- The Runway Ventures
- Posts
- 🙅🏻♂️ Don't build a hardware startup
🙅🏻♂️ Don't build a hardware startup
Here's why Lumos, the IoT startup, failed in less than a year...
Admond Lee
April 14, 2024
Read Time: 4 minutes
Hey Founders,
Welcome to The Runway Ventures, a weekly newsletter where I deep dive into startup mistakes and lessons learned to help you become a better founder.
Building a successful startup is hard. Building a hardware startup is 10x harder. If you ever wonder why building a hardware startup is so tough, you’ll love today’s issue.
Let’s get to it! 🚀
🤝🏻 Join our founders community on Discord:
Building a startup is one of the toughest things you can do. Why struggle alone when you have our community to help and support you.
This is the founders community I wished I had when I first started.
Today at a Glance:
☠️ 1 Failed Startup → Lumos
⚠️ 2 Mistakes → Not the right team
🧠 3 Lessons Learned → Find the right team to solve the right problem
🔗 The Runway Insights → Meet the YC Winter 2024 Batch
🤝🏻 The Founders Corner → Should I be worried about my competitors?
☠️ 1 Failed Startup: Lumos
🚀 The Rise of Lumos
Lumos was an IoT startup founded by 3 first-time founders (Yash Kotak, Pritesh Sankhe, Tarkeshwar Singh) straight out of college in July 2014.
The Problem — Homeowners struggled to implement home automation for power savings.
The Solution — Lumos provided smart internet-connected switches that used AI to understand user behaviour and automated all electronic appliances at home.
This ensured devices automatically go on or off right when needed, helping home owners with power savings.
💰 Since AI wasn’t popular back in 2014 and smart home was still a new concept, Lumos got some interest and funded (pre-seed) by an angel investor, and the founders went to their alma mater IIT Gandhinagar to get incubated.
From there onward, the founders built like crazy. Their 1st prototype was ready in 45 days, and the 2nd prototype was done in another month. They were on track to have a hardware product on the market in less than a year.
In December 2014, they started raising the next round of funding from investors. They were excited. Investors were happy. Life was good…
📉 The Fall of Lumos
Until it wasn’t.
Building a hardware startup was a lot harder than they had expected.
We had underestimated the work, time and funding that goes into making a market-ready hardware product. We had overestimated the demand and utility of our product.
By the time they realised this, shit got real. Because it was too late.
😮 Here’s what happened to Lumos that caused its downfall in less than a year (shared by Yash Kotak):
July 2014 — Lumos was started after raising a pre-seed round from an angel investor.
August 2014 — Built 1st prototype which automated lights.
September 2014 — Built 2nd prototype which automated lights, fans, ACs and water heaters.
November 2014 — Moved from prototype stage to beautiful product stage.
December 2014 — Painful realisation from the founders
Underestimated the work, time, and funding to make a market-ready hardware product.
Overestimated the demand and utility of their product.
Price estimates were wildly off the mark.
January - April 2015 — Forced into making major pivots
Founders were not sure what to work on.
They left IoT as a sector.
One of the co-founders decided to call it a day and find a job.
Lumos shut down.
With that, Lumos couldn’t make it and closed down in 2015. Despite the failure, there are many valuable lessons learned from their mistakes, especially if you’re thinking of building a hardware startup.
Want to learn more about Lumos’s downfall?
⚠️ 2 Mistakes
Mistake 1: Not the right team
This was actually one of the mistakes shared by Yash Kotak in his post-mortem article on why Lumos failed.
Lumos’ founders were neither experts in IoT nor target users of the product they were building. They had never used any home automation products at home, and yet they were building home automation products for homeowners.
⚠️ This was highly risky for 3 reasons:
They didn’t know if their target users would buy their products.
They didn’t know how to price their product.
They were blinded by their own biases.
I was guilty of this mistake too when we were building Staq. My co-founder and I didn't have the domain expertise in the fintech industry, and we didn’t have the right network to leverage.
We thought we were the right team. We were delusional. By the time we knew it, it was too late. We were dying and running out of cash.
🧠 Moral of the story → Founder-market fit is important.
Mistake 2: Fell in love with the solution
Yash admitted that they let sunk cost bias affect their decisions about pivoting. They had spent months to build the product and were not ready to ask the tough questions:
What’s the problem we’re trying to solve?
Is our product solving a problem for our users?
Are our users willing to pay to use our product?
What do we not know?
Because of that, they missed the golden period to pivot and start things from scratch with the runway they had.
🧠 3 Lessons Learned
Lesson 1: Find the right team to solve the right problem
I can’t stress how important it is to find the right team to solve the right problem. I made this costly mistake as a first-time founder and wasted 1.5 years finding problems to solve when I wasn’t even the right person to solve them.
If there’s only one takeaway from this sharing, always ask yourself this question before solving a problem:
Why you?
🎲 Just think of this from a probability standpoint.
If you’re the expert in a certain space with domain expertise or technical skills, or you’re the user facing the problem, the chances of you building a solution to solve the problem and getting people to pay are way higher than random people who just come in and want to solve the problem — because of 2 reasons:
You know the problem well enough
You have the skills to solve the problem
Most people might have the skills to solve the problem, but they’ll lose if they don’t know the problem well enough as they might build the wrong solution to solve the problem.
Lesson 2: Fall in love with the problem (NOT solution)
There are almost always multiple ways to solve a problem.
If you fall in love with your solution, thinking that your solution is the best one without first understanding and validating the problem — you’re doomed.
Being problem-focused also makes us open to new ideas and feedback to challenge our assumptions. Our goal as a startup founder is to:
Step 1 — Identify the right problem to solve
Step 2 — Build the right solution to solve the problem
Most people skip Step 1. Don’t be like them.
Lesson 3: Find a niche
When Lumos started, the founders were trying to do everything for everybody.
They made intelligent switches that could automate lights, fans, ACs and water heaters. They also tried to automate TV. fridge, oven and cars.
The result?
The pitch was unfocused. The product was complicated to understand. Users didn’t get the value proposition of Lumos. When you’re targeting everyone, you’re targeting no one.
🧠 Moral of the story:
Find a niche problem and solve that problem very well instead of solving N problems in a so-so way.
🔗 The Runway Insights
🤝🏻 The Founders Corner
This is the place where you can ask me any questions about building a startup. Every week, I’ll pick one question to answer.
Just reply to this email with your burning question. Let’s win together 🤝🏻
Founder’s Question:
Hey Admond, so I just started working on my startup idea. However, I’m always worried that my competitors will copy my startup idea and kill everything that I’m building here. What should I do?
My Thought:
This is probably one of the most common misconceptions, especially for first-time founders (I’m guilty of this too).
For early-stage startups, founders almost never get killed by competitors. Instead, they get killed by their own mistakes, like solving the wrong problem, building something people don’t want to buy, having conflicts with co-founders, and hiring the wrong people.
So don’t worry about competitors stealing your startup idea or killing your company. Because it’s just a distraction. Focus on talking with your users or customers, build and iterate quickly. The biggest advantage you have over your competitors is SPEED. You’ve got this! 💪🏻
🤝🏻 Join our founders community on Discord:
Building a startup is one of the toughest things you can do. Why struggle alone when you have our community to help and support you.
This is the founders community I wished I had when I first started.
That's all for today
Thanks for reading. I hope you enjoyed today's issue. More than that, I hope it has helped you in some ways and brought you some peace of mind.
You can always write to me by simply replying to this newsletter and we can chat.
See you again next week.
- Admond
Disclaimer: The Runway Ventures content is for informational purposes only. Unless otherwise stated, any opinions expressed above belong solely to the author.
Reply