Why you should never do a hardware startup for the money

Duncan Turner, general partner at SOSV and managing director at Hax

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.

Duncan Turner is the general partner at SOSV and the managing director at Hax. You probably recognize him from Wired’s documentary, “Shenzhen: The Silicon Valley of Hardware.”

In this episode, Turner talks about the Hax program, what industries excite him, and his biggest advice for hardware startups.

Could you tell us about your background?

I originally studied industrial design and engineering in London and stumbled on China by chance, helping out on a two-week project (I was consulting for another company then). Those two weeks turned into two months, then nine—and that was about 16 years ago. I’ve spent most of my time here in China, founding a business and raising money.

I ended up moving myself and our R&D team out to China because we found it’s much quicker to develop the hardware we were working on at the time. So, I built the business, which had gotten rather large, but we had a few catastrophes along the way. That made me reassess things.

I then went to work for a company I’d always admired called Ideo, a global consulting firm. I was helping them with consumer engagement projects for either large Chinese factories trying to build their own brands or Western brands looking to enter the Chinese market.

Through my experiences there, I encountered SOSV, which funds all of the operations for Hax, Chinaccelerator in Shanghai, IndieBio in San Francisco, RebelBio in London, and Food-X in New York.

What does the Hax program look like for aspiring hardware entrepreneurs?

We get a huge number of applications online. So, we’ve noticed that the companies that really stand out are the ones that use their network or other means to get to us.

Once you’ve gone through the due diligence process, you’re in the program. You get US$150,000 in cash plus US$100,000 in services. That’s one-for-one what it costs us to put the program on.

It’s a two-stage program. You spend four to eight months co-developing technology with us in Shenzhen until you have a working proof of principle and a benchtop prototype. The prototype has all of the bill of materials at production grade sorted out. And feasibility-wise, we’re 90 percent sure it can be manufactured the way it is.

Once we’ve seen a company go through that and the milestones we set, we feel confident in introducing them to other investors. We take them to San Francisco (if they are not a Chinese company) and embed them into the ecosystem there. We predominantly help them with marketing, traction, and communication with angels and VCs in Silicon Valley.

We typically invest significantly in these companies, but we generally don’t take board seats.

How do you deal with a situation where a company that’s been accepted into the program doesn’t perform?

Honestly, there’s a spectrum of different answers there, depending on the reason.

Are there some themes of companies that you find particularly exciting?

What advice could you give to hardware startups?