When we started Lemnos we created a program with a five month program for hardware startups to enter and exit the Forge. This was loosely based on my experience with the Small Business Innovation Research (SBIR) Program when I was in the Air Force. With the SBIR program companies were awarded a six month, $100,000 grant.
Three months into our first class we realized that this wasn’t working. What we learned was that different types of hardware companies take different amounts of time. At that time our portfolio included everything from a new type of electric guitar to a robot that could make hamburgers. We knew there was probably a minimum amount of time any hardware startup would take to make significant progress towards shipping their product, but we learned that the actual time varied widely and that it was critical for the company to have the time to properly mature.
Now, we invest year round and we house companies in our warehouse for as long as it takes them to reach their next funding milestone. We’ve found this range to be anywhere from 5 to 14 months. We’ll get into these funding milestones in another post, but so far this model is working.
Nanosatisfi is a great example of how different hardware takes different amounts of time. While they were with us they were building space grade flight hardware. As part of this they needed to set up a full test rig that could simulate the vacuum of space as well as the temperature cycles the satellite would go through.
We helped them source a thermal vacuum chamber for 50x less than the list price and then we worked with them to build and execute a test plan. All of that happened after they finished the design and build of the satellite. This took longer than five months, as it should. They then raised a seed round and quickly grew, when they hit 9 people they found their own warehouse. Clearly kicking them out before they hit the technical milestone they needed to raise would have been a mistake.
Another trend we see is that Lemnos can have a huge impact on a company right after they have raised their seed round. Startups raise seed rounds on ambitious plans and schedules and their investors expect them to immediately begin to execute. Now that there are specific milestones and budgets we find that our design, schedule, and business reviews can really help thread the needle in the post-seed phase. Also now that the companies are in full hiring mode we can help to screen candidates.
Sproutling is our baby tech company. When we invested in them last December it was just Chris and Matt and a duct tape prototype. Over the next 8 months we worked with them to do everything from helping to pick an industrial design firm to helping build the deck for their seed raise. In August they closed a $2.6 million round from First Round Capital, Forerunner, First Mark, and Accelerator Ventures. Since then they’ve been on a hiring tear (check out their jobs page here). We have been very involved by helping to vet and pick a contract manufacturer and build out their project plan. Once again it would have been a mistake to simply end the relationship the day they raised a seed round.
In the end we find that hardware companies require rigor and engineering process to be successful. Across the portfolio we see again and again that good hardware can’t be rushed. This isn’t something you can hack together in a few weeks.
Our model is to invest in a small number of companies every year (10-12) that we think we can add significant value to through our process. By not having classes it allows us to ensure that the companies we invest in have the time they need to hit the milestones to be successful.