Pivoting to a billion-dollar idea: Lessons from Clipboard Health founder Wei Deng

isn’t the bad word</a> some people make it out to be. Many of the greatest companies in YC’s history pivoted along the way.One example: <a href=https://www.ycombinator.com/"https://www.ycombinator.com/companies/clipboard-health/">Clipboard Health</a>. Today Clipboard is built around the idea of connecting independent healthcare professionals — think nurses, medical assistants, or phlebotomists — with healthcare facilities to let them pick up shifts that work with their schedule. It means more flexibility for the nurses, and more much-needed help for the facilities. As of <a href=https://www.ycombinator.com/"https://techcrunch.com/2022/04/18/clipboard-health-which-matches-health-workers-with-facilities-raises-80m//">its last round</a>, it's valued at over $1.3 billion.But that idea wasn’t the first idea. Or the second. Or the third. Clipboard Health founder and CEO Wei Deng tells me the company went through “six to eight different pivots” before it evolved into what it’s known for today.I recently talked to Wei to hear more about Clipboard’s origin story, and our conversation was absolutely full of insights. Here’s just some of what she shared with me.<h2 id=\"talk-to-people-find-the-real-problem\">Talk to people, find the real problem</h2>Wei started out with a mission, and it’s one that hasn’t changed: to find ways to lift people up the socioeconomic ladder.The initial idea was to offer an alternative to student loans — an income-share agreement, years before the idea would become popular. They tried offering it to software engineers, but didn’t get many bites. They shifted to working with lawyers, then doctors — same deal.Another group they tried working with was nursing students. It was in the conversations with these soon-to-be nurses that Wei noticed a common thread: they were all very worried about actually being able to get a job after school. “The idea morphed into… okay, let me try to help nurses find jobs.” Wei tells me. “Helping them with their resumes, helping them with interviews, finding ways to give them clinical experience… It was hard, but it was the first pivot that was at least into this industry.”Wei and her team eventually decided to build a job board just for nurses — and it was there she discovered a deep-rooted problem she could solve.“The only people who would post were staffing agencies,” she says. “I would give them candidates, the staffing agency would hire them full time… but then every month, they’d give the nurse a different schedule. They’d say ‘Here’s the schedule for February, here’s [a completely different] schedule for March.’ It was incredibly hard to find full-time people who could commit to this ever-changing monthly schedule.”But what if she could flip the formula around? What if instead of facilities assigning nurses an unpredictable schedule, nurses could sign up for the shifts that work for them?“At some point I just called the facilities myself and asked: ‘Do you need the same person coming in every month? Or can I give you two different people to fill up that schedule?’ And they all said ‘Yes, we’re very short staffed, we just really need people.’ And this was before COVID, this is 2018!”She tried building software for the staffing agencies to do this — they shrugged it off in favor of paper and pen. The existing system worked for the agencies, but she knew it wasn’t working for everyone else involved.“At that point I was like, OK, there’s an opportunity here.” <h2 id=\"find-the-right-person\">Find the right person</h2>Wei started reaching out to more facilities directly… but it’s not every day someone calls the front desk of a healthcare facility with a product pitch. The person on the other end generally didn’t know where to send her next.“I made hundreds of cold calls a day to try to get someone to even meet me in person […] but I would just get hung up on,” she says. “Everybody thought I was looking for a job. I couldn’t reach the decision makers, so I decided to just go and meet people in person.”Seven months pregnant at the time, Wei was Ubering from facility to facility to pitch the concept of Clipboard Health. After a month of this, a key puzzle piece fell into place; at a facility in Walnut Creek, she found the exact right person to talk to.“This woman… I think she felt sorry for me because I was super pregnant,” Wei notes. “She taught me a lot of the jargon; she was a scheduler and I was, basically, an agency. She decided to give me a chance — she was like: if you can get two people to fill these two shifts this weekend, I’ll hire you on a permanent basis.”“We filled those shifts,” she says with a smile.That facility signed on to be Clipboard’s first customer; today, they work with around 5,000 facilities.<h2 id=\"the-benefits-of-being-new\">The benefits of being new</h2>While coming in from outside the health industry meant there was a bit of a learning curve, Wei now sees it as a hugely positive thing.“I’m very happy I didn’t have experience in healthcare… because I would have thought this was really too hard,” she says. “Sometimes experience scares you off. You've seen how others failed and you’re like 'Oh, we can’t do it.'. We would have had preconceived notions of how facilities work and what they care about.”“For us it was bad and good: we didn’t have the relationships, but we were able to think about a lot of things from first principles. That was kind of freeing.”<h2 id=\"if-you-don%E2%80%99t-win-you-learn\">If you don’t win, you learn</h2>Throughout my conversation with Wei, I notice a common theme: she is incredibly persistent. There were the aforementioned countless cold calls with facilities. Before that, there were dozens of rejections from VCs. Years before that, when studying to become an investment banker, she emailed thousands of bankers just to ultimately get career advice from a fraction of them. Even as a teen that just wanted to teach herself chemistry, Wei was cold calling universities to try to get them to let her use a lab. Most, understandably, said no. I asked her what keeps her motivated when met with rejection:“It’s something I tell my son, and I truly believe: the people who win the most also get rejected the most. When I was pitching investors, I think I got told ‘no’ sixty times. And I’m not a robot — I was crushed.”So she turned collecting rejections into a game. “If you get fifty ‘no’s, you’re not in a worse place than you are after just one. By collecting the ‘no’s, I’m just getting better at the thing!”“Something happens when you have that much practice,” she adds. “You can’t help but just get better. I truly believe that. I definitely felt crushed many times; people would say all sorts of mean things. But I would just regroup and think: one step closer to getting better.”