"The big difference between a hardware company like us, and a software startup, is that you can't ship a minimum viable product," points out Tarun Metha, CEO and co-founder of Ather Energy, a Bengaluru-based company that's been working on an electric smart scooter. The company, which has raised funds from a number of investors including the Flipkart founders, Tiger Global, and Hero Motorcorp, started testing the smart scooter in 2015, with a targeted launch date in 2016, but things haven't gone exactly as planned.
"With hardware, you can't 'move fast and break things', it does not apply," says Mehta. "Last year was pretty interesting for us, and we're still in a formative stage, getting in to the details. Once you get to the concept, from there to production is a pretty long journey."
Today, Ather has reached the stage of final concept testing for the scooter that will ship with an accompanying app for managing the battery and some other features like theft protection. The company hopes to start shipping the scooter this year, though, understandably, it's wary of making a public commitment at this point.
Part of the problem is that there's no ecosystem in place in India to enable this process, Mehta says. "For many things, we are our own vendor - for the battery, charger, many of the subsystems," he explains, "and so all of this has to be tested thoroughly before we can sell to the consumers."
Talent is a bottleneck
This gets even more challenging, he says, because the team at Ather has had to don many hats, going from design and concept, to working on production. "Finding the right talent to work at Ather has been challenging," he says. "There isn't a strong culture of designing and building products locally. This is a mindset, not a job description, and finding the right guys hasn't been easy. A lot of them we get from outside the auto industry."
With a relatively small hardware ecosystem, there's a shortage of know-how on design and production, and this is something even more established players struggle with. Intel India Director, Operations and Strategic Relationships Jitendra Chaddah had earlier told Gadgets 360 that the startup ecosystem in India is very software oriented.
"You need equipment, reference designs, test equipment," he explained, "you need the know how for design and validation, and that's not easy to come by."
Hardware needs less money - in the long run
That's not to say that there aren't companies in India working on hardware - Ather is just one of many such startups that Gadgets 360 has spoken to recently, and in just the last few months, we've met companies making telepresence robots, smartwatches, smart lights and smart home fixtures. Tork Motorcycles is a Pune-based startup working on a smart motorcycle that uses software for predictive maintenance and range optimisation, while Coimbatore-based Spero is in the process of releasing an electric cycle.
But that's still a small number compared to the number of software startups we meet - perhaps a reflection of the high cost of getting a product ready.
Ather's Mehta disagrees. "It's a commonly held belief, but it's wrong," he says. "Quikr has raised $350 million, but there's no electric vehicle that has raised so much money. Tesla got to production with much less - and its valuation came far lower than Uber. It actually takes less capital than a similar sized software company, because your hardware is your moat."
"A good software idea will take less money to get started, but once the idea is shown to work, it's easy for others to replicate it and they have to spend a lot of money on competition," Mehta continues. "Hardware needs less money in the long run, but to get started you do need more, and yes, that can be a challenge."
Part of the problem is that many of the traditional metrics that an investor would look at, such as users, prototypes, and so on, aren't readily available in this space. "Ather has raised $43 million (approximately Rs. 293 crore), without any revenues, or even users," Mehta says. "Getting this was a big challenge, and one common mistake that some people make is to get sucked into showing revenues. Then you have to start making compromises on the product, by taking preorders you have to rush to meet a deadline instead of getting the actual product ready. That's why we didn't go the crowdfunded model. Look at international companies like Skully Helmets, or Pebble, which had great ideas, but couldn't be sustained."
The Ather Energy team
Photo Credit: Ather Energy
Building the ecosystem, one company at a time
That said, Mehta is hopeful about the future of hardware startups in India. By focusing on nurturing local hires, and building up the ecosystem, companies like Ather and others who are getting started today are laying the groundwork for an ecosystem of talent that will be able to create a greater hardware industry in the country.
"Right now, the whole ecosystem is focused on the big OEMs," he says, "and the vendor ecosystem is also therefore focused on margins rather than innovation. As more and more smaller companies come into the picture, there will be a lot more opportunity available."
At the same time, Mehta isn't too sure that initiatives such as make in India will directly impact companies like his - at least in the near future. "The idea is a really good one, and it will help create conditions on the ground that can foster innovation, but it's not directly beneficial," he says. "It's more symbolic in nature, signalling to investors that they should consider hardware. Because the fact is that government support will slow you even further, apart from subsidies. Government speed and frequency doesn't align with the needs of startups."