After five months of toiling 14-hour days, making a hardware IoT product from scratch and spending thousands of dollars of 'other people's money', my two co-founders and I woke up with a jolt.
It suddenly dawned on us that our product would not sell. And unless we did something about it, the startup was doomed. This was December 2014.
Let me backtrack a few months and give you some background.
In July, we started building smart internet connected switches that learn from user behaviour and automate all the electronic appliances in a home. We decided to name the company Lumos. (Yes, I am a big Harry Potter fan!)
We took some pre-seed investment from an angel investor and headed off to our alma mater IIT Gandhinagar to get incubated. We converted a lab into our office space and the Lumos saga started!
The Lumos Team at work
We built like crazy. Our first prototype, which automated lights, was ready in 45 days.
The second prototype, which could automate lights, fans, ACs and water heaters, was out in another month. This is really fast according to hardware standards.
In mid-November, we got a product designer on board to design the final product. In December, we were already in talks with investors to raise the next round of funding.
We were on track to have a market-ready hardware product in less than one year. We were pleased with ourselves. The investors were pleased with us. Life was a bed of roses.
Until it was not. We had underestimated the work that goes into making a market-ready hardware product. We had overestimated the demand and utility of our product.
We were wildly wrong about the price at which we thought our product would sell. And when all this realisation came together, shit got real.
January 2015-April 2015
We were forced into a deathly spiral of pivots that almost killed the company. We made bigger mistakes. We left IoT as a sector. We lost a co-founder on the way. The pivots are a long story. I'll save it for another day.
Now that you have some background, here are the top 5 mistakes we made in Lumos and what we learnt from them.
Mistake 1: We were neither experts nor target users of the product that we were building.
We had never used the existing home automation products in our homes. We were not experts in the IoT sector. When you are new at something, you give yourself the famous Dunning Kruger pass on your decisions.
And we did give ourselves the Dunning Kruger pass. Had we been users of existing smart switches, we would have known that the incremental value that our product was offering was quite low. Had we been experts in IoT, we would have known how to price hardware and the difficulties in building it.
By avoiding this mistake, you can avoid a lot of other mistakes which happen as a result of this one.
Learning:Work on something where you are either an expert or a top user. If not, become an expert/top user.
Mistake 2: We did not take due diligence on the idea before we started building the product.
We did not understand the market and competition well enough. We also did not try to figure out the personality of our prospective customer. And whether that customer was looking for the value that we were providing.
We did not question whether we would be able to provide that value in that first place. (Machine learning cannot read the human mind. Not yet!).
Learning:I learnt this very useful method in an accelerator. Make a thorough list of hinge-breaking assumptions for your market, product and competition. Hinge-breaking assumptions are those that can make or break your company. Rank them according to probability of the assumption being wrong and subsequent risk to company. Start validating from the top while building as less as possible.
Mistake 3: We let sunk cost bias affect our decisions about pivoting.
It was not that we were clueless about the problems in our product. We had doubts in our minds. In a startup, you almost always have doubts. But we had built so much. We were in love with our product. And we were not ready to ask the difficult questions.
Is it okay to be doubtful about your product? Is it okay to voice your doubts and bring the team morale down?
Or make your co-founders feel that you are not as committed to the idea and the vision as they are?
It helps to be transparent about your doubts with co-founders in the long run. It would have saved us a couple of months and some money.
Learning: Build a culture of transparency in your company. Encourage dissent among co-founders and deal with it objectively.
Mistake 4: We were trying to do everything for everybody.
We were making switches that could automate your lights, fans, ACs and water heaters. We would have tried to automate your TV, Fridge, Oven and Car as well had it been feasible to do so.
We were pitching power savings as well as luxury. This made the product and the pitch very complicated.
Learning:As a startup, you are constrained in resources. So it is always better to identify and solve one problem very well instead of solving n problems in a so-so way.
Try to be a drug for your customer instead of being a vitamin.
Mistake 5: We underestimated hardware.
Building a successful startup is hard. Building a hardware startup is 10 times harder.
Pebble, with all its Kickstarter success, is still in troubled waters.
Building a prototype is the easiest part of building a hardware startup. The real challenge comes in product design, production engineering, manufacturing, distribution and marketing/sales. And you need to have friends in China.
Considering all this, we were not the right team to build a hardware company.
Learning:Understand what you are getting into if you are starting a hardware company and plan accordingly. Get experienced people on your team or get into a hardware accelerator like HAXLR8R.
Eventually, we ended up leaving hardware and IoT and decided to build something that solves a problem that we had experienced.
Since Gandhinagar (where Lumos was located) does not have many startups, interacting and sharing experiences with other entrepreneurs was always a big problem for us. Also, we had to subscribe to a lot of blogs (crowded inbox) just to stay updated with top content on entrepreneurship.
We decided to build FundaMine to solve this problem.
FundaMine is a community for professionals to stay updated and interact with others in their profession.
Currently, FundaMine has communities (mines) on Entrepreneurship, Product Management, Android Dev and IoT. Do check it out!
Drop me a line at firstname.lastname@example.org or tweet to me @YashPKotak if you want to discuss anything in detail.