Lowering the Risk of Starting a Hardware Company

Friday, February 12, 2016: 1:30 PM-4:30 PM
Marshall Ballroom South (Marriott Wardman Park)
Milton Chang, Incubic Management, Los Altos Hills, CA
Close to $20 billion of venture capital is being invested in the US per quarter. A closer examination of the statistics shows only a minuscule fraction goes into seed-stage hardware startups!

A startup company cannot succeed unless it can get substantial investor backing, and it is unlikely to get that support without proof that the business can succeed. Professional investors are risk adverse, they want to see a working prototype and positive feedback from potential customers to minimize technology and market risks.

If we are to substantively address the valley-of-death issue, we must work in concert to provide a supportive ecosystem that enables high-potential startup companies to get to a stage where they can get investor buy-in in order to cross the chasm from technology development to commercialization.

The responsibility for building a successful business clearly lands squarely on the shoulder of the entrepreneur. On the other hand we can be more helpful if we view science, engineering, and commercialization as a continuum and encourage academia, established companies, and government to work in concert to provide a supportive ecosystem that enables high-potential startup companies to reach that threshold.

I will describe a process for aspiring entrepreneurs to enhance their work career and also minimize risk when starting companies that is based on my personal experience and observations and that has proven to work.

Universities could encourage and make it easier for students to gain knowledge in multiple technical disciplines, hands-on experience, and business and management knowhow to better prepare them for industry and for entrepreneurship.

Established companies can collaborate with universities to expose students to the real world, provide mobility within the company for employees to practice intrapreneurship and engage in commercialization activities.

Government agencies can do more with the Commercial Readiness Program by encouraging program managers to pick winners and losers in the technologies they fund. Policy makers can also do more under the JOBS Act, and enact additional tax incentives to encourage direct investing in startup companies.

A rising tide lifts all boats. Having more successful startup companies creates jobs and maintains a vibrant economy to benefit all of us. We collectively must work to improve the ecosystem to enable more startup companies to succeed.