Nick: So I, you know, I’ve asked #Steve Blank and #Mark Suster about this, this concept of crossing the chasm. And what I liked about one of your pieces that, that I came across is that you actually provided an example of #Pebble versus #Fitbit and how #Fitbit was able to cross the chasm moving from innovators and early adopters to, to the early and late majority, you know. What are some of the key reasons that you thought #Fitbit succeeded here where, where #Pebble did not?
Ben: Sure, yeah. I mean, I think there are, there are many reasons. And I don’t know all of them. I, you know, I wasn’t, you know, formerly involved in, in, in in either company. You know, I happen to know the founders well and, and have a good idea of, of how they are operating but, you know, I don’t have the full picture. So, you know, take everything I say with a grain of salt. And, and I, I think it’s really important to, to look at examples of companies and how they operate to, to sort of affect my thinking and, and our portfolio companies thinking. But I don’t have the answer. On a, on a, on a sort of high level standpoint I think marketing is a really powerful tool here, and #Fitbit has done an amazing job of building a very valuable brand. And so a lot of that is just by focusing on an element of, of, of life that, you know, people tend to really care about, which is health and fitness. #Pebble did not. They started to towards sort of the end of their trajectory there. But really from the beginning they were a consumer electronic device. And they were really focused on early adopters and, and developers and, and sort of a fairly specific window of sort of people’s mind. #Fitbit on the other hand was incredibly good, even from the very beginning, at talking about benefits, of, of really what their sort of platform and sort of product really spoke about. And that, that, it sounds like a small change but that way of thinking about a company from sort of a customer first sort of brand building standpoint, it creates a, a huge number of changes to the way that company makes decisions about what to do and where to spend time. So I think probably the most powerful sort of, sort of effect there, is the way they distribute their product. You know, #Pebble was sold, you know, primarily online, direct to consumers. They began to go into places like Best Buy and Target and other sort of traditional retailers that focus on consumer electronic products. #Fitbit always has a weird skew to this. And that, that sort of, the way they think about skewing the trajectory of channel strategy was really powerful. And it’s amazing. I remember in the beginning, #Fitbit was the same thing. You’d seem them at Best Buy, you’d see them in Walmart, you’d see them sort of in the Big Box stores, in the consumer electronics section. As they got more and more mature, you’d find them in really weird places. You’d start seeing them in, you know, CVS and Walgreens. You would start seeing them, I remember seeing one at a Whole Foods once, I thought that was really interesting, you know, just odd places, right. But it turns out that,
Nick: flex our brand
Ben: Totally, yeah. And it turns out if you are going to, you know, whatever, to Whole Foods to buy whatever five dollars of kale and, you know, fresh pressed juice and whatever, you probably also really care about your health and fitness. And so, and so it’s just a really interesting way to think about distribution, which #Fitbit I think more than almost any other consumer electronic product nailed in their ability to, you know, sort of build these, these sort of distribution channels into all kinds of places that you typically don’t see products like this. And I think that almost more than anything else, maybe with the exception of brand, is, is a huge part of why that company is, is, you know, is, is, is, you know, worth billions of dollars. And, you know, of course people will complain oh well they’re failing now in the market. You know, I, I always turn back to #Fred Wilson’s quote when, when the whole Zinger thing happened and, and, you know, he was talking about well, you know, even though the value has gone down from whatever 10 billion to 3 or whatever the number was at the time, you know, if you had told me when, when, you know, I first invested in that company that it would be worth 3 billion dollars I’d say holy shit what a success! And it’s really, really important to remember that. Like the game that we play as venture investors is not about oh my god, this is wild, you know, hundreds of billions of dollars of whatever, it’s really around, you know, finding a few companies that really make a difference, both from an economic standpoint and from a sort of a human sort of ecosystem standpoint. And, and I, you know, I think #Fitbit has effected a lot of good in the world. And whether they’re worth 10 billion or 3 or 5 or 100 doesn’t really matter much. It’s a big number. And I, and I think, you know, those investors feel really proud of being part of that company at the beginning.
Nick: So as I understand that you guys invest exclusively in hardware, not
Ben: Yeah
Nick: software alone, but
Ben: Correct
Nick: the intersection of hardware and software
Ben: Correct, yeah, so, and, and I think that that it’s a, you know, it’s worth pointing out that the definition of hardware has changed. Right? And so, you know, ten years ago if you said I’m a hardware investor, people would first sort of look at you like you’re an insane person. But they also would think of hardware as, you know, a piece of plastic, maybe it had some circuit board in it and you sell it at, you know, Best Buy or Home Depot or whatever for 20 points of gross margin. That is really not what we’re talking about here. We have, you know, maybe one company in our portfolio that sort of fits that mould. For the most part, these are, you know, very different types of products that are really architected around software or some other sort of recurring transaction with the consumer like consumables. And, and they behave very differently in terms of, you know, hiring and product and team building and, and, and distribution and customer interaction and all the things that go into building a company, they behave much more similarly to software companies than to the traditional, you know, sort of brick and mortar hardware companies.
Nick: Absolutely. Hardware is sort of a trojan horse for, for
Ben: Totally
Nick: software, for brand, for value.
