Stay Scrappy, Hackers! Hardware Startups Versus Goliath

A toast to all the hackers out there who like to do it scrappy, who fight hard to get your products to work, who make your own tools and testing jigs and assembly lines in your basement, and who pound the pavement (and the keyboards) to get your product out there. Here’s to you (*clink*).

I had the fortune of a job interview recently in a big faceless company that you may have never heard of but probably use their stuff all the time. They make billions. And it was surreal. This article is about what it’s like for a scrappy start-up engineer to walk into the belly of the beast of an organization that counts its engineers in the tens of thousands. For obvious reasons, I can’t go into specific details, but let me paint for you in broad strokes what you, the hacker and entrepreneur, are up against.

When you have a company that’s been around for decades and whose yearly sales volume has more digits than some countries, everything is a few orders of magnitude bigger in scale. People, resources, volumes, everything.

People

It starts with noticing belt buckles. Why? Because belt buckles indicate two things; the people are wearing slacks, and they have tucked in shirts. Some culture shock there, but I rolled with it. But this culture extends beyond the waistline; everything is clean and cared for. You don’t have to empty your own trash can? Mind. Blown.

If you’re a solo founder of a company, you handle the business, sales, product development, procurement, assembly, shipping, support, etc. Any one of those things is a significant learning curve and a lot of work. Big companies have departments that number in the thousands for each of these aspects. They can specialize down to a single component of a sub-module of a product. There’s an engineer whose sole responsibility is evaluating a new chip and mastering it so that she could be the chip guru for a new product. There are people who only test products, people who only write documentation, people who only handle certifications.

You know that at the end of the day, the success or failure of your baby depends on you, and getting hit by a bus will be catastrophic to the company, while in a corporation (and this actually came up in conversation), the bus would have to plow through the entirety of one of their buildings. And you have an attitude that is completely aware of that; you’re not coasting through the work week.

You, the scrappy hacker, are doing the job of scores of people.

Resources

This 'acoustic chamber' lets me calibrate the microphones on our devices. It's not perfect, but it was <$200.
This ‘acoustic chamber’ lets me calibrate the microphones on our devices. It’s not perfect, but it was <$200.

During the interview, I bragged about the tools that I had hacked, like building a reflow oven that I used in production, or the mini-fridge I used as my environmental testing chamber, or the cooler I used for an acoustic chamber. For only a few hundred dollars I had put together a pretty good assembly line, testing facility, etc. I wasn’t sure if they were impressed, but on the tour afterwards I realized that they were probably confused why I would bother spending my time making tools instead of buying them.

We passed an SMT assembly line with top of the line equipment. We passed (for a good 10 minutes of walking) ONE of the product testing facilities. We passed the environmental testing facility, where their new equipment was about to be replaced with even newer and fancier tools. They didn’t even bother showing me the the other big testing lab because it was too far to walk. They talked about the preliminary focus groups they’d done, and the level of space, capital, time, and money that were being dedicated to the project. Compared to these guys, you, hacker, are making things as complicated as cell phones with what amounts to banging two sticks together.

Volumes

When you’re this big, an email from @bigcompany.com carries weight, and people jump at the opportunity to be your customer. They had direct access to engineers at partnering companies, and engineering samples for components that were more sophisticated and beautiful (and unavailable to the plebs) than transparent aluminum. When you are talking in volumes as big as they are for rolling out new products, whole new tiers of pricing is revealed, and calculations become entirely different. They told me about how they were doing a million dollars in revenue a year on a tiny product they stopped developing decades ago. I would LOVE to have a million dollars in revenue on my flagship products!

quote-scrappy-solo-engineerLet’s walk through an example. Say you release a new product and START with a volume of 100,000 units. Let’s throw out some more nice round numbers to make calculating easy. Let’s say the retail price is $200, making the wholesale $150, and the landed cost to the manufacturer $100. So to roll out this product, you’re looking at $10 million dollars in inventory alone, and that’s just to start. Of course, they anticipate yearly volumes in the millions of units, so let’s say 1 million units for a year. $100 million in inventory, with a profit of $50 million. In order to break even after a year, they have to spend $50 million or less on development of the product and marketing. Let’s say our environmental testing lab technicians are $75k and there are 2 of them. (completely made up numbers here; I have no idea how much lab technicians make). And let’s assume the product takes a year to develop. That’s $150k out of $50M. They’d be spending 0.3% of the first year’s profits alone on environmental testing. Yes, I know they won’t be working the full year on that product, but that only makes my point stronger. You, the scrappy solo engineer, are only allowed to dedicate the same 0.3% of your resources towards environmental testing, and you probably don’t already have your own testing equipment so you have to procure that somehow. If it takes you a year to develop your product, that leaves you 3/4 of a day to make sure that your product will survive environmental conditions throughout the range of the product’s uses. You just can’t put the same level of detail and rigor into product development because you’re operating at a completely different level of volumes.

