Indian hardware startups must look at local investment than foreign funding: China's HAX

HAX, China's largest accelerator for hardware startups says that Indian hardware firms must replicate the Chinese model of attracting funds from local investors than depend on foreign funding to build their business.

HAX, backed by venture firm SOSV ,has invested in over 130 hardware startups in China and the US. SOSV has $250 million corpus that it invests in startups.

"Getting funds for hardware startups is always a challenge. This is mainly because investors are not aware of hardware (products)," said Benjamin Jofee, general partner, HAX here on Tuesday.

In China, hardware startups got funding from Chinese investors as foreign investors were sceptical due to lack of understanding of the market and the ecosystem. The trust and funding from local investors helped Chinese hardware startups build products that are global in scale.

"There are very few (foreign investors) that are active," Jofee said.

He expects India to undergo similar learnings as building hardware products is a challenging task considering the infrastructure deficit in the country.

"If Indian hardware companies want funds they need to attract local investors. The best way to do that is by showing investors profitability and scalability. Investors are skeptical whether a product will actually become commercially viable and therefore profitable," says Jofee. "But going forward everything is going to be connected and hardware is the most important aspect of this. In future there is going to be a huge scope for hardware startups."

The key to success for hardware startups is to develop prototypes faster and introduce them in the market. HAX says that India lacks the ecosystem to bring products faster and this needs to be addressed.

"Indian startups should either develop the machines here or they should come to China where the tools are easily available. What takes a week in China takes 30 days in India. The longer time period also puts investors away. So faster prototypes can lead to faster final products as well," Joffee said.

HAX has two accelerators one in Silicon Valley and one in Shenzhen. The company feels that India does not offer it a market like US nor the ecosystem like Shenzhen to produce hardware products and hence would not want to start an accelerator here. It instead is looking at using the country as a testing ground for connected services either in a particular industry or in a particular area, he said.