How are you? How has the last 12 months been since we featured you and chatted in Sligo?
It’s been amazing! We did a lot of heads down, internal work the last year and it has paid off big time. The landscape hasn’t changed much, but it’s becoming more and more clear that you have to focus on the long-term. The short term PR stunts and hype doesn’t cut it in hardware. So we’re very excited that our long-term focus is beginning to pay off after 2.5 years chipping away, building Brinc.
What have been your wins over last 12 months?
It’s been a very productive last 12 months and we’ve gotten to see some of the important decisions we made 2 years ago start to pay dividends. I’ll break it up into two parts: portfolio success and our team.
Our portfolio’s size hasn’t grown as fast as our contemporaries, nor do we have any plans to do so. We’ve seen over 700 applications and have only accepted 14. We’re VERY picky. The main reason is that when you join Brinc, you’re joining a family (we believe to be the best family :). So it’s critical that the founders and everyone at Brinc see the same future together because once we start to build, we go all in. There’s nothing short-term about how we approach helping our founders. We literally do everything in our power to help, for as long as it takes. This strategy has really started to bear fruit. Last quarter we announced that our teams had raised a cumulative $10M USD in follow on funding, we have teams shipping globally, and we will hit 100k units shipped by year end. It’s been a pretty nice first year in market for our early investments (not to mention that two of the first three teams are profitable, hence, they DON’T need to beg for investment dollars… they can focus on scaling their business :).
On the internal side, I can’t say enough about our team. It’s the biggest compliment I can receive, when someone tells me how great a team we’ve curated. It’s truly all that matters. The strategies and tactics are worthless when a single or a couple of big personalities dominate the room. Hardware and IoT companies are so difficult to build and the market is so unforgiving that there really is no room for egos. It’s just heads down, do the work and support founders that have the right stuff to change the world!
— Bay McLaughlin (@betabay) August 15, 2016
What insights have you gained ?
Oh man. This could be an entire book! Where to begin 🙂 I’d say that we are more convinced than ever that long-form is the way to go in this market. Very similar to Andreessen Horowitz, you have to constantly build more and more support for your founders. I knew it was going to be a long-form exercise, but I don’t think I knew just how many aspects we needed to get involved with. It’s really daunting for most people looking from the outside, but we truly love our work, so it is actually quite enjoyable.
Another big insight we’ve learned is that the venture capital (VC) model doesn’t really play well with hardware or IoT companies (at least not most of them). All of my VC mentors agree that only a few IoT or Hardware startups fit the venture demands for geometric growth and returns. However, we (myself included) have perpetuated a very damaging narrative for a lot of founders out there that can build VERY profitable, very exciting businesses. I’m trying to make up for this now by getting out there to tell founders that they CAN and SHOULD build their hardware or IoT businesses and that they don’t NEED VC backing. They can work with amazing angel investors of high net-worth individuals (HNIs) and even, in the very rare but amazing case, an open-minded corporation in the early days of their company. I’m sure this sounds hyperbolic, but I believe it’s important to get loud about this as the competing narrative just doesn’t fit the mold for hardware and IoT. It’s 80% (probably more) about the offline / old economy and if you’re lucky, you’ll get the point in your company’s lifecycle where the digital or data aspect comes into play. Most don’t. So why have we been following the financing model that was built exclusively for digital companies? We’re working hard to ensure that our teams have as many non-instituational early-stage investors to support them while they’re learning about their business models and customers. After they’re shipping globally and have truly figured out their unit economics, that’s when it’s time for the right institutions to step in and pick the ones that can go geometric and hit the required returns of their limited partners (LPs).
Our answer to this misalignment between the media, institutionally backed investors, and founders is that we’ve announced a slew of new programs and services to meet IoT and hardware founders at any stage of their development, using whatever currencies they have at their disposal. We just hate seeing great concepts and founders fail because the existing financing model doesn’t fit their needs. So now we offer everything from FREE trips to China to our studio in China which helps teams manufacture for a service fee to our FREE go to market or distribution programs so that more of these companies can exist! We know that we have to help these products get to consumers around the world so we can unlock the data around us and ultimately, improve our lives.
There are so many more Simon. Maybe we’ll have to do a follow up to this follow up to dive into other lessons learned 🙂
Anything you’d go back and do differently?
Well, I subscribe to the life philosophy of ‘no regrets’, so nothing that seems to leap out. I think we can be a little cautious and certainly don’t market what we do enough. We’re getting better, but we’ve always known that if we just do the work, that our founders and their results will speak louder than anything we can say in a demo day or in the tech media. As we’ve designed much stronger systems and bulked up our staff to support our founders (up to 25 people full time now), we’re doing our best to get out and ensure that we meet with more founders, ecosystem partners, etc. but we could have definitely been a little more aggressive on that front over the last 12 months.
— Bay McLaughlin (@betabay) September 6, 2016
We’ve run a series of pieces on quantified self, biohacking etc, what’s your area of involvement in it, and how do you distinguish between the fads / bad science and exciting possibilities?
