not in tech terms.
- They rarely take the jump unless you’re already selling and growing.
So how do you prepare for these types of conversations? Well you’re going to have to educate your potential investors. Read Venture Funds to familiarise yourself with the types of mechanisms they’re used to, and be prepared to share your business processes with them. The IoT-ness of your product may mean that you have to initially invest heavily in customer support and repairs/returns as you find your feet with your supply chain. You have to explain this to them. If your investment talks turn into master classes, moving on to join an incubator instead is not a bad option. They often will help you with money and for a 3 month stint, which is not bad at all and worth the 6-7% equity. Check out Startupbootcamp, RGA, CLR, Bolt, Usine.io, HAX, Highway1, and many others. There’s also EU grants, government loans and tax schemes for investors, which small businesses can take advantage of. These take more time to apply for but it’s money with no strings attached
Whatever your product, it’s important to make sure you can talk to an investor about it and highlight the major differences to their experience if they’re new to IoT. If you’re clear about what makes your product better and you can prove you’ve thought about all the ways in which you can mitigate the issues I’ve described, you’re on your way already.
A 3-day, IoT workshop to cover all the bases
I don’t think that my struggles are universal. I want this to be easier for everyone. With Dataconomy, I’ll be running an intensive 3-day IoT workshop, condensing everything I know about how to build a business that offers software and internet-enabled product experiences.
Whether you’re a budding entrepreneur with an idea, a product designer looking to grow their toolkit or business owner looking to expand into software-enabled products, there should be something in it for you.
I’m covering everything from planning a product from day 1 and prototyping, to beta testing and learning then how to make bigger production batches and engaging with wholesales and retailers. You’ll learn about IP and business structures as well as investment in this space. You’ll come out of this with a realistic understanding of how much money you need to invest from day 1 and how much time you can expect to spend and who you might want to work with. I am opening up my blackbook and sharing the learnings of the last 12 years of my career with participants online and offline.
This is ideal for you if you already have a product idea you’re looking to develop or if your business is looking to spin off a product idea. If you don’t have an existing idea, this will feel very abstract. You can be a single founder, a team, in a business or a student. As long as you have a product idea already in mind, you’ll get plenty of this overview. I’m confident that these 3 days will save you 2 years of work and will help you manage your expectations moving ahead with your idea. You’ll meet other entrepreneurs, which is essential to a journey which at times can feel really isolating. Community is everything in an entrepreneurial journey.
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Image: Good Night Lamp