This Incubator Helps Ideas Become Actual Products
In the technology market, the Next Big Thing is just as likely to come from some unknown startup than from a corporation. A few years ago, Flex executives realized they needed to work with these promising companies. Already, Google, Apple, Microsoft, and other giants relied on Flex to make computers, smartphones, printers, you name it. Problem was, the world’s second largest contract manufacturer was not set up to assist the small, agile disruptors.
So Flex stole a page from the startup playbook and ginned up a new model. In the summer of 2013, the company unveiled Lab IX, an incubator designed to help new ventures make the transition from birth to adolescence.
“We want to help the breakthrough ideas that we believe will be the next big thing,” says Oshri Kaplan (top), principal director of Lab IX.
Operating out of a spacious facility in Milpitas, Calif., Lab IX is currently helping 24 startups develop a range of potentially game-changing technologies such as brain-sensing headbands, paper-thin batteries, and drone networks.
Lab IX takes small equity stakes in the start-ups it works with, but entrepreneurs say its main draw is that it lets them tap Flex’s expertise in design, hardware engineering, and the intricacies of mass production.
Lab IX gives off the feel of an airy co-working office crossed with a factory. There are private nooks for seven partners and a common kitchen-hangout area. 3-D printers and prototyping tables are sprinkled throughout the floor.
Many companies in Lab IX’s portfolio are developing objects that are connected to the Internet—part of the Internet of Things. Sources predict that by 2020, there will be 50 billion such devices, up from less than 1 billion five years ago. Kaplan says the decreasing cost of bandwidth, sensors, and computer chips means almost anything will be connected to the Internet in the future. Devices will get smarter as they exchange data with humans. In the near term, smart devices will suggest certain actions based on that data, like a computer in your closet that tells you the weather along with the proper outfit to wear. Down the road, decisions will be taken over by networked, software-driven machines. “The smartness that we have in our phones will come to our devices,” he says. For a glimpse of that future, we spoke with three partners working with Lab IX.
Jason Aramburu was developing an organic charcoal-based fertilizer in East Africa funded by the Bill & Melinda Gates Foundation when he stumbled upon what could be an even bigger and more socially beneficial technology.
Aramburu, founder of tech firm Edyn, wanted to track moisture in the soil level, but when he looked at existing sensors he only found kludgy devices that cost a few thousand dollars and were based on old PC software. “I didn’t find anything affordable,” he said during a recent interview at Lab IX.
The insight led Aramburu down a new path to develop a garden sensor that would help farmers to grow food more efficiently and sustainably. He believes there will be an urgent need for such advances, given a recent report he read from the United Nations Department of Economic and Social Affairs forecasting that the earth’s population will reach nearly 10 billion by 2050.
The myth of Silicon Valley is that a lone inventor or two will go into a garage and emerge with a brilliant technology that captures the hearts and wallets of consumers. But Aramburu’s story shows that innovation is a far more collaborative process nowadays that relies on the kindness and self-interest of multiple partners.
Edyn’s tale is also a lesson for hardware startups in the value of thinking about large-scale manufacturing early in the development process.
Around two years ago, Aramburu started tinkering and built a prototype of the sensor using an open source electronics technology called Arduino. It was pretty cool. So cool that it began to attract interest from non-governmental and agricultural organizations with similar needs.
“I thought maybe there is a product here,” he recalls.
Aramburu had some engineering chops but knew little about product design. He came back to the U.S. and started talking to designers, but they were all pricey. Luckily, a friend introduced him to Yves Béhar, a well-known designer who runs fuseproject. Béhar dug it and his firm signed on as a partner in the summer of 2013, trading equity in Edyn for its services.
In September of 2013, Aramburu debuted the company at the TechCrunch Disrupt conference in San Francisco. That’s how he met Oshri Kaplan from Flex and executives from Home Depot.
Aramburu got another boost in winter 2013 when Edyn was invited to join the prestigious tech incubator Y Combinator. Around the same time, he began looking for a manufacturer that would make his garden sensor. “They all wanted a lot of money up front or a lot of equity,” he says.
Flex stepped up to the plate, offering Edyn a manufacturing deal and a $500,000 convertible note on good terms.
It was a prescient move. Crowdfunding services such as Kickstarter are fantastic at raising money and interest—proving there is demand for a-yet-to-be-invented product. But they are of little help in showing entre- preneurs how to actually make the product, a terribly complex undertaking that has stalled many crowdfunded projects. Eighty-four percent of the top 50 most-funded Kickstarters missed their target delivery dates, according to a 2012 study by CNNMoney.
Edyn began working with Lab IX in the beginning of 2014. At that point, the company had a functional prototype, but it couldn’t be mass-produced.
Flex helped the company refine its electronics and make a tool that could mass-produce the sensor’s plastic parts. It also advised the company to switch from a nickel-metal hydride battery to one made from lithium iron phosphate, which extended the battery life by several years.
Last summer, Béhar suggested they launch a Kickstarter campaign. Edyn’s goal was $100,000 but they ended up raising almost $400,000. Nearly a third of about 2,300 backers were commercial farmers. The money paid for a tool to build the sensor’s components and funded its first production run.