I’m SO into quantified self (QS). To me it is the most important work we can do in terms of unlocking the world’s data (our data) and using this information to improve our lives. In a lot of ways, it’s the entire promise of IoT. Anyhow, I’ve been into it for a long time, but recently, my infatuation has become more of an obsession. I launched the Hong Kong chapter of The Quantified Self and have been taking every test you can (micro-biome / bacteria, genetics, biomarkers, you name it).
When it comes to fads, I think it’s important to understand each test and the science behind it in context. For example, learning about how important our microbiome can be to almost every aspect of our lives, even our personalities, is super cool. However, it is VERY early days. To put it into context, we think we know a lot about genetics and we have ~20,000 pairs of genes. Our microbiome or bacteria is estimated to contain anywhere from 2 to 10 million unique types. And when it comes to genetics, we think we know a lot, but we’re just getting started. Imagine how long it will be until we truly understand our bacterial make up? I’m psyched about it nonetheless, just realistic as to how and when we will be able to make profound life changing decisions based on this research.
The thing that I never hesitate to promote, however, is the act of quantifying. Yes, there will be differences from one test or sensor to the next and a lot of this science is new and hard to correlate, BUT, if you don’t quantify yourself, you will have no way to participate in all of the amazing advances when they are made. You HAVE to start taking control of your data and participating. I have made a couple of predictions that I’m keen to see play out.
1) As parents, it will become a duty to take as many tests as you can in order to provide your children with as long of a data stream about what they have inherited as possible. It’s kind of taboo today, but I think it will become similar to vaccinations, where if you don’t, other people will think you’re being a bad parent and putting your child at risk unnecessarily.
2) Our doctors and health care facilities won’t be allowed to see you until you sync your health kit (or other future analog to apple’s health kit) to their system. I think it will be a legal requirement before receiving care. My assumption, although I’m not proud of thinking like this, is that medical malpractice suits will continue to rise and the cost of health care will become even more unaffordable and that the key to managing all of this is to better understand patients. And you guessed it, this starts with their personal health data.
We shall see, but I’m super deep into it and at Brinc, we’re very proud to tell founders that we are becoming more and more able to support health and medical startups. It wasn’t by design, but likely because of the inherent human value of working on these issues that we’ve ended up at about 60% of our portfolio being in the health / medical space.
— Bay McLaughlin (@betabay) September 2, 2016
Same with IoT?
For IoT, I think you have to understand the lens you’re looking through. All aspects of our physical lives WILL be connected. So to think that’s a fad seems a bit off. If you’re thinking from the VC or investors lens, then sure, there are LOTs of fads that come and go. Just check crowdfunding and you’ll see. If there is one connected water bottle today, there will be 10 more in the next 12 moths. Currently, hearables, or connected devices you wear on your ears, is a big trend. Just like any market, very few will really do well and most will go out of business, but we know that everything will end up being connected eventually. It’s an inevitability.
One thing that I think is challenging as an IoT or Hardware investor is that you have to look at a concept today and think of the market landscape in two years (most companies are lucky to get their product out by month 24). That is a unique challenge for physical vs purely digital companies. It’s not a perfect science by at strength, but we think we’ve been getting much better at this thought process at Brinc.
I think the house is about to get SUPER connected, but I don’t think many small players will last long-term. As a data point, connected home is our #1 vertical by number of applications, but we’ve taken zero! It’s a VERY hard space to win and most founders come at the market with enthusiasm, but no defensible plan to own their area of the home. It’s usually easy to copy at lower price points by larger incumbents.
What are you excited about for the future, in your own businesses and wider trends?
I’m just excited period. I love this stuff! But more specifically, I’m so humbled by the work that I see happening around the world in IoT and Hardware today. Some of the most important issues facing the world are being tacked. I love seeing the advancements in homemade prosthetic devices, the advancements in eHealth, and what’s happening in modernizing the way we move around and inhabit the world. It seems that we have come out of the photo sharing app haze and back into the world where we work on really hard problems.
This is the most defining characteristics of the founders we invest in. They have to believe that the world SHOULD be done, no matter how hard and be willing to take the hardships that come along with building IoT businesses on the head, every single day. Without that level of perseverance, you will not live long enough to see an IoT business all the way through.
I have infinite respect for anyone that is willing to take the punishment of building a hardware or IoT company and love when we get to witness them win, because they win really big (like being profitable in under two years!). It takes the type of tenacity and will power that I assume characterized the early founders of the valley and most of the modern day legends in technology. Back then, you couldn’t ‘fail fast’ or ‘pivot and jam’ your way into sustainable companies. They had to plan, plan, and plan some more, work their butts off, and work on massive problems to be worth all of the risk and effort. I have a really warm feeling that that type of old school entrepreneurship is making a comeback, maybe even becoming cool. That’s the kind of world I want to live in and I’m proud that Brinc plays a small part in making this vision a reality.
Anything else you’d like to add / we should have asked you?
So much 🙂 Happy to keep chatting. So much to discuss and so little time!