Hard Tech Startups

&gt; Many hard tech founders come from academia or big company backgrounds, where projects can be expensive and slow. We help these founders shift into a much more iterative mindset so they can move faster.<p>I think this is key and I hope it takes off beyond YC. I used to work on a DARPA-funded R&amp;D project in the wireless space. DARPA&#x27;s culture is really cool: throw a bunch of money at PhD program managers, give them a ton of directorial discretion, and let them fund &quot;blue sky&quot; projects they think are really cool. But it&#x27;s a very academic mindset and the mission creep is huge. DARPA kept sending us down these &quot;oh can we do this?&quot; rabbit holes. At one point our radio grew an expert system that processed XML-formatted regulatory directives.[1] We spent huge amounts of time doing things other than solving the core problem. A decade later consumer deployment is still a ways away. It would be so much further along if DARPA had the focus of something like YC.<p>It seems like a no-brainer to those in Silicon Valley that you should find a tractable subset of your problem and pound on it until you&#x27;ve figured it out. That&#x27;s not the way the big research institutions working on &quot;hard tech&quot; usually operate, and it&#x27;s not really how major research universities teach people to think.<p>[1] <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;DARPA_Agent_Markup_Language" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;DARPA_Agent_Markup_Language</a>

This is the hardest thing to explain to people about companies like ours. When I say that machine vision systems are comparable to building hardware people can&#x27;t conceptualize that because they have never really worked with novel CV&#x2F;ML systems.<p>I think this post has it right too in that finding a small application of the technology is a good approach to sustaining yourself while you get to a bigger goal. This however adds a magnitude of complexity - which means funding requirements aren&#x27;t that much smaller. For example you have to build a product while also building the technology - vs just building a product on exiting technologies, which is hard enough itself. It&#x27;s also a risk because if that one product is not a winner, then it poisons the larger play - even though it might be itself very valuable.<p>The challenge comes when you have to explain that, no actually this first thing is just the POC for a larger thing we&#x27;re trying to do - especially when you are building the market for that larger thing.<p>I think the best path for hard tech companies is to have a lot of money from the start. I know that sounds obvious, but I think it&#x27;s true specifically for hard tech companies.<p>Unfortunately that usually means you as a founder are a known entity in the venture world. Whether that means you use your own money from a previous exit (like Musk) or convince someone to fund a lot of it (probably because you had a previous exit and have connections) you need a lot of capital up-front.<p>So if you are an unknown to the people with cash, with hard tech plans, prepare for a tough time ahead.

&quot;Hard tech startups<p>Some people think YC only funds software startups.&quot;<p>Kinda strange that software is not seen by YC as &quot;hard tech&quot;.<p>I think there&#x27;s lots of hard tech in software but the way venture capitalists&#x2F;angel investors tell it, you should only ever build software that can be made in a weekend and then iterated upon.<p>The outcome of this is the X thousandth dog walking social network for uber drivers staying at AirBNB - i.e. stuff that you can build in a weekend and iterate on. And this is why demo days are full of such lightweight software applications - people are actively discouraged from taking the time to build something large scale and, well, &quot;hard&quot;.<p>Sometimes it makes sense to make a big bet on building some complex software that might take months or years to build, with lots of moving parts, but once complete solves a big problem. That is software that is &quot;hard tech&quot;.

&gt; Hard tech companies go through the same 3-month batch format as all of the startups we fund.<p>Is 3 months sufficient time for working on hard tech startup ideas. The original 3 month batch format was designed for software &amp; web startups - YC&#x27;s initial focus. It seems to me that the cycle time for iterating and testing different approaches to solving problems in hard tech would be much longer - hence require more time?

<i>Very often, the first thing we do is help hard tech founders find a small project within their larger idea that fits the model of quick iteration and requires a relatively small amount of capital.</i><p><i>Tesla is my favorite example of how powerful this small project + long-term planning mentality can be. Their vision has always been to bring an affordable electric car to the masses, but they first built the Roadster—the opposite of a mass market car—to generate revenue to get to the Model S.</i><p>so designing and building a top of the line sports car is a small project? what?