<h2 id=\"when-it%E2%80%99s-working\">When it’s working </h2>I asked Wei how, after a half-dozen-plus pivots, she knew this was the right idea to charge forward with.“I noticed a difference in how our customers engaged with us. Customers wanted to talk to us; they wanted to give us suggestions. They had emotions around our product. They were angry about stuff; they were elated about stuff. ““Yes, from the qualitative data we were growing much faster” she notes “but you could also just feel the difference. You know when you have a date with someone and it’s kind of lukewarm, versus a date with someone who’s super exciting and you’re both interested? It was like that. I wasn’t sure it was working, but our customers cared a lot more.”<h2 id=\"what%E2%80%99s-next\">What’s next</h2>Even after growing Clipboard into what it is today, Wei isn’t looking to stand still for long.She wants Clipboard to expand into other health care verticals that are natural fits — she mentions dental and anesthesiology as categories the company is exploring. But she’s also building what she sees as the “anti-Clipboard” — the thing that would ultimately replace some of the demand for Clipboard Health. Because if they don’t build it, someone else might. “I will never be one to say ‘We’re crushing it! We have product market fit! You have to be honest with yourself; markets change quickly.”","comment_id":"65e78a86b27489000102ed0f","feature_image":"/blog/content/images/2024/03/clipboard.png","featured":true,"visibility":"public","email_recipient_filter":"none","created_at":"2024-03-05T13:11:34.000-08:00","updated_at":"2024-03-06T11:54:37.000-08:00","published_at":"2024-03-06T10:35:15.000-08:00","custom_excerpt":"Many of the greatest companies in YC’s history pivoted along the way. Here's the story of how Clipboard Health founder Wei Deng found an idea worth over $1B.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"645000ebb09be6000165fbad","name":"Greg Kumparak","slug":"greg","profile_image":"/blog/content/images/2023/05/greg.jpeg","cover_image":null,"bio":"Greg oversees editorial content at Y Combinator. He was previously an editor at TechCrunch for nearly 15 years.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/greg/"}],"tags":[{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"}],"primary_author":{"id":"645000ebb09be6000165fbad","name":"Greg Kumparak","slug":"greg","profile_image":"https://ghost.prod.ycinside.com/content/images/2023/05/greg.jpeg","cover_image":null,"bio":"Greg oversees editorial content at Y Combinator. He was previously an editor at TechCrunch for nearly 15 years.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/greg/"},"primary_tag":{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},"url":"https://ghost.prod.ycinside.com/pivoting-to-a-billion-dollar-idea-clipboard-health/","excerpt":"Many of the greatest companies in YC’s history pivoted along the way. Here's the story of how Clipboard Health founder Wei Deng found an idea worth over $1B.","reading_time":5,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":"A photo of Clipboard Health founder Wei Deng","feature_image_caption":null},"mentions":[],"related_posts":[{"id":"63d45276ba7a5900012d1cb7","uuid":"539ff8b7-1511-483b-aade-1dccd48511b1","title":"Learnings of a CEO: Snapdocs’ Aaron King on navigating market cycles","slug":"learnings-of-a-snapdocs-aaron-king-on-navigating-market-cycles","html":"Welcome to the fourth edition of Learnings of a CEO. You can read previous editions <a href=https://www.ycombinator.com/"https://www.ycombinator.com/blog?query=learnings%20of%20a%20CEO\%22>here. <a href=https://www.ycombinator.com/"https://www.snapdocs.com//">Snapdocs is the leading digital closing platform for the mortgage industry. Today, the company touches 25% of all US real estate transactions and is valued at $1.5B. Founder and CEO <a href=https://www.ycombinator.com/"https://twitter.com/a_w_king/">Aaron King</a> and his team have expertly navigated fundraising and market cycles. We sat down with Aaron to hear his insight into getting a business up and running with minimal outside funding and building through volatile market conditions. Why did you decide to raise minimal funding early in the company’s history?I never considered funding to be a requirement for building — but I also didn't know much about fundraising early on in the company’s history. Snapdocs was started as a side project a couple of years before ever thinking about applying to YC. By the time I applied, we had a live product, customers, and revenue. Even after YC, we didn’t raise much immediately. We stayed focused on building and then raised a seed round later in the year.It wasn’t until three years later that we raised our Series A. By then, we had spent about $1MM of our seed round and were at a $5MM revenue run rate. Around that time we started working with much larger customers, and it was clear we would need more capital to be successful in this bigger market. So, we raised our Series A. After we closed the round, our lead investor revealed how capital efficient we had been compared to our peers. Do you feel you had to ruthlessly prioritize when building the product because you didn't have the capital?Yes, and I’ve learned that you should take the same approach even when you do have the capital to be less disciplined. Back then, ruthless prioritization was our only option. We couldn’t afford to build features that weren’t essential. There were always a hundred distractions that would result in a broader, less focused product. But our capital constraints kept us focused on going deep with our paying customers. That helped us avoid the common trap of building products no one wanted. It also meant that when we decided to build a product, we had to think about the smallest version of that product in order to quickly ship. That helped ensure we had a short feedback loop from our users and ensure our resources were continuously being invested in building the right features. Looking back, I’m amazed at how much we were able to accomplish without spending much capital. Being capital constrained forced good behaviors that served us well even after we raised more funding. We continue to be thoughtful about every dollar we spend. But, there is a cost to this approach, and we’re paying for it today. We built many things that weren't engineered for scale or flexibility. However, now we can afford to reengineer those unscalable solutions because we built something people want.What did your product cycles look like before you raised your Series A?We were always heavy on customer involvement when building product. We spent a lot of time in our customers’ offices watching them use what we were building and understanding their work. We also kept a lot of our prospects in the loop as we built new features. Some of the best feedback came from people who had chosen to not yet work with us. Responding to that feedback with a killer feature was a great way to ultimately get