Growing Hardware Start-ups: Inside EcoMachines Incubator
As the saying goes, hardware is hard. Entrepreneurs face tough hurdles from the outset – from expensive IP and prototyping to complex manufacturing, supply chain or piloting setup – before they are able to attract venture capital investment and take on the world. As a result, a new breed of hardware incubators and accelerators have emerged to guide scientists and engineers through early stage pitfalls. Dr. Ilian Iliev, who last year co-founded London-based EcoMachines Incubator Ltd, provides us with insight into how his team is supporting hardware companies.
“At the moment, the process of building a hardware company takes far too long. We want to help companies achieve through our nine-month accelerator programme what it would take them two years or more to do on their own,” says Dr. Iliev. Inspired by software-focused accelerator programs like Y-Combinator, Startup BootCamp and TechStars, EcoMachines created a program tailored for hardware start-ups in the energy, cleantech and waste management sectors. EcoMachines’ team has experience with a range of technology ‘horizontals’ – including power electronics, advanced materials, robotics and Internet of Things (IoT)/Connected Hardware – and the team looks for applications of these technologies into their sectors of focus. The handful of companies accepted annually are offered initial seed funding of £100k ($160k), a customized Accelerator programme, and access to EcoMachines’ group of mentors and network of industry partners and investors.
“We see a major opportunity for the Accelerator model to enable venture funding of hardware companies,” says Dr. Iliev. At EcoMachines, entrepreneurs get hands-on mentoring from industry experts, helping them iterate their business models, identify partners, and also get the help to build industry partnerships. An additional and unique aspect of EcoMachines’ model is the ability of VC-like follow-on funding from EcoMachines itself, potentially providing an anchor investment for a Series A round. This helps EcoMachines investees to scale up and attract further funding, “by signaling quality to the market and to potential investors.”
While EcoMachines is among the first of its kind in Europe, the number of hardware start-up accelerators and incubators is increasing globally, mostly out of tech-clusters like Silicon Valley, Berlin and Shenzhen (view examples here). Following ‘Lean Startup’ principles, many of these incubators offer machine shops and equipment for fast prototyping, along with full-time specialist staff. Boston-based Bolt specializes in software-connected devices and gadgets, while San Francisco-based Lemnos Labs helps start-ups deliver both B2B and consumer products in areas like robotics, IoT and transportation.
Unlike Bolt or Lemnos Labs, EcoMachines Incubator does not provide physical manufacturing facilities, but rather is geared to a market-driven approach. Above all, as Dr. Iliev points out, hardware success in B2B depends on “the soft things – like having an executable roadmap, or access to the right investors and industry partners.” For example, one of EcoMachines’ portfolio companies, Q-Bot – a developer of robots with application in the building industry – has recruited directors through EcoMachines’ mentor network. Another portfolio company, Power Drive Efficiency, has gained access to industrial pilot sites at a major multinational through the support of its mentors. Where companies need access to specialized prototyping and technology expertise, this can be provided through EcoMachines’ UK and EU-wide network of specialized engineering consultancies, from high-end design consultancies in Cambridge’s high-tech cluster, to outsourced manufacturing in Eastern Europe.
The fact that EcoMachines Incubator, Bolt and Lemnos Labs (among others) are attracting large backers reflects how much the investor community relies on these kinds of players to ready engineering talent for investment and commercial success. And the investments are indeed paying off. Lemnos Labs’ first 10 alumni went on to attract $35 million in venture capital, among them Local Motion – a car sharing technology provider for fleets. Bolt’s inaugural class included follow-on investees such as Loci Controls, which recently started piloting its devices for optimizing landfill gas collection.
Moreover, corporations and local public councils alike are realizing the benefits of incubators to their agendas. EnerNOC, the energy intelligence software provider, has recently created dedicated space at Boston’s Greentown Labs’ facility – which hosts over 40 cleantech companies – to give entrepreneurs open innovation access. Furthermore, MassDev, Massachusetts’ development agency, recently announced a partnership with Greentown Labs to enable start-ups to pilot with Massachusetts’ manufacturing corporations.
As EcoMachines is preparing to invite a new set of companies into their program, Dr. Iliev is bullish on the future of the hardware incubators. They are well positioned to serve as an alternative funding vehicle and focus resources for companies with larger needs. We are looking forward to hearing about the higher success rates of cleantech companies as a result of these kinds of Accelerator programmes!