I follow Chris Gammell on Twitter. He does The Amp Hour podcast with David Jones, writes a blog called Analog Life, contributes to a new site called Engineer Blogs, and even helped to start the 555 design contest. A very busy guy, and I enjoy reading his posts.
I happed to have worked for HP at one time. So I was especially intrigued when he tweeted “Starting a Technology Manufacturing Company -- Now and Then: (Alternate title: Could Bill and Dave start HP in 2011?)”
He asks the rhetorical question: “Why not go out on my own and make something?” Followed by five points contrasting now vs then, to support his thesis that it is now much harder to start a technology company.
It seems to me that he is trying to justify why he is hesitating to follow his desire to start his own business. I’m going to respond here, in longer form that a comment on his blog would allow, on each of his points. Maybe I can convince him to take the leap (probably not).
I’m not going to quote his post extensively, go read it for yourself Starting A Technology Manufacturing Company — Now and Then, then come back for my take. If you don’t read his post, some of my examples won’t make sense.
1. Startup costs are very high.
Startups don’t need to buy parts in 50,000 unit quantities. Bill and Dave didn’t build 50,000 units to start. They hand built small quantities in a tiny garage. Still a good role model for today. Start small and bootstrap.
You can still do it now, just like Bill and Dave did then. Adafruit and Sparkfun being two examples of how this can be successful today. SMT parts are cheaper than through hole. 5000 10K through hole resistors cost $85, while 0603 would only cost $25. Using SMT makes your inventory cheaper, relative to the inventory that Bill and Dave had to stock.
In my opinion, SMT is easier to assemble than through hole, for designs with equivalent numbers of parts. In small quantities of boards, it just takes some solder paste, a stencil, some tweezers, a steady hand, and a toaster oven. All of that can be had for cheaper than a decent soldering iron, a roll of solder, and some diagonal cutters. And yes, you can solder your boards in a toaster oven at first.
Thanks to SMT, the cost advantage is now.
2. China, India, Anywhere Else.
Logistics are indeed different. But with the Internet and UPS overnight, the advantage is now, not then. You don’t have to be in Silicon Valley to succeed any more.
We haven’t completely lost our ability to manufacture in the US. I’m lucky to be near Screaming Circuits for building higher quantities than I can handle myself, at least until I can afford a setup like Autosportslabs.
It is easier than ever to get inexpensive high volume manufacturing done overseas.
Everywhere is much closer today. Advantage now.
3. Funding is different.
You can bootstrap as easily now as then. It may even be easier because the Internet helps you reach customers more easily. See: Autosportslabs, Adafruit, Sparkfun.
Getting venture funding can accelerate growth, but you give up some control. It is a tradeoff, but it is an option that was less available then than now.
Different yes, but advantage now.
4. The newest ideas aren’t as simple as they used to be; the highest levels of innovation are increasingly complex.
Comparing a cost reduction for oscillators to an advanced semiconductor innovation is not a fair comparison. Their oscillator was not at “the highest levels of innovation” back then. More on the order of Sugru, an innovation in moldable expoxy.
We are in the midst of an explosion in low cost, very small sensors, and in highly integrated microcontrollers that are also quite low cost for the functionality they provide. Free and open source development tools greatly reduce the cost of development. Lots of possibilities there for innovation.
Home health care and alternative energy are two other areas that are in the midst of a revolution, plus the government is providing funding in those two areas.
Just my opinion, but there are always plenty of opportunities for innovation.
5. More mega corporations in place you need to battle against from the beginning.
I have to start by tossing the graphene innovation off the table. It’s shooting too high relative to how Bill and Dave got their start.
So lets focus on small and nimble vs large corporations.
I’ve seen how large corporations work from the inside. They won’t even notice your $1M idea. They have no interest in your $10M idea. If your idea is in the $100M range, AND it could be part of something bigger they are working on, then they are more interested in licensing it or acquiring the company than trying to put you out of business. I’ve worked on $200M ideas that were rejected because they just weren’t big enough to bother with.
A large corporation isn’t nimble enough to take advantage of emerging opportunities. It can easily take a year to just get through the planning and approval process to launch a new initiative. Another year in development and preparing the launch of the product. And then a large corporation will have to sync the release to their product release cycle, which occurs only once or twice a year (“back to school” and “holiday”). In a small company, you can have a product out much more quickly than a big corporation. A small company can’t help but be more nimble.
The past does not have a monopoly on being nimble. The present doesn’t have a monopoly on monopolies.