So while you have insight into every level of your business, every cost and fee, you don’t have access to the kinds of things you can get when working in volumes this large. You can’t spend as much time worrying over every aspect of the packaging and getting it to be Apple Store ready. You can’t even get conversations with people who can help because you’re dealing in volumes for which they cannot be bothered.

Customers don’t care

In general, customers don’t care about how resourceful or nice or talented the product developers are. They want the product to look great, work great, and be cheap. You, the scrappy solo engineer, are competing against Goliaths with infinitely more resources, but when placed side by side on the retail shelf (if you’re lucky enough to be able to get there), the customer has no idea. They can see one looks more polished and cheaper, so they pick that one. They don’t know about cost structures and volume pricing, or development costs or tool amortization, or fixed certification costs. It’s a classic David and Goliath battle, except the crowd doesn’t see an underdog or a mismatched fight.

So excited to see my first product in retail. To everyone else, it's just another thing on the shelf.
So excited to see my first product in retail. To everyone else, it’s just another thing on the shelf.

This big company didn’t start off so big 100+ years ago. They, like all companies, started scrappy and kicked and fought their way up and amassed resources and acquired value until they became the behemoth they are today. There are a lot of people who feel comfortable nestled in the security of a big corporate culture. They look at entrepreneurs and hackers like they’re crazy (we kinda are). But this is what we’re up against, and the numbers paint a scary story that makes nearly impossible the American dream of becoming a wealthy entrepreneur who builds his empire from scratch.

So, dear hacker, let me finish this winded toast by pointing out your advantages. You move fast; you identify a problem and build a solution faster than a big company knows that there’s even a market. You know your customers and form relationships with them, few as they are. You know the ins and outs of your business and can run a tight ship with little waste. You are passionate about your products and take great pride in what you’ve accomplished. You have the potential to get rich and famous. And you are welcome here any time with your sweet hacks.

Let us know how you’ve gone up against the big guys and how you’ve cobbled together your own tools.

64 thoughts on “Stay Scrappy, Hackers! Hardware Startups Versus Goliath

  1. I scooped Google once. They reacted very nonlinearly.

    Years later, I came out on top for a NASA sensor procurement, ahead of a better represented startup. That one got really surreal. They tried to tell people I was one of their engineers when I caught them doing a presentation of my tech at a science conference as if it was theirs, so I got on stage, slammed their microphone down, and shouted the rest of the presentation instead of them. This one I actually have video of: https://www.youtube.com/watch?v=RnRSu9LjV7E

    Years later, I got on a bigger company’s turf. They reacted by throwing a safety audit at me, which I passed better than they did, and then stopped talking to me.

    Not much to say really. It’s all a lot of work. There are some moments in which you can feel the triumph, though.

    1. Most big companies had to start somewhere…basement/garage.. Whether it be a single person or a team, they were smart about where to spend their capital and how to manage/expand their human resources. Most importantly they have to stay competitive..which can be very hard to do when you go up against a Goliath that is buying massive volumes of a certain resource. All about scalability right? lol

      1. Or…

        Most large companies started out small.

        Then they took out loans to buy out their competitors and concentrate the supply of the good / service they sold.

        Next they used cash to lobby law makers to make their product required to be purchased by law and to institute as many hurdles for start-ups as possible.

        Sooooo many industries…

    1. Or, start out with products that won’t sell in volumes that Goliath would be interested in. If you only have the capital to make 1000 devices, start with a market where there aren’t millions of people who would buy it at Wal-Mart, but a couple thousand people who would be glad to pay the higher cost of a short production run to get their hand on your niche product.

      1. You hit the nail on the head!

        It doesnt make sense for a one man show to try and outpace a giant corp with a product for the masses. Take a market they arent interested in, and grow from there

        1. Isn’t that what every startup (trying to get investment) is trying to do, though? They have to show that their market has the potential to be giant, which means that their market has to be attractive to big corps as well.

          1. Depends on what you are trying to do. Your recent background looks to be more geared towards organizing to bring a product or related products to market but do you realistically think that the market for digital ice fishing tip up detectors is in the billions of units per year? It’s a neat idea and it certainly can generate profit if enough people find it useful and the margins are reasonable but it still has limited market potential. That said, the group of investors you gathered must have believed in the concept enough to design, refine, manufacture and market it and there is hopefully enough of a return to make all of that time and investment capital worthwhile.

