Awais Bhattee from the IACT19 Committee sat down with Tom McMenamin, IACT16 Alumnus and Co-Founder of Pixelated Induction, who shared his story and gave advice on teams pitching for grant funding and the coming steps in their journey.
One day, back in 2016, Tom McMenamin was sitting with his friends at a bar at the end of a long day and running out of battery on their phones. “[We thought] ‘I wish that the table charged my phone’. And we were engineers, so we felt we could make this!”. They started working on the idea as a group project for their Engineering course at ANU and during this they decided “Well, let’s do this properly. Let’s do InnovationACT”.
Tom recounts how his learning at InnovationACT provided the stepping stones for further involvement in the entrepreneurship and innovation ecosystem. “There is learning about innovation, and then there is learning to do innovation”.
After successfully receiving a grant from InnovationACT, they took their Executive Summary to receive an Innovation Connect grant from the ACT Government. Putting all this money into Research and Development and taking advantage of the ANU Makerspace, they were able to show their progress to a business accelerator, which accepted them and this ultimately led to investment from a VC firm.
When starting a business around a hardware solution, you face a unique set of challenges. Having been through the trials and challenges of this journey with Pixelated Induction, we asked Tom what were the lessons specific to being a hardware startup that he could share to entrepreneurs who may be just starting the journey.
“For a hardware startup, it is very expensive. You have the disadvantage of having to pay the same costs as a large company. Your R&D costs are the same, your patent costs are the same”. This implies that if you want to have a successful hardware startup you need to follow a path that leads to investment, so you can reach the scale that allows you to sell your products at a reasonable price. This means generating credibility around your startup and your idea in order to be investment ready.
“The biggest trap of making a hardware-based product is that inventors think their product is cool, that people will love it and buy it, but that is not a business model”. Tom goes onto explain that engineers, like themselves, love making things and love making things they love. This is the wrong place to start when making a solution for others. The question should not be about what you want to make, but what the customer needs and the problem it is solving.
“Unfortunately, as a hardware startup, you can’t just do a free trial with your customers. You can’t do all these things that a software startup can do, so their playbook doesn’t apply so much to you”. This puts your startup at the risk of being out of touch with the customers unless you take specific actions to address this. We learn in innovation that instead of going through the cost and effort to create a finished product we should be doing product validations such as showing customers a Minimum Viable Product (MVP). Generally speaking, an MVP is a usable form of your complete product that customers can interact with. Even getting to this stage for a hardware solution can take a long time. So Tom recommends that entrepreneurs start using even earlier forms of product validation such as Proof of Concepts. Proof of Concepts do not have a focus on User Experience that an MVP might have, it simply focuses on providing a definitive ‘yes’ or ‘no’ to whether a concept is viable.
“The first step is getting that initial bit of funding. The great thing is that this money is there now in Canberra and in Australia, for anyone to work on their idea and have a proper go”. After mentioning sources like IACT, Innovation Connect, and PARSA Student Extracurricular Enrichment Fund, Tom went onto explain, “You want to use the grants to build your Proof of Concept and that is what they want you to do. They want you to do the non-commercial work of creating Proof of Concepts”. This means that this small amount of money is not given to you to start a business, but to validate your ideas.
At this stage, you are also thinking about finding the customer and finding the right layer you want to enter the market. “Do we sell a product that people can put on their tables, or is it something built into furniture. Do we sell to the person that owns the table or do we sell to the person that makes the table”. Finding the right layer of the market you want to enter allows you to talk to those customers about what they need your product to do.
If you have done these early stages right, you can move onto finding an accelerator that fits your business. “It is about so much more than just the money. It is about the social credibility and the networks… There are companies that have raised money or are profitable and joined an accelerator just to be part of the community.”
As a concluding piece of wisdom for our IACT teams or other entrepreneurs starting the journey, Tom had this advice to give, “The value that is generated, from everything we have talked about today, is still with you even after you fail. Even if your business fails, you don’t lose the networks you have established. Even the points of validation you have are still there. Participation and having a go, is not about either a 0% or 100% thing, there is always something you take with you.”