them on board. We built a lot of trust and rapport with these early customers, and the in-person interactions helped immensely. As a result, they would call one of us the moment they thought there was a problem or if they thought a competitor was doing something compelling. Customer churn for Snapdocs has always been incredibly low as a result. We created a disciplined product release process, even in those early days, but we were still able to move quickly. We shipped code every day, sometimes multiple times a day. Customers were impressed by how quickly we could respond to issues and feedback. Interestingly, not having too much pressure from investors early on allowed us to experiment more in an underappreciated part of our market. The Serviceable Available Market (SAM) of our initial product was roughly only $20MM, but we believed it would allow us to expand into more critical parts of the mortgage ecosystem. It was the type of opportunity that would be hard to discover through market analysis or spreadsheet exercises. You had to get deep into the problem set to see the opportunity and develop the right strategy—and that ultimately worked to our advantage. Founders need capital to hire employees. As a bootstrapped company, what was your strategy around hiring? Hiring was hard, but we did a few things that worked well. Even before the company could afford full-time employees, I worked with talented contractors. I also leaned on friends to help me work through both technical and business challenges. Someone would come over and whiteboard with me or we’d get into the code and work through a problem. When I could afford to hire full-time employees, I treated them like founding team members. I was generous with equity and shared everything about the potential and challenges of the business. We built a lot of trust as a small team. Getting a few really good people into the company early on was foundational to the company’s success. The first person to join full-time was an engineer I had worked with in a previous role (and one of the friends that would help in those early days). The second and third hires were applicants from job postings on Hacker News. All three turned out to be excellent. None of us initially had large networks in the startup world, so most of our early hiring involved lots of interviews and hiring a few of the wrong people. We couldn’t attract well-known talent and took risks; invested in people we thought had a lot of potential. One mistake I made in the early years was being too timid to approach more of the people I respected. I should have tried to convince them to quit their successful jobs and join our small (yet risky at the time) startup. I’m fearless on this approach now, but back then I was intimidated to try to convince a friend to join a company that might fail. In hindsight, I did them a disservice by not trying to recruit them. The truth is that these people are smart and you’re not harming anyone by sharing your vision and the potential of the company with them. As long as you’re honest and transparent about the inherent challenges, you should give them the opportunity to take a risk on you. As Snapdocs grew, it became easier to pull from the team’s networks. We continued to build a lot of trust within the team, and they started referring their friends to apply. Eventually, we attracted well-known investors, and that, along with our culture and growth, made hiring easier. Because we were capital constrained, we also didn’t hire anyone until there was a clear and painful need. It made running the company harder because we were all spread thin but ultimately made us incredibly productive, as it meant we were always working on the most important things. How have you navigated different market conditions? When do you decide to react?A big part of our success has come from selectively ignoring some market changes while reacting quickly to others. It has always been a question of how the change aligns with our resources, vision, and north star metric of market share growth. For example, the biggest and most dynamic change we regularly experience are fluctuations in the number of mortgages that happen in a given month or year. This can change quickly based on a host of economic factors. When we are well-resourced and growing fast, we can ignore some of those market downturns and stay focused on market share growth — knowing we have the momentum and capital to power through it. Other times we’ve had to scale up or scale back based on the size of the fluctuation.But other market dynamics can change quickly too, like the industry’s appetite for new technologies and the competitive landscape. There have been times when the market was demanding a technology but we believed there were underlying factors in the industry that would prevent that tech from scaling. If we built the technology, it would pull resources away from the priorities that drove us toward our long-term goals. And so, sometimes to the protests of our sales team, we ignored it or invested minimally in these trendy areas. By doing so, we were able to stay focused on the things that were truly going to transform the industry. It’s also worth noting that navigating change was relatively easy in the first few years of building the company. It was a lot easier to adjust course on company direction or strategy when the team was smaller and could all fit in the same room. The product cycles were relatively short and malleable. The cost of making a change was low. As the company has grown, we’ve had to be a lot more thoughtful and methodical about changing the speed or direction of the business as we react to market changes. The cost of making a change has increased a lot. Investments take longer to play out. Changes to headcount take longer to scale up or down. There are more people on the team and more layers in the organization to communicate the change through. In March 2020, Snapdocs made a huge shift because of changes you were seeing in the housing market. How did you communicate this shift to your team and ensure their goals were aligned with the new priorities? COVID accelerated demand for our product, but with that came a shift in what our customers wanted from a platform like ours. We had to expand quickly to serve their needs, and we had to pivot our roadmap on a dime. It’s a testament to the team that we were able to pull that off. To make decisions quickly and then communicate them, we worked in concentric circles. We started by discussing the change in a smaller group of 3-4 people. This is where the hardest and messiest conversations took place. We moved quickly to define the problems and opportunities and set a direction for the company. We then looped in the senior leadership team for further discussion and to arm them with everything they needed to share the directional changes with their teams. Finally, we held a