From Apple to Oculus-Now Taking On Consumer Hardware | Nirav Patel, Framework

Intro

00:00So ultimately, fundamentally, I am a hardware person. There's like screws flowing through my blood or something in there somewhere. My parents would occasionally complain when I would take stuff apart in the house, but usually I was able to successfully put it back together, so it ended up being okay.

00:14I want to build the best laptop. I want to build a laptop company. framework is a company that builds longerlasting consumer electronics products so that if anything ever happens to the product, something breaks or you just need more out of it, more performance or more capability, you can actually just open it up very easily using the screwdriver that we include in the box, swap out a part and keep using it for longer.

00:41growing more than double revenue year-over-year for the last couple of years, which is pretty unusual for a consumer electronics startup, especially in a pretty tough environment. Fundamentally, the mission is about empowering the enduser of the product, making it clear that this is their product, not our product.

00:58One of the problems that I thought was most important to solve was just how hard it was for consumer electronics startups to be successful. But looking across consumer electronics across the entire startup space, it was clear that there were a number of companies that had really interesting and really excellent products but failed.

01:16Anyway, the thing I needed to do is prove that there's a better business model for consumer electronics. One of the secrets to building a successful startup is that the CEO needs to

What a Hardware Guy Learned at Apple

01:34be in school and actually I graduated from university in 2009. That was a period of great economic uncertainty. it was uh the start of a pretty heavy recession and so actually there weren't a lot of jobs available and there was not a single hardware company hiring.

01:49Um but it turned out that Apple in one of their software organizations did have this role open that I was able to jump into right out of school. And so I ended up at Apple for a little over 3 years working on software of all things. Apple had just released the iPhone 3GS.

02:06This was like right still at the dawn of smartphones becoming the default mode of interaction and actually kind of the default mode of computing. So I was working on FaceTime and uh Game Kit and Game Center which was this kind of multiplayer games framework that Apple was developing from a software perspective.

02:25And mostly what that

“I Didn’t Want to Work at Apple”

02:28experience taught me was that I didn't really want to work in a company like Apple. Um one of the challenges at Apple is that it is a very very siloed company. as an engineer there, it was actually quite frustrating that I would see all this cool hardware or see all this cool software but have no real ability to either influence or even understand or speak to the people who were building it.

02:47So I was working a relatively normal number of hours a week. So like say like 40 to 50 hours a week, a normal number of hours. And I would spend another 40 to 50 hours a week actually tinkering on mostly VR stuff. And this was before VR was like actually really a thing.

03:04building these little gadgets and tools and toys to basically just see what was even possible and doing it within a community

First Meeting with Palmer Luckey

03:14of other people who were like-minded. And so one of the other people in that community was probably the farthest along in that community was someone named Palmer Lucky who of course ended up founding Oculus. My name is Palmer Lucky and I'm a virtual reality enthusiast and the designer of the Rift.

03:30Where this all started was in my parents' garage in Long Beach, California. And I was interested in stereoscopic displays. I was interested in headmounts. And the problem was there was nothing that gave me the experience that I wanted, the Matrix, where I can plug in and actually be in the game.

03:43And I was sure that somewhere out there there was something that I could buy. And the reality is there's nothing. I set out to change that with the Oculus Rift. And at the time that he founded Oculus back in 2012, there was just one piece

There Wouldn’t Be Oculus Without Nirav Patel

03:58of the headset that was missing, which was motion tracking. And motion tracking happened to be the one gadget that I was personally the furthest along on. And I had sent one of two prototypes of motion track that I'd built to Palmer a few months earlier just to get his thoughts on it and see see if it would be useful to him.

04:18And so in mid 2012, Palmer reached out to me and asked if I wanted a demo of this VR headset that he'd been building up and said, "Of course, of course I want a demo of it." And I ended up meeting with him and the rest of the early team, the rest of the founding team there.

04:33And what I thought was going to be a demo turned into a job offer. And they said, "Uh, you have to leave Apple and join us within a week cuz we really need your motion tracker." And that was just an very obvious choice for me of like, yeah, I don't want to be at Apple.

04:47I want to be working on this cool stuff here. VR, let's do it. But actually, the move from Apple to Oculus was a bit more a bit more of a jump because at that point, of course, Apple was on its very rapid growth trajectory and to leave that very rapidly growing company and join this scrappy startup of people trying to build VR on on its surface seemed crazy.

05:07And I think my parents at first were like, "Oh, are you sure? This doesn't seem like a good idea." Um, but I was convinced. I I knew that that it was the right team of people. I knew it was the right technology space to explore at that time and of course ended up being a good bet to have taken.

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Oculus’s Biggest Mistake

06:09The first two years of Oculus. So from 2012 until we got acquired in 2014, literally every month was some new insane occurrence and insane change, insane learning. Like the pace of iteration that we had across those two years, I look back on and think like how did we even do that?

06:26A normal hardware product, a consumer hardware product, it takes somewhere between 12 to 24 months to go from initial idea of like, oh, this is a product I think I want to build to being able to do development cycles on it, ramp up production, and getting it into a customer's hands.

06:46the Oculus Rift dev kit, the first dev kit, we went from the company forming to getting it into customers hands I think in six months, which is not not normal. That's not how you build build hardware normally. Working with devs to get all this going.

07:04There's some really incredible and interesting stories around that. But that's not what this talk is about. This talk is only about the hardware side of the story. We decided to take a different optimization and optimize for getting the virtual reality ecosystem seated as quickly as possible for the sake of figuring out what is VR, what works and what doesn't work in VR.

07:23And for that we needed help from all of you which required us to take the risk and build a product really really quickly. And one of the challenging things here, one of the the biggest like mistakes maybe that we made is that obviously we were a startup.