            If you are seeking VC investment, then sure, you want to buy the next hot thing that is going to change the world. But that’s not the only type of funding out there and the general goals of each differ, to a degree. Crowd funding is completely different from VC, as you are more selling a concept of a potential product to potential backers/customers (not investors). Angel investment might not have the exact same expectations as VC would but it is also generally committing less in terms of capital. Then there is murky actual crowd investing market now that is due to the SEC rule changes that normally required private citizens to be a qualified investor.

            Most people posit themselves as being ready to “change the world” or “be the next ABC company” but that is more salesmanship than reality in the vast majority of cases. Plus, the people who are best equipped to create a brand new venture are rarely (there are exceptions) the best equipped to take it to a medium sized venture or a large venture.

            Most legitimate investors cannot realistically expect to hit everything out of the park, even if they pay for the majority of the returns. It just doesn’t happen. But you can generally still make good money hitting a series of singles and doubles with some striking out. Also, companies that sell themselves to investors well don’t always execute well for all sorts of reasons. Just look at the glossy crowdfunding projects that raise a ton of money and have no idea how to execute it or are outright fraudulent and then crash and burn for examples of this. The same happens to VC backed ventures too, they are just generally less public about it.

            The majority of companies out there by number are not megacorporations. They are small businesses that will likely never be the next multinational business. But you can do very well by finding a niche and serving it well and expanding organically over time. Not every company has to have a stated goal to eventually compete with Apple or Alphabet to be a worthwhile venture. That said, it still helps to have stretch goals but you have to be realistic at the same time.

            Your background with both larger organizations as well as the closer to the ground, smaller ventures speaks differently to you?

    2. Good Grief… You gave any of the Goliaths” who may have happened across your comment a fuzzy warm feeling. While they may not have played any role in creating such apathy, they understand that in the long run they will benefit from the lack of competition. In the event you follow your own advice, how do you plan to provide for your sustenance; work for one of those Goliaths at low level, low paying position?

    1. It’s supposed to sound like a lot of companies. I was very careful not to violate an NDA and give out details that could tie it to a specific organization.

        1. An NDA can extend beyond the term of employment, and therefore you can still be legally liable.
          We all start by entering the workforce as young and ignorant. Thus, often signing things that seem harmless early in our careers that can have unintended consequences later.

          Find a few local contract lawyers to talk with early, as the few hundred bucks you invested will save you a lot of grief later in life.

          1. Or just don’t sign NDA’s? Yeah, yeah, not always perceived to be an option. Give them to potential investors and they will most likely laugh at you.

  2. The last time I was job hunting I made sure to ask managers how they prototype new hardware designs. My cube-owner for the last 7 years responded correctly: they often do proof-of-concepts with devkits, junk raided from the bone pile, and plenty of blue wire. My desk is host to a few such ugly hacks, including some that are occasionally used by remote developers to get started on new product firmware ahead of the first PCBs. We usually have software ready for bringup, and knock out a fair number of board issues in schematic review from this sort of prototyping.

  3. It seems like a very odd article. I’ve never worn anything other than t shirt and jeans to work, and I’ve worked for industry leading companies (both UK and US owned) all along, peaking at 35k+ employees.

    In all cases, they’ve appreciated the hacker aethos, and actively encouraged it in some.

    1. While I currently get to wear a t-shirt and shorts to my engineering design job, I can vouche for the fact that many of the big corps (at least the big semiconductor corps i’ve been to) don’t take kindly to the ‘hacker vibe’

      1. I can’t blame a business not taking to the hacker vibe.. A hardware hack should be considered a temporary fix until the engineering, resources and time can create an enduring solution. As a builder I probably never fully embrace the hacker vibe beyond what I laid out. As a graybeard I still the child of the ’60s I once was.

  4. While the equivalent of one guy, compared to a mega-corp, means you can only effectively spend 3/4 of a day on environment testing or whatever, I think by necessity they’re different games. You don’t do a small business as a scaled-down IBM (was it IBM?!). Your percentages are different. So are your sales volumes, and I’m pretty sure your profit margin.

    When things become gigantic, lots of numbers change. It’s a different game. Different things make economic sense, or necessity, at different scales.

  5. Just google theranos and copy their approach if you want real $. Otherwise do what all normal businesses have always done: start in a niche you have something to offer within.

    Free endless cash for pretending is widely available to certain types of ‘entrepreneurs’, but not most or many.

    Google, Amazon, Facebook.. These are obviously companies that rely on coorporate welfare and largess.

    1. The industrialized US espionage partnership that allowed them to appropriate a technology that they couldn’t really understand — was derived from our company’s tiny $10k internal project I personally froze to watch them die.