company-wide meeting to share the new direction and answer questions. All of this happened over the course of about 2 weeks.Now, our business required more speed and flexibility as information was coming in and changing week on week. We dealt with this by creating temporary pods of 4-5 team members focused on solving specific challenges that would spin up for a few weeks and then dissolve once the challenge was addressed. We also increased the frequency of our company-wide all-hands meetings from monthly to weekly so we could keep the whole company up to speed. Luckily we had a deep culture of transparency that goes back to the beginning of the company. We’ve always tried to share everything with our entire team — our cash balance, monthly growth rate, burn, our biggest challenges. This got harder as the team grew, but we’ve largely continued this transparency to today. It’s much easier to be transparent in times of great change if you've laid a foundation of trust and transparency in the past. We also worked hard to be intellectually honest about the growth we were experiencing. It’s easy to take credit when the business accelerates, but our message to the team wasn't, “Look at how great we're doing.” The message was closer to, “This industry works in cycles. We're in an up cycle now and that's great. There's going to be a down cycle. We don't know when or how strong it's going to be. But we should not overly congratulate ourselves for the current situation, just as we shouldn’t be too hard on ourselves when we’re fighting through an inevitable downturn in the future.”In 2021, Snapdocs <a href=https://www.ycombinator.com/"https://www.snapdocs.com/resource-center/blog/announcing-our-150m-series-d-funding-round/">announced a Series D round. How did this change your mentality around resources?It was clear that the pandemic would be an accelerator for our business, and we needed to move fast to stay ahead of the market. We went from being frugal to raising larger rounds of capital and hiring seasoned executives who could help us scale. It’s important for companies to evolve at the right points in time and ask themselves, “Is what I did yesterday the thing that's going to get me to where I need to be tomorrow?”. We asked that question and decided we needed to change parts of our culture and capital investment strategy if we wanted to win.When we raised capital in 2021, transactions on Snapdocs had steadily increased to millions of closings a year and thousands of lenders and title companies were using our technology every month. Demand for mortgages throughout the pandemic was strong, and we deployed an intentional strategy of prioritizing effectiveness over efficiency. We needed to get aggressive and expand our market position, which required capital. The market turned again later in the year, with demand for mortgages cooling. It was clear that it was time to go back to some of our old ways of doing things. We ditched the motto of being effective over being efficient. This meant a return to ruthless prioritization of our focus. We shifted away from investing so heavily in future scale as we wouldn’t need to tap into these systems for a few years.I find it helpful to remember that market fluctuations are normal and unavoidable. Startups should scale up at times and scale back at others. It’s hard and painful. There’s nothing easy or enjoyable about being understaffed to meet customer demand on one side, or needing to let team members go on the other. But these ups and downs are natural and a necessary part of building an enduring company. In a startup, you’re always making hard decisions based on insufficient information. You’re never going to be able to perfectly predict the future. You need to keep making the best decisions you can — knowing all the while that you may be wrong and need to change course again once the future becomes clearer.","comment_id":"63d45276ba7a5900012d1cb7","feature_image":"/blog/content/images/2023/02/BlogTwitter-Image-Template--24-.png","featured":true,"visibility":"public","email_recipient_filter":"none","created_at":"2023-01-27T14:38:46.000-08:00","updated_at":"2023-02-22T18:17:22.000-08:00","published_at":"2023-01-30T08:59:00.000-08:00","custom_excerpt":"Founder & CEO Aaron King expertly built Snapdocs through volatile market conditions and with minimal outside funding into the mortgage industry's leading digital closing platform, valued at $1.5B today. This is what he learned about navigating market cycles.","codeinjection_head":null,"codeinjection_foot":null,"custom_template":null,"canonical_url":null,"authors":[{"id":"61fe29e3c7139e0001a710a7","name":"Lindsay Amos","slug":"lindsay-amos","profile_image":"/blog/content/images/2022/02/Lindsay.jpg","cover_image":null,"bio":"Lindsay Amos is the Senior Director of Communications at Y Combinator. In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"}],"tags":[{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},{"id":"61fe29efc7139e0001a71181","name":"YC Continuity","slug":"yc-continuity","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/yc-continuity/"},{"id":"61fe29efc7139e0001a71152","name":"Founder Stories","slug":"founder-stories","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/founder-stories/"},{"id":"61fe29efc7139e0001a71158","name":"Leadership","slug":"leadership","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/leadership/"},{"id":"61fe29efc7139e0001a71170","name":"Startups","slug":"startups","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/startups/"},{"id":"61fe29efc7139e0001a71155","name":"Growth","slug":"growth","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/growth/"},{"id":"63d45389ba7a5900012d1ccf","name":"#622","slug":"hash-622","description":null,"feature_image":null,"visibility":"internal","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/404/"}],"primary_author":{"id":"61fe29e3c7139e0001a710a7","name":"Lindsay Amos","slug":"lindsay-amos","profile_image":"https://ghost.prod.ycinside.com/content/images/2022/02/Lindsay.jpg","cover_image":null,"bio":"Lindsay Amos is the Senior Director of Communications at Y Combinator. In 2010, she was one of the first 30 employees at Square and the company’s first comms hire.","website":null,"location":null,"facebook":null,"twitter":null,"meta_title":null,"meta_description":null,"url":"https://ghost.prod.ycinside.com/author/lindsay-amos/"},"primary_tag":{"id":"61fe29efc7139e0001a71174","name":"Advice","slug":"advice","description":null,"feature_image":null,"visibility":"public","og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"codeinjection_head":null,"codeinjection_foot":null,"canonical_url":null,"accent_color":null,"url":"https://ghost.prod.ycinside.com/tag/advice/"},"url":"https://ghost.prod.ycinside.com/learnings-of-a-snapdocs-aaron-king-on-navigating-market-cycles/","excerpt":"Welcome to the fourth edition of Learnings of a CEO. You can read previous editions here. ","reading_time":9,"access":true,"og_image":null,"og_title":null,"og_description":null,"twitter_image":null,"twitter_title":null,"twitter_description":null,"meta_title":null,"meta_description":null,"email_subject":null,"frontmatter":null,"feature_image_alt":null,"feature_image_caption":null},{"id":"61fe29f1c7139e0001a71af6","uuid":"686e1e7d-ad94-4ba6-9b90-31137e273ce7","title":"Hardware AMA with YC Partner Eric Migicovsky","slug":"hardware-ama-with-yc-partner-eric-migicovsky","html":"YC Partner <a href=https://www.ycombinator.com/"https://twitter.com/ericmigi/">Eric Migicovsky</a> recently did a Hardware AMA with Startup School founders. It was so good that we wanted to share it here.