Before building a startup, understand the penalty for failure, says this investor

This article is part of Tech in Asia’s partnership with The Jay Kim Show where we publish the revised transcripts from the show’s podcast interviews with top entrepreneurs. This is heavily revised from the original show transcripts. For the full interview, go here.

Benjamin Joffe is a general partner at Hax, an accelerator for hardware startups. In my interview with him, he discussed why many investors shy away from hardware startups. Having a front-row seat in China, he also described how things keep getting better in the country every month.

But Joffe also introduced a new perspective where entrepreneurs should understand first the importance of safety nets before joining a particular ecosystem.

Learn more from our conversation below.

Who is Benjamin Joffe?

I’m a partner at Hax, an investment company specializing in hardware and early-stage IoT startups. We run an accelerator program in Shenzhen and San Francisco, and we try to be a full-stack accelerator to support startups from the very first prototype all the way up to scaling. So far, we’ve done about 200 investments.

Quickly about my background, I’ve been in Asia since 2000. I’ve worked in Japan, Korea, China, Hong Kong, Singapore, and Malaysia.

What brought you to Asia? Have you always been in tech and hardware?

When I was studying engineering, I picked up the Japanese language as a minor. I’m originally from France, but when I graduated, I wasn’t too excited about working in France and joining large companies or consultancy firms. Instead, I decided to move to Japan to combine my interests in the language, strategy, and technology.

So, I worked in Japan for a few years, initially covering different technology sectors and then telecom. Then, I got curious about Korea, China, and one thing led to another.

I joined Hax shortly after it started in 2011. At the time, I was running my own consultancy firm in Beijing. On the side, I had started some major investments.

I moved to Shenzhen and I discovered the ecosystem. I was just blown away. What I had seen in Japan was like a mobile revolution. What I had seen in Korea was broadband, online gaming, and social networking revolutions. All those revolutions were very, very local. But in Shenzhen, here was, for the first time, an ecosystem that had direct global relevance. It was like a secret garden.

All the big companies were making their stuff there. But for startups, it was really a novelty to be able to access that supply chain. And that’s what Hax tried to enable. I felt this was really a chance to combine global ideas, innovation, and entrepreneurs with the best ecosystems that were mostly the property of big companies.

What is one thing you want to personally share with the startup community?

I’ve been researching innovation ecosystems for several years. I wrote a few articles about understanding what really makes Silicon Valley different or the opportunities in various locations. Initially, I broke it down in a number of parameters: market size, capital access, infrastructure, regulations, and talent. But you cannot really change most of these.

A parameter that eluded me was entrepreneurial culture. People say some cultures are risk takers and others are risk averse. And what I recently understood is that people are encouraged to be entrepreneurs, but the risk in doing so depends on where they are. And it’s not just about culture. It’s about safety nets and the penalty for failure.

What can you say about investing in hardware startups?

What are some of the things you guys look for before making an investment?

What excites you about China or the hardware industry?