Ben: Yeah, I, I really love this, this phrase that #Brad Feld, an investor at #Foundry and is sort of one of the first real hardware investors, throws around that, you know, it’s not that he invests in hardware but he, he invests in software wrapped in plastic. And I find that, I find that incredibly compelling from a, from a, you know, sort of simple a little bit off the cuff, but I think really helpful.
Nick: So how do you think about sort of these lessons and, and some of the things you’ve shared today. Do you think they’re exclusive to hardware startups or do you think they apply to software as well?
Ben: That’s a good question. I, to be honest, my, my knowledge and value as an investor more or less falls off a cliff when it comes to software. I, you know, I don’t even have a Facebook account. I’m like pretty, pretty technologically sort of naive.
Nick: #Ben!
Ben: I know, I know it’s not good. I’m just, I just love tinkering in building physical things.
Nick: I was just interviewing an LP #Trey Hart in Chicago,
Ben: Yeah
Nick: and he had a Blackberry.
Ben: Yeah
Nick: And I was like #Trey, you got to be kidding me, man, come on.
Ben: Yeah, yeah, yeah, I mean, #Trey is a good guy and, you know, means well. But yeah there, there is, there is a definitely a drop off even between, you know, GPs and LPs when it comes to technological savvy. I am, I am not, I am pretty good on the hardware side, will buy a bunch of stuff and, and, and play with all kinds of things. Mostly I take stuff apart, you know, which is how I, I learn how things are made and how people think about products. But I am definitely a, a software ledite. And so I, you know, definitely want to be careful in, in commenting too much about software in general. I imagine a lot of this stuff in certain ways does apply to hardware, correction, to software. I just don’t know exactly how or what those things are. So, you know, I’ve heard, you know, folks like #Paul Graham, you know, #Fred Wilson, other sort of well known investors that talk publicly a lot. I think some of these sort of ideas are, are pretty sort of engrained in software culture. But I also think there are many differences too.
Nick: Well, in light of the, the hardware focus, can I get your thoughts on, on CES a little bit?
Ben: Of course! Of course.
Nick: I know you’ve been going for 10 years and you’ve seen the evolution of Eureka Park and, and the show at large. So, I don’t know, what are your, some of your key observations from the development of CES over time?
Ben: Yeah, I mean, it’s a really interesting place. I am not a fan of Vegas in general. And, and I actually tend to spend less time at events and, and big conferences and stuff than probably the average investor. You know, I’ve, I’ve been a hardware guy my whole life, you know, tinkering since I was a little kid. And, you know, even in my professional life for the last, you know, decade or so, you know, hardware has been, you know, a core thing of, you know, that I spend my time on. And, and so there’s really no better place to see that than at CES. In terms of scale, you know, it’s, it’s an amazing, amazing site. And even the general public, you know, I think for, for many years CES was open to the general public. I think it’s now sort of quasi open to, to the general public. It’s a very interesting place just to walk around for half a day or so. I was really surprised when I landed at, at, at the airport, you know, for CES this year and they hand me this, you know, this badge that says Congratulations on 10 years. I was like holy shit! I feel way older than I thought I would. And, but yeah, it’s, I mean, it’s been amazing, you know, being there and, and watching not every year in a row but, but I think it’s been maybe a dozen years since the first time I, I, I went to CES. And it has dramatically changed around startups. And so in the beginning it was in, you know, Las Vegas convention center it was this gigantic, you know, sort of like huge open structure. And the startup, you know, small little companies are just sprinkled around. And, you know, you have an area for whatever, automotive, and every automotive startup would be over there. And then you have an area for whatever consumer electronics and, you know, be focused around whatever, entertainment and television and you have, you know, any startups around there would be over there. And it creates this really bizarre dynamic where, you know, you had a little tiny booth sitting next to Sony with like ten million dollar booths and, you know, all these, you know, models of whatever. And it was sort of odd. It felt, you know, made you feel very small and sort of insignificant. And now they, they’ve built this thing which I’m sure many of your listeners know about called Eureka Park, which started off as an experiment. I remember being there the first year. It was just like kind of dingy like, you know, sort of poorly thought through, kind of like crappy carpeted room in the venetian. And it’s now, it’s now turned into this, it’s hard to describe, sort of like mecca of hardware startups. And it’s, you know, it’s now, you know, two huge floors, you know, it’s probably I don’t know what the number is but it’s got to be around a thousand companies. There’s, you know, tens of thousands of people just kind of mulling around, maybe ten thousand people just sort of mulling around. It’s, and you feel this energy. It’s very palpable. And I find it, you know, ten times more interesting to be in that space than the sort of big show floor with all the gigantic companies and the new cars and the new whatever. I really, really, really prefer the, the sort of, you know, sort of focused sort of scrappy small companies with crazy ideas all, all sort of, sort of in one incredibly cramped room. That, that’s just, it’s just much more my style. And just, just watching it change over time has been really interesting.
Nick: Awesome. Any other thoughts or advice for founders starting a, a hardware IoT or connected device startup?
