The Hardware Puzzle
A raft of startups
is combining India’s celebrated software skills with emerging capabilities in
product design, with solutions focused on enterprises rather than consumers
When three Bombay-IITians decided
to turn their fun innovations in drones into a hard core business of building
and selling them in 2016, it almost didn’t get off the ground. Their Drona
Aviation ran into one air pocket after the next. First, there were no clear
guidelines on the flying of drones in India at the time, which effectively
meant a ban, and then a glut of Chinese products saw local players crash-land.
To regain some altitude, Drona’s
founders Prasanna Shevare, Apurva Godbole and Dinesh Sain tried multiple routes
— including providing their drones to the local fire brigade and the Coast
Guard — before turning the company into a DIY platform where everyone from
engineering students to interior designers can build customised solutions with
its hardware and software tools. In the past two years, Drona has sold nearly
2,300 drones. It is battling investor indifference and regulator sloth to build
a viable hardware business in India. It isn’t easy.
India’s hardware companies have,
over the past couple of decades, flattered to deceive. Starting with laptops
and, recently, mobile phone handsets, companies have promised much, but
delivered little. Stymied by slow regulatory approval and paucity of funds,
many firms shut shop. The rapid growth of China as a hardware manufacturing destination
hasn’t helped either, as companies have voted with their wallets and focused on
making their products there.
Now, a raft of new Indian startups
are having a fresh go at hardware. Rather than chase the high-scale, high-cost
consumer market, these ventures are striking out in a different direction. They
are marrying India’s inherent software skills with emerging capabilities in
hardware design, and supplying to enterprises and industries.
“Dumb” hardware boxes can be
easily replicated by large-scale manufacturers, leaving Indian firms struggling
for differentiation. Adding a layer of proprietary software or analytics helps
build a more robust solution. Arvind Lakshmikumar, CEO of Tonbo Imaging, which
designs, builds and deploys sensor systems and is backed by WRV Capital and
Qualcomm Ventures, agrees this is the right mantra. “Unless your hardware is
coupled with a strong software play, few ventures will scale,” he says. His
firm’s rise — over much of the past decade — is largely due to this hardware-software
combination. “Even though hardware is critical to military deployments, we
realised that we needed to add a software layer to our package.” It added a
command and control software module and a centralised intelligence platform to
its hardware to ensure that its technology stayed unique.
The New Wave
In the $2 trillion global market
for hardware and electronics, India is a bit player with barely 2-3% share,
according to industry estimates. “While talent and a large local market are
available, what has stifled growth is the lack of an ecosystem,” says Sateesh
Andra, cofounder of early-stage investor Endiya Partners. “Critical pieces like
fast prototyping and large-scale manufacturing are missing. The high cost of
capital for a lowmargin industry, combined with prohibitive taxes and levies
makes this a challenging market.”
Since 2014, Avinash Kaushik has
been running Revvx, one of the few startup accelerators focused on hardware,
and pushing six or seven ventures through a programme to hasten them along the
development path. At least one startup from each batch has bagged institutional
funding, he says, even as they seek to ride this connected hardware-software
wave.
“The age of the dumb device is
over,” says Kaushik. “Today, it comes with data and connectivity and this smart
hardware is providing many more opportunities to entrepreneurs.” While
supply-side companies ranging from Robert Bosch to Intel have driven this new
hardware movement with funding, testing labs and other support, much more needs
to be done to drive demand, he says.
“Hardware, software, robotics,
artificial intelligence and machine learning are all coming together in this
new wave,” says Mahesh Lingareddy, cofounder of Smartron, a startup that got
off the ground with funding from cricketer Sachin Tendulkar. In July, it
announced the launch of a smart electric bike, under its Tronx subsidiary, that
would allow users to set rides based on fitness goals and monitor them on their
phones. “Doing all this is time- and capital-intensive. Five people can’t build
this in their apartment.” Smartron wants to focus on a range of devices powered
by internet of things and, in the process, stay ahead of the tech curve. The
other side of things: it still hasn’t got the VC funding of $25 million that it
crowed about two years ago.
