My startup story

Written by Ethan ou Journalist of HHQ Alfred was riding home from university through Sydney’s inner west. Passing through traffic on one of the city’s main intersections, the day seemed fairly typical. That was until his wheels slipped on an oil slick in the road. “Within seconds I was pinned underneath the bike, with a fractured knee cap and a concussion. My camera on the side of my helmet smashed apart and I was lucky that it didn’t penetrate the helmet as I fell.” “I realised as I was on the ground these accidents happen within a few seconds. If we could do something to increase reaction times for riders or athletes in general, we could save a lot of people and give them foresight.” Inspired by this event, Alfred worked on how to relay video, data and the location of police officers for his final thesis project. “The prototype we envisioned was 100% autonomous. It would’ve saved previous seconds across the whole of the emergency services fleet and made sure that the number of fatalities from car crashes. That was the goal—to create more time to react to situations with the helmet than without.” “If we could get the ambulance and motorcycle police to move to the scene of an accident without needing to manually relay the information, we could improve the likelihood that people could survive an accident.” Before Alfred began building a concept, the idea had success in the media. It was featured in Time Magazine, Gizmodo and TechCrunch, and won the Hill’s Young Design Award, the Red Dot International Award and Silver in the Dyson Award. The press led to multiple PR agencies and investors reaching out to Alfred to help facilitate the building of a prototype. That was in 2012. Alfred ended up graduating from university and started work as a design engineer. He realised over time that he made a mistake. “I thought I wanted to do design work, but I realised that a lot of the corporate work that I was invited to do was very boring. Had I been there for any longer, I would’ve been working on CAD models of screw bosses until I had the permission to start working on really interesting products. That gap was too long for me.” “I quit that path and went to freelance in wearable technology, building everything from smartwatches to pet tracking devices—even working for an IP firm for a bit. However, the money I was making through these jobs wasn’t important to me at all. I wanted to do something that was exciting and meaningful, and I knew it had something to do with the smart helmet idea.” At the end of the same year, Alfred sat down with university friend—Julian Chow. Once class rivals, they became close friends after sitting next to each other in the first year of their industrial design course. As Julian was returning from Hong Kong that month, he had new conclusions on which direction Alfred’s concept could go. FINDING PRODUCT-MARKET FIT AND RAISING FUNDS “We were sitting in a café in Sydney and looking at everyone riding around with GoPros strapped to their helmets. I rode like that. Alfred rode like that. We knew there was a trend where motorcyclists were becoming proficient with technology. Alfred’s concept simplified the gadgets that motorcyclists were using, and helped riders increase their situational awareness. “We also came to the conclusion that targeting the emergency services industry was far too ambitious for what we could accomplish. Going forward we decided to switch from a commercial B2B product to a consumer-oriented B2C product. We knew we would be more comfortable targeting this market, since we knew what sort of helmet consumers like us were looking for.” As the pair narrowed down the type of helmet they were about to create, they found themselves choosing between three target markets—cyclists, motorsports and snow sports. Each had their unique style of helmet with its own specifications, legal requirements and capacities. After careful deliberation, they chose to go with the snow sports category. “We wanted snow sports to be our apex product,” recalled Julian. “It was a logical decision—it had the smallest profile as a helmet, with the ability to showcase all the features that Alfred’s prototype had at university. Once we brought that product to market, we believed it would be an easy translation to a motorcycle helmet.” Their first investor found the company on a forum and wanted to invest $10,000. More funding came soon after. In their seed round, they raised just over $1 million which got them a small office in Waterloo—outside the Sydney CBD. The increased attention connected them to Michael Drysdale, who later started structuring Forcite into a business. With a host of new contractors and investors, the company launched their initial product on Kickstarter—the Alpine. By then, the helmet had gone through four variations and now had a 4K camera, GPS, helmet-to-helmet communication, on-board sensors, a Bluetooth headset and an emergency beacon. As Julian described, “we were trying to replace the walkie-talkies and GoPro’s with a helmet that streamlined all the features they needed.” However, even before they launched the Kickstarter they had a sense it was the wrong channel to launch with. The customer feedback they gained confirmed their beliefs. “We were selling a seasonal product that people needed to feel in their hands,” Julian remembered. “They needed to know whether the ergonomics suited them, and it was also a fashion item for many. Instead of buying through the campaign, customers were waiting until the product would launch in stores, hoping to answer these questions for themselves.” Despite the project being 75% funded, they cancelled the campaign in late October. Alfred recalled, “I think at that point, me and Julien was disappointed about what happened. We knew we decided to do the Kickstarter against our gut feelings, but we were convinced to do it at the time.” “Luckily, the campaign spread like wildfire across the motorcycle community. They came to us after the Kickstarter and said they wanted a smart helmet built for their needs. There was much more enthusiasm than any hardware product we’ve seen.” “The only fear they had was the features were fake. Launching the snow helmet would’ve been like seeing broadband internet in 1995—the market was so early, no one had adopted the technology yet. We still believed in the product enough to know that if we continued to pursue the idea, we knew we’d have something very successful. “But after the incident with the Kickstarter campaign, we realised we needed to change our plan of attack. We didn’t have enough capital to manufacture or market our own product. We needed to find a new way to sustain the company in the short-term.” PIVOTING THE BUSINESS MODEL, PARTNERS AND CONSUMER FEEDBACK The team at Forcite spent the next year building connections in the motorcycle industry. They pivoted from the Kickstarter to a licensing model where they would sell the hardware to manufacturers who would be willing to put R&D into smart helmet technology. It took nine months of rebuilding before the team finished their pivot—and