Now is probably the best time to get into &quot;hard tech&quot; - aka industrial automation, automotive, aerospace &amp; defense, energy &amp; utilities, etc.<p>Look to GE for a prime example - a $250B manufacturing and processing behemoth rebranding itself as an agile tech startup with GE Digital and Predix rolling out across many of its factories. Its 2015 10k was titled &quot;Digital Industrial&quot; and really describes the company&#x27;s new focus on &quot;hard tech&quot;:<p><i>We are just beginning our transformation as the Digital Industrial Company. The Internet has had a massive impact on consumer productivity and commerce. Its impact on industrial markets is just now being realized. By 2020, 10,000 gas turbines, 68,000 jet engines, more than 100 million lightbulbs and 152 million cars will be connected to the Internet.<p>At GE, we have decided to generate and model this data ourselves—both inside the Company and with our customers. This is what we mean by becoming a Digital Industrial. Our Digital Industrial capabilities will expand our growth rate, improve our margins and bring us closer to our customers. There was a time when every sale had a clear endpoint, followed only by routine service and maintenance. Now, sensors on our products send constant streams of data, analyzed and translated into upgrades that drive productivity in industries where even the smallest incremental efficiency can mean very large gains. Capturing it will be a mission in every one of our businesses. Our aspiration is to offer with every GE product a pathway to greater productivity through sensors, software and big-data analytics.<p>Why GE? I assure you we didn’t wake up one morning with “software envy.” We have been investing in software and accumulating data for decades. Competing will not require big acquisitions. Rather, the technology required to compete is in our sweet spot. So, why not us?</i><p>Similar story if you look outside of the traditional IT market and across the embedded market. Software is being layered on top of &quot;hard tech&quot; to collect data and provide value in a ton of markets that you won&#x27;t see covered in Tech Crunch. Or maybe you will, given that YC is now pushing for founders with knowledge of these grittier industries.

<i>&gt; [Tesla] first built the Roadster—the opposite of a mass market car—to generate revenue to get to the Model S. The Model S then generated the revenue to start the Model 3.</i><p>Except the Roadster didn&#x27;t generate enough revenue, Tesla was on the verge of bankruptcy, and Elon Musk swooped in to save the day (and have himself labelled a co-founder as part of the deal).<p>The Model X was supposed to be a quick reskin of the Model S chassis as an SUV to provide a stopgap model while the Model 3 was developed, but that turned out to be more complicated than expected and Musk&#x27;s demands for those striking but complicated gull-wing doors caused development and production problems that delayed it for years.<p>I&#x27;m readying the popcorn for the delays and production issues of the Model 3.

Interesting post, could be interpreted multiple ways:<p>- growth in pure&#x2F;easy SW projects is stalling, need to find new areas<p>- trying to get away from the &quot;bro&quot; prejudice against SW startups<p>- YC has found a good way to bring rapid, iterative development techniques to hard&#x2F;HW projects<p>Hopefully the third one but probably a combination of all of the above.

I am somewhat curious whether Y Combinator is considering partnering with Cyclotron Road up at LBL. It seems to be focused on the same type of companies, hard science, but with an excellent model for supporting this kind of work.<p>As a scientist who founded a hard science startup (and now work for another), I feel like the hands down biggest barrier is lack of access to free&#x2F;low-cost space to work. These projects aren&#x27;t the kind of thing you can do out of a coffee shop, it&#x27;s just too dangerous. Plus it requires expensive capital outlay to do the initial work, even if you only need the equipment for one or two tests.<p>The fact that they partner with a national lab to provide those testing resources saves so much time and energy that&#x27;s better spent on finding product fit than fundraising enough to get to the point where you can even find out how well your technology can perform.<p>I&#x27;d strongly suggest at least reaching out to them to see if they can help advise, they&#x27;ve had amazing results so far.

&gt; YC’s largest exit to date is a self-driving car company<p>Isn&#x27;t that just because several highly valued software startups haven&#x27;t exited yet? Judging by this list:<p><a href="https:&#x2F;&#x2F;www.cbinsights.com&#x2F;blog&#x2F;y-combinator-startup-valuation&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.cbinsights.com&#x2F;blog&#x2F;y-combinator-startup-valuati...</a>

My two cents here from the industry I am in. Thesis: I can&#x27;t see any nuclear reactor at the paper stage in 2016 beating the small modular reactors from westinghouse (III gen integral pwr) or ge-hitachi (IV gen PRISM sfr) to the 2030 race for the next coming innovative fleets in the Western World. Corollary: Elsewhere, China and Russia will probably risk more and do better at raising the bar of progress. Action: What can be done at YC level then imho? There may be a niche in standardising the design of the most critical components using data science methods, think of an Ikea for the nuclear island. Hard tech, reduced to the simplest problem with a customer, may be the for nuclear sector some critical process (a new material?) or some critical component (a one-fits-all vessel?), both economically affordable at the lab level and at the computer-powered engineering design.

Out of curiosity do the &quot;hard software&quot; startups at YC (a startup is whether there is doubt that the software can be built at all) share more DNA&#x2F;commonalities with the &quot;hard tech&quot; startups or their fellow software startups?

