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How Homebrew “Got Smart” About Hardware Investments

Bias Towards Action. Learn By Doing.

Satya and I both believed these tenets as product managers and extend them into the work we do via our seed fund Homebrew. So when we started the fund in early 2013, we knew that in addition to investing in the familiar, there would continuously be new areas of exploration that we’d want to “get smart” about. One of the first “get smart” projects involved the advances being made in “software-enabled hardware.”

Enterprising founders were telling us about a future where many configurations of sensor-enabled hardware would be paired with software and developer communities to form new platforms.

New devices and machines that could dramatically reduce costs, increase quality and create new industries. We were believers but given our focused approach — 8–10 core investments per year — how should we proceed?

It wasn’t by purely researching the opportunity, it was by getting to work. So during our fund’s first year, we quietly made three supporting investments in hardware startups that we believed:

a) Were being run by exemplary founders to help us refine how we can be of use to them within the Homebrew model.

b) Had platform potential. Namely, proprietary hardware giving way to software giving way to developer communities atop the software.

c) Would attract the best hardware investors so we could establish co-investor credibility and begin accessing collaborative dealflow.

The first company we looked at was Cruise, a driverless car technology we funded in their seed round out of YC. They’ve since raised an A Round from Spark and are quite a formidable team.

The second company was Eero, home WiFi innovation, alongside their other seed investors. Eero is preparing to ship very shortly and since have raised funding from Shasta and Redpoint.

The third company Estimote, whom this past week disclosed their A Round led by Javelin. Estimote is the leader in beacon and spatial hardware, and we were able to slide a check into cofounder’s Steve Cheney’s pocket when he joined the early team.

Alongside these investments we started spending more time with hardware entrepreneurs and working with vertical accelerators/funds such as Lemnos Labs, Bolt, PCH/Highway1.

Eventually we started writing lead checks into hardware-first companies, funding a soon-to-be-announced consumer hardware company (which recently closed its A Round with one of the best consumer hardware funds in the Valley), and an industrial carbon fiber printing startup which promises great innovation in high-strength, durable manufacturing.

Now in our second fund we’re spending an increased amount of time — and have particular interest — in hardware startups fitting these categories. While we’re open to hearing from any founder with a strong vision of what the future will look like, we’re proactively reaching out to companies in these verticals:
  • Industrial IoT — it’s fascinating to see the manufacturing floor, the warehouse, the field worker and others benefit from automation, more accurate and frequent data measurement.
  • Sensor Networks & Machine Learning — host of startups deploying what are essentially low cost sensor networks to gather data, then applying machine learning to help businesses make ongoing business decisions. In agriculture, in urban planning/logistics, in health and safety, and so on.
  • CRISPR & Health Sciences — I’m still understanding the early stage venture opportunities here but am increasingly fascinated by the prospects for speeding the cycles of testing, and ultimately delivery, for biology related science. Not afraid of projects aimed at human-based outcomes but also thinking about agriculture, foodchain.