However, companies are slowly
catching the eye of investors. While the number of hardware firms that got
funding may still be tiny compared with VC favourites like online retail (which
attracted 522 deals between 2011 and 2018 according to data tracker Tracxn),
fashion
(302) and fintech (794), the last
couple of years have seen the tide turn ever so slowly. Nineteen hardware
ventures were funded in 2017, according to Tracxn, with investment touching $50
million.
“We don’t make investments in
startups because they call themselves hardware or software company,” says
Manish Singhal, cofounder of early-stage fund pi Ventures. “We back a company
based on the problem they solve.”
Entrepreneurs leading new-age
hardware ventures say there’s a disconnect between investor expectations and
reality. Hardware takes longer to gestate, is costlier to run, thanks to steep
spending on R&D, and can be run off the road by unexpected factors,
including the arrival of cheaper, mass-made Chinese products.
These are the problems that Rahul
Shingrani, cofounder of medical devices venture Ten3t, faced since the firm was
founded in 2016.
Ten3t took many months to get
right the design of its triangular, wearable health monitoring device. “It took
eight proofs of concept before we were confident of putting the ninth one on a
patient,” says Shingrani. Along the way, Ten3t dealt with challenges most
hardware startups are familiar with — finding designers, components and form
factors that balance their thin budgets with customer and regulatory demands.
Ten3t is on the move now. The firm wants to lean on its combination of
hardware, software, networking and other technology to predict illnesses
earlier, faster and more accurately. “Consumers are taking greater control of
their lives. They want to be able to predict illnesses and deal with them,
rather than battle for a cure after the onset,” says Shingrani. “We want to
pick up health deterioration days, if not weeks, ahead. We have the
intelligence to do this, now we need more deployment.”
Currently Ten3t is in 10 hospitals
and is expected to grow tenfold in the next six months to a year, as the
hardware matures. The founders are also considering pushing directly into the
consumer market with their products.
Taranjeet Singh Bhamra knows how
tough the road is.
“The biggest challenge in India is
going from a working proof of concept to productising your hardware,” says
Bhamra, who cofounded AgNext, an agri tech hardware firm, in 2015. It can’t use
an off-the-shelf solution as its products are complex, like handheld device for
soil spectroscopy and to test the curcumin content in turmeric. “We have to
custom-build hardware to provide data analytics for this business,” he says.
For a particular product, AgNext had to ship its design to a contract
manufacturer in Taiwan to speed things up.
Hardware development is a
challenge because unlike software, skills required for it are not easily
available in India. It is hard to find board designers, experts in chip-level
work and people who can piece together the external shape of a product.
Another challenge is that
customers in India don’t want to pay for hardware, preferring software and
analytics that the solution throws up. In AgNext’s case, a customer was
disinclined to pay ₹75,000 up front for a particular hardware per farm, forcing Bhamra and
Co to devise a cheaper solution, an IoT hub to collect data from fewer units.
Building a hardware-centric
business can be costly. Lingareddy claims to have invested over ₹200 crore in R&D. “India lacks a strong product and brand
ecosystem,” he says. “We want to change this by not building standalone
products, but an entire platform.” Its investments, such as in smart switches
and locks, are all leading to the big thing: “We want to launch a smart home
platform by early October.”
Kapil Agrawal and Ankit
Karamchandani dislike calling their startup RedSky Tech a hardware company at
all. “We are a market research company that uses hardware as an integral part
of our technology stack,” says Karamchandani. However, the firm’s hardware that
plugs into any point-of-sale terminal at a grocery store (some seven million of
them and counting in India), allows the firm to convert dumb terminals into
cloudready devices and provide analytics and data as a service to customers.
The firm is eyeing an expansion in Southeast Asia and Canada.
The rise of India’s new-age
hardware startups may have just begun.
Rahul
Sachitanand
ETM 29JUL18
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