Edyn is now preparing to ship the first batch of sensors to its Kickstarter backers— on track to meet its initial spring 2015 target. After its release, Home Depot will begin selling the garden sensor for $99.
The product has four sensors that track light, temperature, humidity, soil moisture, and nutrient levels. It passes the data over a Wi-Fi router and is paired with an iPhone app.
The yellow foot-high gadget uses the data to make recommendations in tandem with a plant database that Edyn built from scratch. Open the app, and it tells a user that “there is enough light” or “you should add fertilizer.”
There is a social aspect to it as well. The app tells users the optimal parameters for each garden metric compared to those of other farmers, Aramburu says. “I think that will be the most valuable aspect to it,” he says.
Rob Katcher got tired of his kids running out of clean underwear and milk to drink. So, like a good entrepreneur (and dad), he founded Hiku Labs in January 2012 to solve both nagging problems at once.
The company makes an egg-shaped gadget called the Hiku that creates a shopping list for harried parents by scanning bar codes of products or recording a person’s voice. The list can be shared with family members through a mobile app that exchanges data from the device through a Wi-Fi connection.
“When you walk into a store you know what you need,” Katcher says. “We want to kill pen and paper.”
To get started, the company set about creating a prototype. For hard-to-find hardware expertise, Katcher tapped some former co-workers at Palm Computing, where he’d been a product manager in its smartphone group.
Together they refined the product’s mechanical, electrical, and industrial design firms. Based on that initial version, Hiku was able to raise a $750,000 round of seed capital in the spring of 2013 led by Morado Venture Partners.
The San Jose, Calif.-based startup then began building the product with a local manufacturing firm in the San Francisco Bay Area. In October 2013, Hiku began selling its gadget for $79.
As Hiku started to gain early traction, Katcher began looking for a bigger manufacturing partner that could help it scale to more than 10,000 units a month. He heard about Flex and approached the company. Near the end of the summer of 2014, Flex invested in Hiku, and the startup handed over its manufacturing to them.
Thanks to Flex’s global factory network, Hiku immediately slashed its manufacturing costs by more than a third. “Going from prototype to manufacturing is really hard,” Katcher says. “That’s where Flex is really helpful.”
Hiku is currently running two pilots with grocery stores in Europe, which let users order goods from their online stores through the app.
Down the road, Katcher believes the real value of the product will come from the consumption data its system is gathering. He sees a day in the near future when Hiku will make smart product recommendations to users, like Amazon.com does.
“There’s a ton of intelligence you can apply on top of that,” he says.
Isy Goldwasser enjoyed a successful career as a chemical engineer. After getting his master’s at Stanford University, he joined Symyx Technologies, helping to take the material discovery company public in 1999 as its president.
But for his second act, Goldwasser wanted to do something really special, something that pushed the envelope of technology and touched the mainstream.
In September 2011, he co-founded Thync and began noodling on a notion that has inspired science fiction for decades and is now one of the frontiers of the 21st century: the merging of man and machine.
Thync’s foray into this field is a wearable headband that uses ultrasound technology and small doses of electrical stimulation to produce an energizing or calming effect in a human being. “We are trying to let people tap into the powers of their own minds,” Goldwasser says.
Thync’s headband is based on several breakthroughs, Goldwasser says. First is the science behind the technology. Central to that effort is Goldwasser’s co-founder and chief scientific officer, Jamie Tyler, a neuroscientist who taught at Arizona State University. After the two met and launched the company, they used their ambitious vision to raise their first round of capital from Khosla Ventures.
Thync scientists began developing the neuroscience behind its machine and the signaling algorithms that would trigger desired responses. Then they started to fashion the biomaterials that would interact with a person’s skin, as well as working up a prototype of the device.
Using an early version, Thync began testing the headband on real people in a series of studies. People control the Thync through a mobile app that communicates with the headband over a Bluetooth connection. They pick a calm or energy mode and wear the headband for about 10 minutes.
Overall, Thync studied 3,000 people, capturing and analyzing data such as their heart rate, skin response, and pupil diameter.
“They would try some sessions with us and we would see how they respond,” Goldwasser says. Over 18 months, the company has advanced its neuroscience and steadily created effects that are much greater than the placebo effect, says Goldwasser.
Thync’s founders believe they have proven the efficacy of the system. In 2013, they began working with the Food & Drug Administration to get approval to sell their product even though they say it is unclear if they need such approval. “What we are doing, there is no precedent for it,” Goldwasser says.
Last fall, the company began working with Flex to develop their first production versions that will be available for sale this year. Flex has helped Thync think through hundreds of little decisions raised by the manufacturing process, like the placement of a screw.
“Before we met them we were assuming we could build our unit,” Goldwasser says. “With their input we got to manufacturability.”
To finance its next phase, Thync announced last October that it raised $13 million from investors, including Khosla Ventures. That will help give Thync time to integrate its headband with other wearable gadgets, like a sleep monitor, which could help show users how the device is impacting their minds and bodies.
“It’s early days,” Goldwasser says. “We are trying to create a new category of products.”