the team stretched five months of capital to survive. The pivot gave them the opportunity to work with big helmet brands all over the world, and helped develop the relationships necessary to make sure Forcite succeeded in the long-run. They started rebooting their product line, worked with an American football manufacturer, and lasted through the rest of 2016 with less than three months of capital to spare. Along the way, there a major lesson the team learnt before taking their motorcycle helmet to market—a lesson that became clear only after the Kickstarter campaign. “We didn’t have a challenge setting up the meetings with these global helmet brands. We didn’t have a challenge setting up convincing their R&D teams it was a really good idea. Our main issue was the technology was ahead of its time. Helmets were going from a piece of Styrofoam to Iron Man in a day.” “We learnt from meetings with executives in the industry that packing so many technologies into one product was counterproductive for our mission. A far better idea was to take the best two or three and execute those in the first helmet, then launch the other features in the second, third and fourth generations.” “Because the technology was so new, it was difficult to launch in the existing market. The motorcycle industry is ruled by old helmet brands that own all the distribution networks. They don’t want to build smart helmet technology because it’s expensive, doesn’t result in the same margins, expensive to maintain and requires lots of new hires.” “The hard thing is that big companies want to do everything they can to dominate the market, and they’re the brands that people gravitate to. If a popular company starts a new product line, customers assume it’s good even if they haven’t tried it. It makes it hard as a small company to break through.” “So far, about five companies have tried to release a smart helmet for motorcyclists and not one has been successful in bringing the product to market. Two companies (as of early 2018) even went bankrupt trying to build their prototype, and it led to a lot of early-adopters and brand manufacturers losing confidence that a smart helmet could even exist.” In the book Blue Ocean Strategy, W. Chan Kim and Renée Mauborgne argue that the best way for a company to succeed in the long-run is by creating new market space (a “blue ocean”) rather than competing in an existing industry (a “red ocean”). Alfred knew this was a textbook case of a Blue Ocean market. There were no existing competitors in the space, and of the companies that launched previously, none were able to gain mainstream demand. “Being a startup against these huge companies is like trying to take down a tank with pebbles. It’s possible, but it would take a very long time. If we want to take our product to market faster and with less risk, there’s only one way to do it. You have to stop throwing pebbles, and piggy-back yourself off a bigger tank.” THE HIGHS AND LOWS OF STARTING A COMPANY Alfred and Julian stepped into Haymarket HQ wielding a matte black motorcycle helmet that looked like a prop from the film Tron. With a camera integrated in the front, the design made wearers look like they were ready to fly to another planet. “We’ve been in stealth mode for a while,” Julian said. “But now we’re putting together a go-to-market strategy and refreshing the face of the company.” At the time of this interview, there were lots of new developments that the team needed to manage. In the middle of 2017, a series of connections led them to meetings with a global motorcycle brand. And in the beginning of this year, the team found themselves closing a deal to test their prototype with real motorcyclists. “We’ve spent two years building up the networks and the know-how to make the helmet a possibility. Now we’re looking to raise $2 million and launch the motorcycle helmet by early next year. It’s ambitious, but speed is crucial.” Although the team were starting to gain their first taste of progress, they were careful to avoid oversimplifying the reality of entrepreneurship. “The most breathing room we’ve gotten was 3-4 months of capital,” Alfred describes. “The harder you push the innovation side, the higher your burn rate gets.” “You have to make your decision as a founder on whether you’re going to sit around on life support—which is probably what your investors want you to do—or whether you’re going to get your remaining money and put it into a crazy, high risk idea. As of right now, getting all our money and putting into building prototypes has looked to be a very good decision. But the risk is you only know the results after you invested.” To make sure Forcite didn’t go bankrupt, Alfred and Julian refused to pay themselves in the first two years of starting the company. They had a brief period in the third year where they reversed this decision, but went without income again in the fourth year. Both founders were clear on the consequences founding the company had on their personal lives. “It’s hard to rent a place. You can’t take people out to dinner. And the idea of regular work hours evaporates instantly.” “You sacrifice holidays and relationships with friends and partners. It sometimes drives them mad that you’re always talking about work. And many of your personal relationships degrade. But the good news is you get down to one or two genuine friends that are willing to help you. They’re the people who stick around despite the fact that you’re broke, because they can see you’re doing something you care about.” “In the end, it’s a blessing in disguise. It helps you see the world very clearly, and separate what’s important. You start funnelling your earnings and your time into what matters. It pushes you hard—forces you into the position to make a decision on what you value. It filters things that are non-essentials, and makes you more secure, despite the financial insecurity.” “And when you do get a win, all these sacrifices start to make sense. The pain of working until late at night, the uncertainty of whether you’ll be able to survive until next month, and the struggle of getting up in another country at 3am when you’d rather be watching Netflix—all of these pale in comparison to the rush we get when we succeed.” As Alfred looked back over the history of Forcite, he remembered an image he had earlier in the life of the company. “I thought to myself the worst thing I could ever imagine is sitting in a design consultancy making screws for someone, when one of my coworkers shows me an article on TechCrunch. As he’s chewing an apple, I’d be reading about a smart helmet company that’s completely blowing up, and he’d be saying—hey, didn’t you want to try that?” “That image is why I’ve kept going for so long. I don’t want to be that guy. I’d rather say—yeah what are you talking about? I’ve been building those helmets for the last eight years. That’s such a better answer!” “So long as Forcite saves one person I think it’s a win. If someone can feel safer on their bike and look like a badass at the same time, then I consider our helmet is a success.”