\nEnjoy!\n<hr />\nSoftware is easy to release and sell as a beta, but we’re worried it will be hard to sell our hardware if it looks too “prototype-y.”\nHow can Hardware startups sell product as early as possible?\nAre preorders usually required, or is there a way to can sell product before setting up high-volume manufacturing?\nI could help more if you describe what you’re working on. But in general, you should try to be as hacky and prototype-y as possible. I wrote about this here: <a href=https://www.ycombinator.com/"https://techcrunch.com/2017/09/19/what-working-on-pebble-taught-me-about-building-hardware//">https://techcrunch.com/2017/09/19/what-working-on-pebble-taught-me-about-building-hardware/
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For example: \n– Buy off the shelf hardware (eg RasPi + USB camera) and enclose it in a 3D printed case. Sell it. Many YC companies have done this in the past (eg Flock’s first gen device was exactly this – <a href=https://www.ycombinator.com/"https://www.flocksafety.com//">flocksafety.com, and Piccolo) \n– Buy a device that already does 90% of what you want it to do, then work with the manufacturer to customize the last 10% (I explained it a bit in that TC post)\nYou can sell preorders but I find it easier to simply build 2-3 units then actually sell them to early users. Then use the profits from that to build more units, sell them, repeat. That’s what we did for our first gen watch, inPulse. It worked great, we manufactured the first 1000 units one-by-one in the garage. Secondary benefit: you can immediately incorporate improvements into the product as you assemble them. Of the first 20 units we shipped – 4-5 were completely destroyed during shipping. We fixed that asap and never had the problem again.\nPlease tell your top must-read books for Hardware Startup entrepreneurs?\n<ul>\n<li>\n<a href=https://www.ycombinator.com/"https://www.amazon.com/Piloting-Palm-Handspring-Billion-dollar-Handheld/dp/075678798X/">Piloting Palm</a> is the best, most accurate book about starting a consumer electronics company. A bit dated, but still highly recommended.\n</li>\n<li>\n+1 for <a href=https://www.ycombinator.com/"https://www.amazon.com/Hardware-Hacker-Adventures-Making-Breaking/dp/159327758X/">The Hardware Hacker by Bunnie</a>.\n</li>\n<li>\nAlso <a href=https://www.ycombinator.com/"https://www.imdb.com/title/tt0168122//">Pirates of Silicon Valley</a>!\n</li>\n</ul>\nWhat tools/resources did you use to develop and manufacture prototype?\nOur first prototype was just an Arduino (atmega) plus a screen from a Nokia 3310 smartphone. See the first proto here: <a href=https://www.ycombinator.com/"https://www.youtube.com/watch?v=qVZDx86Ft0o\%22>https://www.youtube.com/watch?v=qVZDx86Ft0o For the next gen (called inPulse), we made the watch case out of CNC milled aluminium and designed a custom PCB. We actually manufactured this in our garage and sold several thousand units.\nWhat did you change in your product after YC W11?\nBiggest feedback we received from inPulse users was: longer battery life (was 24 hours), outdoor readable display, needs to work with iPhone, support for fitness tracking apps. We took the feedback and incorporated it into the first Pebble watch\nWould be great if you share your YC Application\nSure, here it is: <a href=https://www.ycombinator.com/"https://drive.google.com/file/d/1CemwTH8UpInp6wqyv822Usu_PQR_Ho8s/view?usp=sharing\%22>https://drive.google.com/file/d/1CemwTH8UpInp6wqyv822Usu_PQR_Ho8s/view?usp=sharing
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How much did you spend on the Kickstarter campaign?\nWe spent $5k on prototypes for the first campaign. Borrowed a camera and filmed the video ourselves. No other spend.\nWhen did you find the market fit, and how did YC and Kickstarter help you and your team with this?\nYC heavily encouraged me to talk to my users more. I had definitely been bad at this before YC. We also moved much quicker during YC. PG asked why we didn’t have an SDK for devs to write apps for inPulse. I gave all kinds of excuses but eventually he just asked ‘how long would it take to write one?’. We said 2 weeks, and he convinced us to just f’n do it. We did and it turned out to be a critical part of product development that lead us towards Pebble (which reached product market fit).\nTopic: How to be defensible?\nI applied for HAX accelerator and they rejected me saying: “Your product is good and innovative but not defensible. It can easily be copied”.\nMy product is a completely mechanical wheelchair. How to proceed in this case for being defensible. Anything other than patents that can help me here?\nAs without any electronics/codes/app I can’t go for achieving network effects. And being completely mechanical product, anyone can reverse engineer it.\nThere also comes the fear of getting copied by someone in the market (soon if the product starts selling good).\nOne thing I’ve learned about rejections: listen to the ‘no’ but not the ‘why’. Often times investor (including YC) have no idea whether a company is going to be successful or not, but it’s easier to reject than accept. We come up with vague reasons why we shouldn’t fund the company and then move on. From the entrepreneurs side, it’s hard to understand because usually the reasons sound logical but the crazy part is the VC probably will not fund you even if you fix the problems that they outlined.\nDefensibility is my view is the ability to build some sort of moat around your product that either: \na) disincentivizes customers from leaving for a competitor or \nb) reduces/eliminates competition. There are many ways to build this into hardware companies: \n– strong brand or great customer service \n– hw built on a software platform \n– access to a better supply chain, or cheaper/faster logistics \n– many more…\nIn your case, I bet the most defensible thing you could do is truly care about your customers base and move quickly to build products or features that your customers want. While this is not perfectly defensible, you’ll be surprised by how few companies actually do this 🙂\nAssuming that your MVP is a SaaS that receives feedback from a few devices: what are your thoughts on going to market with a hardware solution where your core piece is a commercial single-board computer (Raspberry Pi Zero W)?