      Like any paranoid crack whore bulimic addicted to consuming other people’s valued work — the government backed business intelligence groups outright stole it hook, line, and sinker. I’m not sure exactly when they started resorting to outright “exceptionalism” thievery, but social engineering the intelligence communities for the win was much easier than we anticipated.

      If Theranos succeeded in solving any of the issues we had solved, than I would have cheered them on as a peer — at least they contributed something to science. This year was a Schadenfreude stock investment — many people made money knowing their demise was imminent.

      If you are reading this Elizabeth, know that I cleared it with legal prior to acting on my plan — you losers…
      We’re going to donate back to the school as a tax write off…

      1. I’m not sure what’s going on here, but I can say that a flashy powerpoint presentation gets you more investor interest than a working prototype lately, and that’s sad.

        1. No, its not sad, its a different language for different groups. investors are *investors*, they might find a startup exotic, or interesting like a rough diamond, but they are a re in it for the money. Look at it like programming languages: you use python for handeling stuff to the external hardware and php for the frontend. the same with investors. they dont speak the prototype language…

        2. While it is indeed sad from the point of view of the tech that thinks he came up with something great, the problem is that a working prototype means you know how to work with parts, while a good powerpoint presentation means you know how to work with people. And like it or not, nowadays people who work successfully with parts are interchangeable and a dime a dozen, while people who work successfully with people a scarce a well paid: that’s why management gets the money and that’s why they want to know whether you have an MBA more than what engineering titles you have. Which is not to say truly excellent professionals aren’t still a rare, but it is to say that they are hardly ever actually needed and used to their full potential. Being Dijkstra himself will do you no good if your job is to write style sheets for the company website – and not everyone is cut out to be an academic, an independent freelancer or an entrepreneur (see that part about working with people being the more scarce resource…). So yeah, like it or not – an idea is just that, an idea that somebody else is guaranteed to have five minutes after you did if it’s not patented already, an implementation can be achieved any time by hiring appropriate workforce – but ultimately the right powerpoint presentation is the one that will get you the attention of those supposed to be financing it… And yes, I do hate that; but it’s the way things work.

          1. “nowadays people who work successfully with parts are interchangeable and a dime a dozen”
            The rhetoric of the outsourced is strong in this one, but may be probable if it was a cubical farm where the positions are task specific like a call centre. However, we have hired and fired quite a few talented people, and never really considered anyone interchangeable.

            Being able to communicate with other people is critical for project coordination, customer support, and ultimately your job. Even I’ve had to admit a 5 minute slide deck will have a greater impact on a project than months of engineering work.
            ;-)

  6. This is all great and dandy. Every company has it niche. But I would at least remind everyone that a smaller company – both in dollars and people can usually develop much faster, not because they can buy the newest things, but because the red tape of sourcing both employees, equipment, time from other projects, work locations, etc. takes much, much longer in larger corporation – where projects measure from 6 months to multiple years. A small company doesn’t have that luxury, and must be both frugal and nibble or get squashed. I saw it happen many times back in the software heydays of the 70’s and 80’s where companies came and went every few years, and that was with venture capital in huge quantities. Even getting computers in that were fast enough to handle new development or different supported hardware porting could mean the difference between surviving or not. And a failed project in these companies often meant the company would not survive it they have it happen too many times in a row. Another note – up until 2000, all of the tech companies I worked for (and there were a number) always wore ties and suit jackets at a minimum, unless you were working in an area that was dirty (like tire testing, or steel manufacturing/smelting areas), and in those areas you usually put on overalls to protect your clothing.

  7. No offense and all.. But I haven’t seen anything “hard” or “out of the box” from the new-era “hacker” or “”make” scene let alone startup-fund-me sites outside of amateur satellite stuff and only because of the radiation-proof manufacturing. The algorithms around 3D printing and A.I. that exist currently are based on math and science you learn even first-year in US colleges. If any of the stuff referenced is stand-out anywhere it’s in marketing.

    The hardest thing about making ARM based boards is sourcing chips and volume parts. It’s the same with even delta 3D printers. There is no deeply complex or elegant algorithms or manufacturing-tech to be found with any of this stuff.

    A.I. is hard.. When you want it to have less than a 18% failure rate.. Good luck with that even with Bill Gates money(read about speech recognition funding through history.. George Hotz and Elon Musk will also fail with self-driving I’ll bet money on it)…

    1. speech recognition has come a long way in the last 20 years, imagine what it’ll be like in another 20 now that it’s so pervasive that nearly everyone carries around a smart phone with at least one speech recognition system in it. Self Driving, like most technology is something that will take time and effort to improve. Unlike voice recognition however, a major failure can cost people lives and is not something to be taken lightly. As a technology self-driving cars are not new, but because of the potential for fatal error, it has yet to get to a viable state. This will change, eventually- it might be another 40 years, but it too will change.

