CubeSensors: a Hardware Startup That Didn’t Need China

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D 18. 01. 08ZEMANTA D.O.O. LJUBLJANAFOTO: ANDREJ KRIZAles Spetic is the co-founder CubeSensors and has founded many other companies including Zemanta, DeckReport, FriedWorks and setup TSstartup, the first corporate incubator in the CEE region. 
Editor’s note:  Today’s guest post tells the inside story of CubeSensors, and covers a lot of ground such as crowdfunding without using Kickstarter or Indiegogo, manufacturing electronics close to home instead of in China, the challenges of raising VC for hardware startups and more. Thanks for sharing the insightful post, Ales!
When I talked to a friend two years ago about starting a hardware startup, he politely spelled out the landscape for us: we never launched a hardware product, we had no funding, we were based in Slovenia. Well, that sounded like a challenge!
We started to think about homes and offices and the fact that we spend 90% of our lives indoors, yet we know almost nothing about the environment there. On the other hand, the environment has a profound affects on our lives; a bedroom that’s too warm affects our sleep, and a poorly lit desk area affects our eyes. We live our lives unaware of the pollution or other things that may surround us.
So we set to learn about the biggest problems in today’s indoor environments and how existing solutions address them. For example, how thermostats are mounted on some walls and are almost never available in the rooms where people actually live. And that they concentrate on temperature only.  What about air quality, noise, humidity? Another fact was that requirements for different rooms are different, that offices requires different settings than home environment. Home and building automation always focuses on comfort and almost never on productivity. There are people spending a lot of money on ergonomics, but they often forget that the environment has a major impact on productivity.
This gave us a rough sketch of what we needed: a device that can measure everything indoors in every room, be aware of where it is and make intelligent decisions about it. In order for people to adopt it we needed it have have a beautiful design, require no installation and be a simple, preferably wireless, object. No screws or configuration needed!
After several iterations we came up with small cubes, which we now call CubeSensors. They are small beautiful devices, packed with sensors that measure everything about the indoor environment they are placed in, and continuously stream that information to the cloud. Inside buildings they act as mesh networks, talking to each other and relaying the data they collect such as air quality, temperature, humidity,noise, light and air pressure.  They give their users a pretty good idea of what’s going on in each and every room of one’s home or office — actionable data that helps people improve their lives.
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But of course building a device is only one piece of a puzzle. Making a product is a whole different ball game. Here our advantage of being in Slovenia came into play. We didn’t need to fly to China to prototype or iterate. We didn’t need to spend a lot of money to hire engineers. Most was done by founders and friends. Since we didn’t have a lot of experience with hardware products we had some interesting discussions with our suppliers. We didn’t take no for an answer. We usually followed up with: “but, why?”
When we said we wanted plastics that are transparent only in one direction, the manufacturer said it couldn’t be done. It took several trials and a lot of reading to come up with a material that now allows the cubes to glow when needed, and look opaque otherwise. Another story was with fronts. We couldn’t afford laser machine production and aluminum, so we found another techniques, which seemed impossible at first. One particular sensor that we wanted needed significant energy to run, which meant it was useless for battery use. The solution: we worked with chip supplier to adapt the firmware for us! So now we have amazing low power chip that nobody else has in the world. This sounds logical but it’s not easy to do without any money, by sheer force of persuasion with suppliers.
proto1We felt we couldn’t pull all of this off in China, so we did everything here at home in Slovenia. Established manufacturers are great when you know what kind of techniques or materials you want. However they are often impossible to work with when they’re out of their comfort zone. So you need to find shops and producers willing to experiment with things they never did. You need to sell them the world domination story that you believe in. It really helps when you’re a 15 minute drive from production lines, prototyping shops and everything that you need. Working with another culture on the other side of the globe that only sees your money doesn’t cut it.
We announced our product on the Launch festival in March of this year and ended up winning the Best Hardware Award. We naively thought that it would help with fundraising. We talked to probably 40 investors and as it turned out they usually fall in several categories. First half are the ones that simply have allergies to hardware. Another quarter fall into category when they think they understand hardware, however they keep talking about it as it was software, often not thinking about working capital, supply chain constrains and other problems inherent to “atoms”. The last quarter of investors are the most interesting ones. They know what they’re talking about, however since startup hardware is still a novel concept they often see every gadget startup as a competing investment. And yes, being from Slovenia does not help in fundraising either. Interestingly, most have no problem about startups moving China, yet Europe remains a taboo, as if electronic products have never been produced outside of Szhenzen. Things are changing, but slowly. And fortunately, the ones who do understand it are gaining an edge.
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So after failing to raise capital, we decided to take the product to market to validate it. We opened up a reservation page, where buyers could reserve their set of cubes for a $10 dollar reservation fee. We were shocked that we sold out our first batch within three weeks — without any KickStarter or Indiegogo campaign. That gave us a significant boost in confidence (but still no money) to push forward with production. In hindsight we should probably have charged the full amount for pre-orders, but still it’s a great confirmation when the market wants your product and it will to confirm that with cash.
Of course it would be easier if we had funding, but being broke was also a blessing. We had to work harder and think about every detail. We couldn’t afford to outsource a lot of things we normally would have. The fact that we’re from Europe gave us totally different perspective on usability of the product, and the fact that we had little experience with production and product design, forced us to challenge every assumption.
After two years we’re ready to ship something beautiful: a cutting edge product that improves peoples lives. It has amazing features that others don’t have. People can interact with it directly or use it as a heart for their intelligent home or office. It will improve peoples lives.
It was designed and build by an amazing team from Slovenia, working on it  in an unfunded startup with a lot of help from our friends. We believed it could be done even when everyone was telling us that it’s too hard.
I guess there is always a competitive advantage somewhere, it’s not always obvious. One just need to find it. We did!
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