\nYou are on the perfect track. Do exactly that. I wish more people would follow your exact plan! There is a ton of money to be made by using off the shelf hardware, writing great software and solving a real business need.\nI build a scripting framework for bash which may have use cases for companies building systems on embedded Linux devices. Where can I find companies or strategic partners that are building hardware/IOT products on embedded Linux?\nI recommend reading about some past attempts in this space. Most recently the $9 computer people (Next Thing Co https://en.wikipedia.org/wiki/CHIP_(computer) tried to do this and it didn’t work out. Probably because they were making customer chips though.\nHonestly most hw companies are very resistant to using off the shelf software in their custom builds. Might be an extreme case of NIH. I am always surprised by few companies there are that make sw libraries or modules specifically for embedded systems.\nYou can find potential customers on subreddits for embedded development, or on podcasts like EEVBlog or hackaday.\nWe’re a hardware startup building an interactive learning robot for kids. In the current funding environment, how much weight do you feel seed stage investors are assigning to a crowdfunding campaign?\nI personally assign a lot more value to a company that has shipped something to paying customers. Doesn’t matter how many units, 1 is a great start! Shipping a product means the founders have: \n– developed an idea into an actual solution to a problem \n– figured out some basic marketing and found potential customers \n– convinced those customers to part with their hard earned cash \n– built and manufactured at least one working unit \n– figured out the logistics of shipping and doing customer support \n– have a happy customer\nIt’s actually a lot cheaper (generally) to do this rather than execute a potentially expensive crowdfunding campaign. The best companies I’ve seen actually do the above, sell 50-100 units and then use the knowledge that they’ve gained from that process to create a fantastic crowdfunding campaign. They learn what potential customers actually want out of their product and how to correctly market it.\nAs you know, hardware startups are expensive. We are currently raising a SEED round and our ideal funding amount sometimes feels higher than we are comfortable asking for. When you are pitching your MVP product with a small number of users, how do you justify asking for the money required to take your hardware product from MVP to CVP? Especially when a software product can do it for so much less?\nIf you are already selling your product, why raise a seed round at all? Why not continue selling units to customers and grow your business organically off the profits from your sales? Raising money is super distracting from building product and talking to customers. I would recommend focusing on that.\nHardware startups in general are slightly more expensive that sw startups, but actually not that much more. It does depend on what you’re making of course. We started shipping the first hundred units of the inPulse watch on total spend of less than $50k CAD in 2010.\nWe are also working on prototype of fitness band(Patch). We already released android fitness activity tracker app for the same with few active users.\nI want to know how to reduce the expenses while building an MVP & how to reach potential customers.\nAnother question is what are the key points we have to consider while designing a hardware product?\nWhat expenses do you have right now? Presumably not many. Hard to know what to reduce without knowing what you’re currently spending 🙂\nKey points: same as with a software product. Are you building something that people want? This above all is the most important thing you should be working on. Finding product-market fit. Everything (literally) else is secondary to this all important goal. Often times HW founders think that cost optimization, or beautiful industrial design, etc etc is important…at an early stage – it’s not. The only thing that truly matters is ‘do people want to pay for your product and do they like using it’\nWe are developing a 3Door device using 3D face reconstruction and recognition technology. 3Door will have features like video doorbell, video interphone, security camera and smart access system. In a one-liner, you will be able to unlock the door of your property using your face. We developed algorithm and now we are working on a hardware development. We have a prototype but now we are looking how to make it more <code>consumer friendly/fancy</code>.\n1) Do you have some advice on how to find a vendor for electronics and printed board instead of using Raspberry Pi3 or you think that Pi3 will work well in our case?\n2) Also about the design of hardware, do you have a suggestion how to find the person that can help us with that task and anything else (advice/suggestions) related to this part will be very helpful for us.\nCool! I love smart door stuff. I’ve had a Lockitron on my door since Sept 2011 and haven’t carried a key since then 🙂\n<ol>\n<li>\nSounds like a Pi would be great for your use case. Just 3D print a nice case and make sure it can’t be easily stolen 🙂\n</li>\n<li>\nwhich part of the hardware design do you need help with? You could try posting on this forum, another startup may know someone who could help. For example there are many industrial designers who can do case design remotely\n</li>\n</ol>\nAre there any resources you could recommend for quality control and do you have any tips for sourcing and working with manufacturers?\nI have an electronics client and they have ~10% return rate. Last batch they had a 24% return rate supposedly due to a defective batch. How can you tell between defective hardware and bad design? For QC, they have a team in China that checks random x items to determine the defect rate, but is there a way to automate the QC testing process, or more sophisticated and better ways for QC? Or is the only way having someone on the team there at the factory?\nIs this an enterprise (b2b) or consumer product? Each group has different standards. If they are seeing 24% return rate, they have a big problem. One way to solve this is to institute 100% QC at the factory – meaning one of their team members, or someone they trust (not a factory working) is in-line at the factory checking each unit as it’s prepared. It’s a huge time sink and annoying but sometimes this is the only way to fix problems at the factory.\nDo we need to get validation that the problem we are trying to solve is ‘hair on fire’-type before building the MVP? We are building an IOT cushion to correct user posture and increase physical activity. People we to talk so far don’t believe it as there is no product to show.