Funding Q&A: ArcBotics
Connie Hu, the CEO and Co-Founder of ArcBotics, has a wide range of expertise.
From studying cultural anthropology to prototyping hardware products, Connie’s journey encapsulates the agility and acumen required to become a successful social entrepreneur. Here, she shares some of her experience getting funding for the educational robots that ArcBotics now supplies to over 1,000 educational institutions.
Could you first tell us a little about ArcBotics, its main aims, and your value proposition in the education sector?
Our mission at ArcBotics is to make learning robotics easy, accessible, and open source. We believe that everyone should be able to learn robotics, no matter their background or current level of technical knowledge. Only by understanding robotics, programming, and electronics can we truly control our own futures and not be afraid. These topics are not magic – they can be learned by anyone, step by step.
To accomplish our mission, we have created two popular robot platforms called Sparki and Hexy since our launch in 2012. We have robots designed for complete beginners with no prior knowledge of robotics, programming or electronics, whether the student is 9 or 69. We offer multiple programming environments so complete beginners can start with block programming to learn the basic logic of programming and understand how a robot interacts with its environment. Then as they feel comfortable, they can move onto Arduino programming (C/C++). One of the major barriers to learning robotics is that the tutorials are confusing, non-existent, or too advanced so only other technical engineers can understand the product. To address this issue, we offer full guides, lessons, an online global forum where users can post projects, and email and chat support by our team in California. We also believe that products are better when a global community can access and work on them, which is why all our products are open source hardware and software.
And lastly, price. We created Hexy as a $250 alternative to another hexapod retailing at $800, and Sparki as an alternative to another educational robot starting at $350. Unlike other robot platforms, we include all the accessories in the kit so customers don’t have to buy costly expansion packs, and we offer lifetime access to all our lessons for free. And we are constantly investing in new lessons for the products written by professional educators.
Without obtaining venture capital, ArcBotics has successfully scaled its intervention to get its products into over 1,000 schools around the world. How did you do it?
We grew through two key ways: word-of-mouth and retail relationships. We launched a Kickstarter campaign for each of our robots, Hexy raising $168,000 USD from 860 backers, and Sparki raising $188,000 from 1620 backers. Our first Kickstarter backers were the beginning of a grassroots global community for each product. You must build a fantastic product that reflects exactly what your customer needs in order for word-of-mouth to grow. My co-founder Joe and I both intuitively understood our space, because we had both been teachers before, and I was a strategy consultant for national educational clients before ArcBotics. We understood that, unlike other edtech platforms in our space, you cannot ask teachers to pay for things like monthly subscriptions, costly expansion packs, or a string of lesson books. That simply does not work, both on a personal mission level but also on a logistics level. However, you would be surprised by how many people in and out of our space did not understand our business model and thought we should be trying to upsell our customers any chance we got.
Regarding retail partnerships, we established several key relationships after our campaign, which helped with short term cash flow and allowed us to cross the “bridge of death” for hardware startups where you use up all your crowdfunding dollars on your first manufacturing run and then cannot afford to buy the second. Regarding retailers, I would say that it is okay to walk away from some negotiations if the terms are not favorable. We purposely started working with only retailers in the maker/DIY space who were fantastic partners and understood our mission. As our company matured and could take larger risks, we started working with more traditional big box retailers. Too many startups rush into signing on prestigious contracts that bankrupt them shortly thereafter because they did not study the terms. Today we have over 20 global retailers like Barnes & Noble, Adafruit, RobotShop, and Micro Center.
ArcBotics has completed multiple successful crowdfunding campaigns. Could you share any successful strategies you have used and any suggestions for other social entrepreneurs considering launching a crowdfunding campaign?
In addition to having a fantastic video and campaign, you want to build a huge list of early adopters before you launch to help build early momentum for your campaign. As soon as you can, put a landing page up so people can join your mailing list. You can use this landing page to build marketing campaigns around like from Facebook or retargeting, even in advance of crowdfunding launch.
On the actual campaign itself, you could establish reward tiers separated out by price, such as having a Friends and Family only tier, an Early Adopter tier, and then the Regular tier. Then time the sending out of emails so that your Friends and Family are notified in the first hour when the campaign launch, then the Early Adopter goes the next hour, etc. This way your early adopters are more incentivised to back you early on, and you have momentum to point to for press.
Before you launch, especially if you are doing a physical product, you should know exactly what your supply chain will look like, how much your COGS are, how you will ship out the product, and how to price for domestic and international shipping. Do you know who your suppliers are for all your component parts? Do you have backup suppliers in case your campaign wildly exceeds your expectations and your first supplier is at max capacity? Do you know what the final retail price for your product will be? Do you know how much you should be charging for shipping by country? In this day and age of Amazon, we think shipping something is easy and cheap. Trust me when I say that it is harder than it looks when you are not Amazon and you have to build up your infrastructure from scratch.
How have the challenges of obtaining funding evolved as your enterprise has grown? What advice do you have for early-stage social entrepreneurs trying to find the right funding opportunities for scaling up?
Our problem in the early days was staying in stock. We were constantly selling out of our inbound inventory even before it hit our warehouse. A good problem to have, but still a problem for growth. It took intense minute planning as well as learning about all the alternative forms of credit out there besides VC.
There is a strong bias in the startup world to think that the only way to fund your startup is through VC. But there is a whole ecosystem of other forms of credit that entrepreneurs should be exploring, the ecosystem that small and medium businesses have been utilising for decades. For example, one bank we interacted with had a special program for startups where they only looked at the personal credit scores of the founders and needed no assets to establish a line of credit. Other forms of credit are newer peer-to-peer loans like Lending Club, or Amazon credit for FBA sellers with a history. Whatever you do, manage every dollar you have well. Invest it back in your product, not on things that won’t actually accomplish your goals (more on that below).
Do not get caught up in flashy startup things just because you see other people doing it or it seems prestigious – things like a lavish office just to impress random people. Four and a half years is a long time in the startup world, and already we have seen startups rise and fall in our space because they prioritised their dollars the wrong way.