VC is apparently awash in capital (11 Trillion USD in bonds now trading at negative interest rates quotes Andreessen)<p>The Internet was born out of probably the worlds most successful long term focused VC - DARPA<p>now I can&#x27;t tell if this is the VC community going back to a long term model and invest for decades before expecting a return. 11 trillion would do a lot of good invested for ten years in the globes best and brightest<p>If we don&#x27;t know if the tech will work at all (fusion etc) then YC is effectively funding academic research. Which is fine, but I assume the right way to build a business may not be the right way to choose the next research project. Gittens index notwithstanding<p>Are these businesses measured in some way differently to the next Uber? Different P&amp;L expectations, different pool of funds? If not then ... ?

My first company Light Up Africa Inc., a hard tech startup, was a part of the Impact Engine in Chicago. We did not have access to 3D printing, hardware facilities, and labs to help us prototype and iterate effectively. And that is just step 1. We then had to manufacture in parallel while continuing to research.<p>Also, I can attest that is extremely difficult to build a startup with a heavy research focus. However, from the brief write-up presented, I don&#x27;t see how YC is in the position to help build and scale hard tech startups at scale - especially those with a tremendous need for capital invest to further research and manufacture.

I find this to be a unique &#x27;hard tech&#x27; example ... <a href="https:&#x2F;&#x2F;www.technologyreview.com&#x2F;s&#x2F;422511&#x2F;the-fantastical-promise-of-reversible-computing&#x2F;" rel="nofollow">https:&#x2F;&#x2F;www.technologyreview.com&#x2F;s&#x2F;422511&#x2F;the-fantastical-pr...</a> <a href="https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Reversible_computing" rel="nofollow">https:&#x2F;&#x2F;en.wikipedia.org&#x2F;wiki&#x2F;Reversible_computing</a>

As much as I like YC and this particular board, their standard deal is $120K for 7% of the company. That amount of money is so ridiculously low for almost any serious hardware project.<p>Just consider what $120K buys you. Barely one mid-level engineer for a year (don&#x27;t forget the taxes, social security). In that year you would have to create and mass-produce and sell the product, just to keep paying the salary.<p>I&#x27;m surprised YC doesn&#x27;t offer something like $500K for 50% of the company.

By &quot;hard tech&quot;, YC apparently means &quot;has technical risk&quot;, as opposed to a marketing-based business.<p>There was a time, pre-2000, when VCs did almost entirely &quot;hard tech&quot; startups. VCs were more profitable then. But the weakening of patents by the anti-patent lobby has made this infeasible as a business strategy. You have to buy market share now before someone steals your technology.

I prefer Hard Business to Hard Tech. Some businesses may be easy on the tech side, but very hard on the customer acquisition side because they require a complete change in the way people think and&#x2F;or behave.<p>In that light these businesses were easy tech but hard Businesses that ended up being worth a lot: Ebay, Amazon, Uber, AirBNB, Dropbox, and more.<p>EDIT<p>10 of the top 15 Unicorns<p>Uber - Not Hard Tech<p><i>Xiaomi - Kind Of Hard Tech</i><p>Didi - Not Hard Tech<p>AirBNB - Not Hard Tech<p>Palantir - Hard Tech<p>Snapchat - Not Hard Tech<p>Wework - Not Hard Tech<p>FlipKart - Not Hard Tech<p><i>SpaceX - Hard Tech</i><p>Pinterest - Not Hard Tech<p>Dropbox - Not Hard Tech

Say I have a technology that&#x27;s related to autonomous vehicles. It requires hardware and software. How would joining YC increase the odds of the technology being adopted by auto manufacturers? Its not a consumer product and its a technology that aides and improves autonomous operation but does not actually drive the car. It would be nice to hear from anyone from YC or with experience.

Hmm. I&#x27;m only half serious, but if anyone wants to compete with mylan&#x2F;epi-pen ping me.<p>They&#x27;ve taken the price from $100 to $500+ over the course of a decade. There&#x27;s got to be a way to (1) make epi-pens for $25-$50 (which mylan does), (2) sell them for $50-$100, (3) get stupid rich (4m sold per year in the us alone), and (4) do good for the world as well.

I watched Chad Rigetti&#x27;s talk (<a href="https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=GzMvG8UO6Eg" rel="nofollow">https:&#x2F;&#x2F;www.youtube.com&#x2F;watch?v=GzMvG8UO6Eg</a>) this morning, which was really exciting.

Alright. I&#x27;ll apply. I&#x27;m barely through the business model stage, but I&#x27;ll do it. I&#x27;ll lose some sleep, but if YC is serious about hardware then ok.

Cool!

&quot;We look for brains, motivation, and a sense of design. Experience is helpful but not critical.<p>Your idea is important too, but mainly as evidence that you can have good ideas. Most successful startups change their idea substantially.&quot;<p>Could you possibly be more la dee dah?