\nWhen looking for potential markets for a product I consider a venn diagram of 3 circles: \n– severity of problem (how much money can be earned or saved) \n– frequency of problem \n– spending power (does the person with the problem have the power to buy a solution)\nThe best hair on fire problems are people at the centre of all 3 circles. You can test your potential market by talking to customers and determining how willing they are to spend money to solve their problem. People with ‘hair on fire’ problems should be willing to prepay for a solution to their problem.\nOutsourcing Advice: Which part of that hardware startup, one can be better off by getting it done by a third party and not necessarily from a founding team?\nWhich one is preferred: Learning the activity self, and trying it first hand with the higher risk of failure at implementation or outsourcing it to a third party with the risk of beind dependent on outside at cost of some leverage?\nThings like Supply Chain, Web design, Industrial design, Aesthetics, Legal compliances etc.\nThis was a lesson I learned at the beginning of Pebble: it’s impossible to pay someone enough to care about your startup. You and your cofounders are the only ones who actually care. You are the ones who get up in the morning and throw 110% of your energy into making your vision come true.\nIn the early days, I thought I could get by with contractors doing things but they invariably failed, charged too much (and then failed) or did shitty work. The most helpful non-founders were friends of mine who I con(vinc)ed into doing odd projects, helping with the early assembly line and such. Looking back, I wish I had offered to make them cofounders and encouraged them to come on full-time.\nIn the early days, when money is super tight, founders have no choice but to do literally everything themselves. And that’s a good thing. Learning how to do something makes you better at outsourcing it later. Your naivety will also be an advantage – you may not know that something is ‘impossible’ and accidentally create a novel solution that an expert may have written off a long time ago. I benefited from a number of these situations.\nThe one area that I would recommend cultivating is a network of advisors and startup founders that are a few years ahead of you in the process. These people are the best sounding boards for questions like ‘who should I use for FCC testing’ or ‘should I use Shopify or build my own ecommerce site?’ (answer: USE SHOPIFY).\nI’d like to know the strategies you used to boost the success of your kickstarter campaign. If you had to do it all over again would you still go for crowdfunding (why/why not)? Thanks for your time.\nPeople tend to overlook the fact that I started Pebble in 2008, shipped several thousand units of inPulse in 2010-2011 and only launched Pebble on Kickstarter in 2012. That was 5 years later. We learned a ton in those early years, improved the product and figured out how to market it. That’s the real reason why our Kickstarter was so successful in 2012. There are no silver bullets.\nIf I were to do it all over again, I would definitely focus on shipping a working albeit alpha product to customers first, then only after shipping many units of that would I move onto a crowdfunding campaign.\nIn your experience, what is the minimum level of fidelity that a seed or an investor wants to see in a prototype/MVP? Any way to know it before pitching? Any recommendation? What was yours?\nBreaking the chicken and egg is really difficult, and wasting time on useless twitches is a very real problem for a hardware startup. But a fugly MVP seems to get you nowhere…\nAs a seed investor, I look first to see if the startup has shipped product to a paid customer. That’s the gold standard – if you can do that, you’re ahead of 99% of all other hw startups. So try to do that – don’t build a prototype just to impress investors.\nA fugly MVP with paying customers is no longer a prototype…it’s a real damn product with a market!\nI and my friend are both web developers. Recently, we’re so passionate about the idea of autonomous robot charging. We know that it involves high technology of AI and Robotic, but we believe in the vision and so start learning AI and Self-driving, which has a lot of similarity to our idea in tech aspect. We really want to bring in another cofounder who has decent knowledge in tech.\nHow do you bring in cofounders or hire technical people in these highly expertised engineering field?\nSince the learning curve is super steep, should we keep learning until we build a prototype to be more easily pitch in a new cofounder or go networking right the way, by just pitching the concept to try to bring in a new cofounder?\nSince you both are already technical, you could consider researching and studying the technology and work to build it yourself. I’d recommend this route as it’s entirely within your control – you don’t rely on any outside forces to make it happen. Alternatively you could consider bringing on another cofounder, especially if you happen to have a friend or past colleague in the space! But oftentimes I find that technical and problem solving ability beats experience in a particular domain.\nI’m a software engineer. I have 2 hardware product ideas but I don’t have the expertise on electronic/electrical field. What are the good ways I can find a like minded hardware expert as co-founder to research and bring out a product?\nSounds cool! What are the product ideas? Best way is to start by sharing your ideas with practically every person you meet. You never know who will be a) interested in the same stuff and b) have a complementary skill set that can help you make it a reality.\nThe key problem that I have right now is a manufacturing management. We got 6 months delay at the first batch and 4 months delay on the second production batch. Yes, we are still alive but I’m looking for a new manufacturer. I’m afraid that the problem is not in manufacturer but in my incompetence in managing them.\nQUESTION: Is there a proper way to deal (manage) with suppliers and manufacturers to get the product on time and with the expected quality?\nI know that we can set strict terms in a written contract/agreement, to cover the risks, but the manufacturer increases the price and increase the lead-time. Also, because the manufacturing cost is 2x-3x lower than the MSRP, I can’t assign the direct delay losses to the manufacturer as an equation MSRP * PO Quantity = Fines.\nWe had the same type of problems with Pebble – long lead time components really constrained us. If I were to do it again, I will try to design products specifically with easier to source components.\nHave you traveled to visit your supplier in person? Sometimes it takes in-person pressure to kick people into gear. Contracts will never have the right effect, they have to sense that you care and will stop at nothing to get it done. So it might be time to get on a plane and camp out at the factory until they get moving.