When I first launched Techless, one of the early significant moments in my journey was landing a Y Combinator interview. (FYI, Y Combinator is the most renown tech accelerator in the world and was the birthplace of Airbnb, Stripe, Dropbox and a majority of other unicorn tech startups). The interview was wild - they paid for me and the team to fly to California, spend a couple nights…all for a 15 minute in person interview.  Geoff Ralston, the president of Y Combinator, gave me a piece of advice that stuck with me: "Stay away from hardware." At that moment, I nodded in agreement... Geoff was a legend. 

I already knew custom hardware is notoriously difficult, and many have been burned by the complexities and costs involved. The creator of Android, raised $100M to launch a cool custom phone, flopped it, and lost his investor’s money. 

Yet, as our startup grew, we found ourselves diving headfirst into the very realm we were advised to avoid.

The reason was simple: there were no software solutions that adequately addressed the vulnerabilities we were encountering at the device level. Apple and Google will not allow developers the level of control necessary to protect kids and have a trustworthy, distraction free device. (I think this is tragic exploitation of their monopolistic control of their platforms for profit, but that’s for another day to discuss). 

We realized that to ensure the security and reliability our customers needed, we had to develop our own hardware. At the end of the day, Techless isn’t selling phones, we’re selling trust. To This decision brought us face-to-face with the unique and daunting challenges of designing and manufacturing our own custom device. 

Techless isn’t selling phones, we’re selling trust. 

 

I’m going to share a few details, but leave certain parts of our story intentionally vague as we’ve had a handful of competitors copy our playbook ;). 

The Manufacturing Maze

One of the first hurdles we encountered was finding the right device manufacturer. This was insanely difficult. We are extremely well connected, yet we we eventually paid thousands of dollars for connections to the right people in the supply chain space. The landscape of phone hardware manufacturing is polarized: On one end, there are small, often unreliable manufacturers with questionable quality control. These manufacturers are willing to take on smaller orders but at the risk of producing subpar components. On the other end of the spectrum are the industry giants. These massive manufacturers have impeccable standards and capabilities but won’t entertain minimum orders of less than 100,000 units.  As a startup, we didn't have the financial muscle to place such large orders, nor could we risk our reputation on unreliable manufacturers. We were stuck in the middle - a no-man’s land in the supply chain. 

After an exhaustive search, we landed with the best in class of the few the mid-tier manufacturers. Their quality was impeccable, a significant step up from the smaller players. However, we are their “smallest fish” which means that our project was immediately low on the priority list. Ensuring they met our production schedules was tremendously difficult. Our orders were often pushed down the priority list, making it a constant battle to nail down firm timelines. Even as I write this, I’m sitting with an unusual and uncomfortable amount of ambiguity around when we will have phones in hand. Despite this, the reliability of their product quality made the trade-off worthwhile.

Navigating the Supply Chain

Even after finding a manufacturer willing to work with us, the next challenge was navigating the supply chain. Components for hardware products come from various suppliers, each with its own lead times and reliability issues. Coordinating the delivery of these parts to ensure a smooth production process is like conducting an orchestra with instruments spread across the globe. Delays are common, and a hold-up with one supplier can halt the entire production line.

This isn’t always bad - we had an issue supplying core chips, which actually ended up pushing us to overhauling our initial plans, choosing a new, beginning-of-life chipset that was a major upgrade. 

Quality Control and Testing

Ensuring the quality of our hardware was another significant challenge. Unlike software, where bugs can be patched relatively quickly, hardware flaws can be catastrophic. We had to implement rigorous testing protocols to catch any issues before the products reached our customers. This process required a substantial investment in testing equipment and the development of custom testing software. Additionally, each iteration of testing and feedback took weeks, if not months, to complete, slowing down our time to market.

We have ended up partnering with a 3rd party QC group with deep specialization and the ability to check in on a daily basis at the factory to ensure quality is above our hurdles. 

The Complexity of Phones

Building a hardware device, especially something as complex as a phone, introduced a new layer of challenges. Compatibility with various chipsets was crucial to ensure smooth performance and integration with different wireless networks. We had to navigate the labyrinth of FCC certifications, ensuring every component met stringent regulatory standards. Moreover, we designed our devices to be future-proof, incorporating bands and technologies that would remain relevant longer than the typical iPhone’s two-year life cycle. We fundamentally do not believe in intentional obsolescence; our goal was to create a device built to last, providing value to our customers over an extended period.

The Financial Strain

The financial strain of hardware development cannot be overstated. The upfront costs for tooling, prototyping, and testing are immense. Unlike software development, where the primary investment is time, hardware requires substantial financial investment before you can even produce a single unit. This financial burden was a constant source of stress, requiring us to be incredibly strategic with our spending and fundraising efforts.

In the end, we ended up receiving inventory financing from investors with extremely favorable terms, rather than raising costly equity, or taking on high interest rate credit lines from financial institutions - yet another reason why we value our relationships with our investors. 

Lessons Learned

Despite these challenges, diving into hardware was a decision we don't regret. We continue to learn invaluable lessons about resilience, problem-solving, and the importance of quality. We learned to balance cost with reliability, to build strong relationships with suppliers, and to navigate the intricate logistics of global manufacturing.

Looking back, Geoff Ralston’s advice was not misplaced. Hardware is tough, and for many startups, the risks may outweigh the rewards. But for us, it was a necessary path to create a product that truly met our standards and our customers' needs. The journey was fraught with challenges, but it also brought us closer to our mission and forged a stronger, more resilient company.

As tech entrepreneurs, we must be prepared to make tough decisions and navigate uncharted waters. Sometimes, the path we initially avoid is the one that leads to our greatest achievements. And for those considering the plunge into hardware, be prepared for a rough ride, but know that the rewards, both personal and professional, can be well worth the struggle.

The good news is, what we’ve done is very difficult, and therefore hard to duplicate.

A couple of months ago, we had a partner reach out to dive into the details of launching their own niche purpose phone…my advice to them? “Stay away from hardware.”