The hardware entrepreneur movement is gathering steam with more options and services emerging in its ecosystem. However, this time around those options are located outside the United States.
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Yesterday, I spoke to HWTrek, a newly-launched global platform for crowdfunding and contract manufacturing services. The Taiwan-based site aims to cater to hardware entrepreneurs based in the United States and Europe. If their platform pitch sounds familiar, that is because it is similar to that of other platforms such as Dragon Innovation. There are a couple of differences, however.
For starters, HWTrek’s business model is a combination of Kickstarter and standard contract manufacturing services. This means that, despite the fact that they offer a vertically integrated suite of services, they have different fee structures for each part of their service.
For the crowdfunding part of their service, HWTek does not charge an upfront fee or equity stakes in startups. Instead, they follow the Kickstarter model of taking five percent off the total amount raised by entrepreneurs.
Much like Dragon Innovation, their crowdfunding site requires entrepreneurs to submit manufacturing plans before raising funds. Eight project managers from manufacturing facilities listed on their site review the plan and provide feedback to make sure that entrepreneurs deliver on their products.“We want people to understand more precise way to produce a product and check whether their (manufacturing) plans are feasible,” explains Lucas Wang, chief executive officer at HWTrek. According to him, the review process is not intended to lock entrepreneurs to their downstream contract manufacturing services. “They can choose to go with a third-party service provider (who is not associated with HWTrek),” he says.
For the contract manufacturing part of their service, the site functions as a marketplace of sorts with multiple vendors and services under its umbrella. “Based on our experience, one factory cannot do everything,” Wang says. So, HWTrek has partnered with over 130 manufacturers across China and Taiwan to offer variety and options to their clients. These partners are a mix of well-known facilities such as Foxconn (which is famous (or, should I say infamous?) for manufacturing Apple iPhones) and some not-so-well-known facilities that offer economies of scale to entrepreneurs.
Manufacturers showcase their facilities (and manufacturing capabilities) on the site. The firm follows an 80:20 rule of interaction, once an entrepreneur decides to work with HWTrek. In practical terms, this means that eighty percent of an entrepreneur’s work is done online and the remaining twenty percent involves onsite visits and site inspections. Wang likens it to the Apple or Dell model of working, where manager/engineers make onsite visit manufacturing facilities only on a periodic basis.
According to Wang, there are over two hundred virtual mentors (which include several manufacturing partners and experts) who respond to an entrepreneur’s initial queries and provide quotes. Wang says the virtual mentor effort is aimed at
One of the more interesting parts of their fee structure relates to the payment schedule. According to Wang, the site starts charging entrepreneurs for their services only after the first batch of products starts shipping. I suppose one could look at their schedule as a virtual line of credit for cash-starved hardware entrepreneurs. Of course, this strategy also has the opposite effect of increasing pressure on hardware entrepreneurs to make sure that their product ships.
Since its launch late last year, the site has racked up 1500 registered “creators” and hosted approximately seven fully-funded projects. According to Wang, approximately seventy percent of their traffic comes from the United States and the firm intends to open up a local office here pretty soon.