\nDo you have any advice on pitfalls hardware startups should avoid as they mature? I’m not sure if it’s a subject you want to broach as Pebble had a large sales success but was sold to Fitbit. There are also a lot of consumer electronics companies that do IPO but struggle to maintain financial success afterwards (notable exceptions exist).\nI just would like an idea of what to expect on the road ahead of a hardware startup after prototyping, manufacturing, and sales no longer become issues to contend with. Much thanks!\nReally depends on the type of company. Consumer or enterprise? One-time sale or recurring subscription? The best advice for early stage companies is ‘how not to fail’ by Jessica Livingston <a href=https://www.ycombinator.com/"https://blog.ycombinator.com/how-not-to-fail//">https://blog.ycombinator.com/how-not-to-fail/ and ‘how not to die’ by PG <a href=https://www.ycombinator.com/"http://www.paulgraham.com/die.html/">http://www.paulgraham.com/die.html
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Hardware startups usually die for the same proximate cause as non HW cos: they run out of money. It’s exacerbated for HW startups because they have inventory which locks of their cash early in the sales cycle. If I were to recommend one thing for hw startups – understand your cash conversion cycle and make sure you have the right ‘business model to company’ fit, which is just as important as PMF for hw companies.\nMy question is about the ethics of manufacture: Do you have any insights on how we could be more mindful of product impact on a long term basis?, the possible impact it could have on the planet, the ethics of the suppliers & manufacturing processes and long term repercussions, are there any tangible ways (you may have found) to measure or calculate the future impact of a product so it can be negated right at design stage? any resources would be very useful, as it is my goal to make my company among the most ethical on this planet.\nModern design thinking is centered around something called ‘cradle to grave’ product design. So you consider the materials going into your product and how the user will deal with the product after it’s lifespan is up. The easiest way to build this into your product is to design it to last and to be repairable. Then the user can continue to use it long into the future.\nWhat’s the best way to outsource embedded electronics prototyping? Also, what resources do you recommend when looking for a manufacturing partner in China?\nI wrote a post precisely about this: <a href=https://www.ycombinator.com/"https://techcrunch.com/2017/09/19/what-working-on-pebble-taught-me-about-building-hardware//">https://techcrunch.com/2017/09/19/what-working-on-pebble-taught-me-about-building-hardware/
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It seems to be a catch-22 situation for a new company, as protecting product IP internationally, including design patents, brand IP etc, is cost-prohibitive at an early stage, yet without these in place, launching a product puts the founders in a non defensible position. How would you recommend tackling this challenge especially when your focus is creating a strong international ‘Brand image’?\nI would not worry about IP in the early stage except for a very specific set of products (mainly pharmaceuticals). If you really care about patents then file a super broad provisional patent for $500 to $1000. This gives you 1 year period to file a full patent for anything that you actually end up building.\n“Don’t worry about people stealing your ideas. If your ideas are any good, you’ll have to ram them down people’s throats.”\nMy company is working on remote control cars for car sharing companies. We’re remotely piloting cars so that there’s no need for an in car driver. Right now we are in the very early stages of development but we had a few questions.\n1. Our team eventually will need to recruit someone with a mechanical engineering background as my co-founder and I are a bit weak in that department, but we’ve been debating on if that person should be an early hire or a founder. Do you have any advice on how we should evaluate that distinction?\n2. Right now we’re bootstrapping development and we believe we have enough savings to get to an MVP though it might be cutting it close. Is there an ideal time to start the fundraising process?\n<ol>\n<li>\nEssentially the first 4-5 people at any company are cofounders. Sometimes they have the title, sometimes not. But they effectively are and should be treated as such with large amounts of equity. Think of it this way – if the first 4-5 people aren’t spending every waking second thinking about how to make the company a success, who else is going to? If you are relying on them to do this, they should be compensated as such. Some people need to make more money for personal reasons, that’s okay but the important thing is they still have a large % of equity. Don’t be stingy with equity to someone who is putting in 20% of the effort to make your company a raging success.\n</li>\n<li>\nNo, fundraising basically always sucks. I would try to optimize for earning revenue over trying to time fundraising. If you earn revenue you have cash to fund further growth and the happy side effect of making investors want to invest in you!\n</li>\n</ol>\n1. How essential is it to figure out the manufacturing aspect very early on versus just making an MVP prototype as soon as you can?\n2. Where can we go to read/learn about hardware startups and their product-market-fit process, and especially, how they scaled effectively? (including Pebble)\n<ol>\n<li>\nSpeed speed speed! The one thing a startup needs to accomplish is prove that they have product market fit. Everything else is secondary. So make the MVP asap!\n</li>\n<li>\nThis is a great blog by a friend of mine. Fellow HW founder: <a href=https://www.ycombinator.com/"http://marcbarros.com//">http://marcbarros.com/
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What is your opinion in engaging product design companies if we can’t build the complete hardware all by ourselves? What are the documents needed to protect our IP?\nFirst I would try to build it all yourselves without working with product design companies. Not because of IP, but because they’ll bleed you dry with fees and are generally slow. Now I don’t know what you’re trying to build (feel free to share!) but in general, I’d recommend pursuing a path more like this: <a href=https://www.ycombinator.com/"https://techcrunch.com/2017/09/19/what-working-on-pebble-taught-me-about-building-hardware//">https://techcrunch.com/2017/09/19/what-working-on-pebble-taught-me-about-building-hardware/
/n by Lindsay Amos
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Greg Kumparak