Ben: Oh man, I mean, you kind got some of my, my, my biggest points there often around focus, being careful with setting expectations too lofty. I think you can never ask for too much advice. I try to be really helpful with, with, with, with hardware companies getting going. I don’t have the answer to everything but, you know, we, we look at, you know, about 1600, you know, hardware companies every year. So you get pretty good at, at being able to see what works and what doesn’t. And, and so, you know, I’m totally, totally open to chatting with companies, you know, I, I even have a policy now of trying to reach out to every hardware company that I hear about that gets funded. And just say hey listen I’m, you know, I’m not an expert at what you do but, you know, I’m trying to help, you know, every hardware company to be successful, so if there’s anything I can do to be useful, just let me know. Which I think hopefully people view as helpful. So I, it, it’s a little hard to generally comment but, but, you know, if people have questions or comments or curiosities about hardware, I’m always happy to be useful to them.
Nick: And your, your cheque size and sort of valuation range where you guys invest?
Ben: Yeah. So we are an incredibly early stage investor. And in many of our companies were the first money in. We have this sort of unusual way of operating with companies. We have a, you know, internal engineering team of, of folks that have shipped, you know, tens of millions of units of products. Any company we invest in gets the support of our full team. And so hey, you know, maybe they don’t have a mechanical engineer, or they’re not sure about how to, how to mould a part or whatever, and we either, either help or do that for many of the companies that we invest in. Cheques sizes tend to be fairly small in the sort of 100 to 500K range. And valuation, you know, for most of the companies, you know, we’re sort of in the sort of 4, 5, 6 sort of pre range. But it really, you know, runs the gamut. We’ve invested, you know, as high as 30 posts and as low as 2. So it, it, it really depends, depending on the entrepreneur and the space that they’re working at and how much capital we believe the company needs.
Nick: Got you. #Ben, if we can address any topic related to startups or venture, what topic do you think should be addressed and who would you like to hear speak about it?
Ben: Ooh, good one. Let’s see. I find, again I’m going to skew everything towards hardware because it’s all I know, I find not enough people talk about advertising when it comes to hardware. It’s actually pretty different form the way people think about software and consumer behavior is really different.There are very few people that know about this. Again, I’ll use #Brad Feld’s name, hopefully he’s okay with that, you know, talking about, you know, how to capitally efficient figure out how to, how to spend money on advertising and collect customers. I would love to hear more people talk about that publicly. I’m actually working on a, on a blog post with him to sort of talk in more detail about, about how, how small consumer hardware companies need to, need to talk about their sort of marketing enhancement. It is a thing that is, you know, everybody or maybe not everybody but many people are now aware of okay hardware is a little different, I need help on engineering and manufacturing and crowd funding and all things that sort of I talked about. But the real hard problem in building a good hardware company is understanding how to acquire customers. And is a thing that you can only do once you’ve acquired, you know, tens of millions of customers and you really have a good idea of what that looks like. Because it’s very, very, very hard to know what that is from my stage of investing which is, you know, whatever, 5 people and a dog, you know, trying, trying to , you know ship a thing. And you don’t really optimize the advertising stuff until you’re, you know, you’re a much larger company. And I tend to be less involved when the, when the companies are that big. So yeah, sort of a little bit of a different dynamic that I wish was more in the public eye for sure.
Nick: #Ben, what startup investor has inspired and influenced you most and why?
Ben: Ooh, that’s a good question.
Nick: You’ve mentioned quite a few on the show today.
Ben: Yeah, I mean, I think, I don’t want to, I don’t want to beleaguer those. You know, I think, I think, you know, I, I’ve talked about #Brad a few times. You know, he’s been, I think he’s a mentor to many, many young VCs. And so, you know, I don’t know if it’s super unique but, but, you know, I find his voice and honesty incredibly empowering. He’s one of the very few people to be, you know, just super direct with the companies and, and the founders and other folks like me that he talks to. He was one of the first people to be open to investing in hardware companies. And one of the first people to encourage me to, you know, shut down my, my last company and, and try to do something bolder with #Bolt. And, you know, that’s a pretty valuable thing, right, someone that actually tells you what you’re doing is interesting and will be useful. Many people are told no, and myself included when, when you’re setting out to start something. And so you look for a handful of people that are, that are really positive about what you’re doing. So I, I would say #Brad is sort of an outside influence on, on the way I think. But there are many other people that have, that have influenced me a huge amount as well.
Nick: Right. And, finally, what’s the best way for listeners to connect with you?
Ben: Ah, super easy. I can give people my email address if that’s okay. I’m totally open to, for anybody to
Nick: Yep
Ben: to sort of chat if they have questions or need advice about hardware. I don’t know anything about anything else. but when it comes to hardware I’m the guy. And so that’s just ben@bolt.io
Nick: Awesome. Well, I’ve been a big fan of yours for a long time. I’ve really enjoyed your writing and I hope you do more of it. And thanks so much for the time today.
Ben: Oh thanks, #Nick, it’s been a pleasure.
You’ve discussed Pebble’s inability to ‘cross the chasm’ and access the early & late majority, while Fitbit was able to. What were the key reasons why Fitbit succeeded where Pebble did not?