      1. Is that the same “revolutionarily better” speech recognition that you’re still to this day advised to preferably defer to cloud analysis for better results and recognition accuracy…? There still are a few bright sparks at work inventing better CPUs (or GPUs) and such – but most of the rest of us just hot-glue some kind of radio to some unrelated piece of hardware that doesn’t need it and claim fame as inventors of the latest, greatest full-of-security-holes IoT tat… (now get off my lawn…)

        1. Chip manufacturing and silicon work isn’t something you see in “make” or “hacker” scenes or on startup sites. I think it’s simply because of the time and manufacturing costs though.

          ARM, AMD, Nvidia, Intel, Megamos, TI, Hitatchi and others are big monopolies so disconnected to anything remotely connected to these scenes it’s crazy. They are basically big monopolies who can have firms design silicon and pipeline it to asian foundries on lunch breaks and do it purely out of commerce using what a few IP license purchasers suggest as features..

          You see the same thing on a slightly cheaper scale with ASIC and FPGA design where there is big capital like with bitcoin. The dictators around all this don’t care about the tech to them it’s just a market.

          1. Just adding this on.. Autonomy solutions out there have almost no tolerance for dynamics. Even defense contractors with mega government budgets can’t pull it off with buildings full of the best and brightest.. It’s mainly because they have extremely tight time constraints on anything remotely experimental.. Again because it’s all about commerce nobody cares about science or the tech..

          2. “Chip manufacturing and silicon work isn’t something you see in “make” or “hacker” scenes or on startup sites. I think it’s simply because of the time and manufacturing costs though.”

            You are hilarious, yes, those must be the only possible reasons there aren’t basement hacker semiconductor foundries in Brooklyn yet.

          3. What other reason would people not do SOHO silicon? Technical rigor of clean room and getting it right before fabrication? Yeah.. My statement covers that..

  8. I call BS, there is no-one writing documentation these days, be it individual hackers or multinationals.

    There’s patchy out-of-date readme.txt’s on github pages, unmaintained wikis, dead links, and pleas to “read the source code” which is neither readable nor commented.

  9. Daily Affirmations with Bob Baddeley

    Seriously though, it’s a difference of kind, not degree.

    Goliaths are not a mass of dumb people with resources.

    There’s a sea of experience separating an Arduino shield entrepreneur with any single employee doing any single task at that massive company. Don’t kid yourself. Just because you taught yourself KiCAD doesn’t mean you could layout even a two sided board for high volume production. Just because you ignore regulatory certifications doesn’t mean you’re doing the same thing as a compliance engineer.

    1. You’re way off the mark here. Bob is comparing small hardware companies with a handful of people on the team to huge hardware companies with hundreds or thousands of staff.

      Not sure where you came up with the “Arduino shield entrepreneur” and “ignore regulatory certifications” points but that’s not what’s being discussed in this article.

      1. Scxzvyz,
        Not sure if trolling or you didn’t read the article.
        Basically everything Bob put in bold or in large font…
        “If you’re a solo founder of a company… ”
        “You know that at the end of the day, the success or failure of your baby depends on you..”
        “And you have an attitude that is completely aware of that; you’re not coasting through the work week.”
        “You, the scrappy hacker, are doing the job of scores of people.”
        “Compared to these guys, you, hacker, are making things as complicated as cell phones with what amounts to banging two sticks together.”
        “It’s a classic David and Goliath battle, except the crowd doesn’t see an underdog or a mismatched fight.”

      2. Bob is comparing the two. Of that limited scope you are correct.

        In his comparison, he implies workers for large companies are complacent and outright states small hardware companies are doing the same job.

        In reality, small companies are simply the remora. They are tolerated until their size makes them a target. They are no more skilled or clever.

        The earlier post which suggested he wrote this in front of a mirror was apt.

  10. > hacker-blogger writes article on hacker website congratulating hackers on hacking (in this instance hacking against giant corporations)
    > aforementioned hackers respond with caustic remarks about self-indulgent tone
    > self indulgent tone is a given: see first point
    > congratulations in order: hacking against big corporations decidedly difficult
    > ???
    > observer frustratedly returns to writing VB scripts LOL

  11. It the “its not my job” mentality that will forever keep me a scrappy hacker. When its just you or just a few and the toilet (or cofee maker or printer or….) you just fix it because thats what needs to be done. And I have no patience for the “its not my job” mentality and it has gotten me in trouble early in my career.

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