07:37We're on a shoestring budget. We were being incredibly efficient. We're going as fast as we can because we knew we needed to make progress before running out of money basically. And as soon as we got acquired by Facebook 2 years in, we had effectively unlimited money and unlimited resource and we could hire literally as many people as we wanted to.

07:56There were actually no limits aside from how quickly we could physically onboard people to how quickly we could hire. It actually slowed us down. It slowed us to a total halt. basically went from iterating on a new version of VR headsets essentially every few months to not being able to ship another product for about 3 years.

08:15And so we lost the massive iteration velocity that we had. And it meant that that three-year bet instead of the six-month bet had to be so perfectly right otherwise the opportunity cost of missing those three years would end up destroying us.

08:32And we kind of got it a little bit right, maybe not as right as we needed to, but looking back on it now, those early years in Facebook, what we really needed to be focused on was iteration speed, not trying to build a big team and build a big consumer polished product.

08:48And so that's what brought me to then start up framework and then build an even more incredible team, but a very small focused team where we have this clear mission, clear vision, clear roadmap that we're able to execute on.

Playbook for the Consumer Hardware Market

09:14One of the things that works really well for us is that the market that we're entering, the categories that we're entering in each of our products, they're just colossal. So for us, we look at $200 billion notebook market and we see massive, massive headroom to continue to grow and succeed in this business model that's focused on longevity.

09:32It actually means that the more we grow as a company, the more market share we capture, we're actually shrinking the size of the notebook industry because we're going from a mode where consumers and businesses are defaulting to replacing a product, let's say, every 3 to 5 years to a mode where they're using the products for longer.

09:52And so that's actually a win condition for us that we're converting an industry from one that is shorter lived to one that's more efficient and longer lived. And as a startup, of course, we have an immense amount of headroom and a ceiling that's very very far away that we can continue to grow within.

10:08But even as we capture more and more of that pie, that doesn't mean that we would need to then change our business model to go back into that transactional model that other companies are taking today. It means that we've grown in an install base that's large enough that this network effects based re-engagementbased business is a massive business in itself.

10:30And of course, as a company, we're not only limiting ourselves to notebooks. It's that we're taking the success that we've had with notebooks and bringing that category by category across this just huge consumer electronics

Step 2

10:50industry. You're really thinking about the audiences that you're going after. We actually have this concept that we call terminal audiences. this idea that we enter a new product category and we lock in an industrial design and a form factor and set of features that we're defining both the initial set of audiences that we can win with most efficiently but then also the terminal audience basically the broadest furthest away audience we think we could still win with this product and we make sure that we know what those bounds are when we reach and build new products for

11:25example a framework laptop 12 that gives us a moment of reset of this is is a new category. We're renting a new segment. We have to figure out now who are our initial audiences for this product which actually start from the same core audiences as our other products.

11:38But then who are the terminal audiences? And one thing we were deliberate on with this new product is we made it simpler. We made it much much lower cost and we made it more generally appealing to people who are not necessarily tech enthusiasts.

11:54And so as we think about this product, the core tech enthusiast is still there as an initial audience, but our terminal audience is a lot bigger and a lot further

Step 3

12:10away. Audience expansion is definitely the key to success in consumer startups in general. We have a set of core audiences that we kind of layer outwards on top of one by one as we go. And of course like it's easy to come up with personas like define these discrete personas of like DIYer and we have Linux user and we have like IT manager and we have environmentally conscious consumer.

12:36We have these very clear personas. But obviously in real life people are more complex than that. Like everyone is some combination of a million different things. And so it's not that we necessarily have this like clear set of like layers where it's like a discrete layer, discreet layer, discreet layer.

12:50It's that we're slowly growing the reach and awareness and credibility of what we're doing as we go and then pulling in those people whose personas match to the things that we're delivering value or interest around. So we took that tech enthusiast gamer persona and the various subpersonas within it and thought like, okay, how do we win that audience?

13:10And we thought they want latest and greatest graphics. Like graphics upgradability is huge for the audience and they just can't get it out of a laptop. And so we thought, okay, when we build our next laptop form factor, the thing we should prioritize is graphics upgradability so we can go win that audience.

13:26And so this goes back to fulfilling our mission. We have this long lasting repairable upgradeable product but doing it in a way that also expands our audience reach by being not just a new version of our laptop in a different form factor but enables this functionality that is actually the key thing that was holding back a specific set of consumers out there in the world.

Step 4

13:55One of the biggest things that I've learned actually and I've actually tried to share with other people starting consumer hardware startups is that critical fundraising roadmap. And of course, if you're building hardware, there's typically a 2-year ramp from coming up with the product you want to build to being able to ship the first version of it and collect revenue for the first time.

14:20If you can't fund your way to escape velocity, you're going to fail anyway. So, what you need to do is think through what is that path? What's the high assurance path that you have as a company with the product and business model you're building and the audiences that you're going after to reach escape velocity?

14:38Meaning the point in time where you're able to self-fund your own product roadmap and your own growth. And so one of the most important things for consumer hardware especially because those development timelines are so long is to make sure that you have funding in the loop almost this idea that you're talking to investors very early and very regularly to make sure that at the right points in time when you're going to need funding that you're going to be able to show the right kinds of traction and the right kinds of metrics for those investors to see the signals that

15:10they'll need to see to be able to put funding into you. that even though we have a product time horizon that's two years away, we have a vision time horizon that's 20 years away, that we we look out 20 years and we see a world and a consumer electronics industry that's fundamentally different.

15:26That this business model that we've adopted at scale is just so fundamentally more efficient than the traditional business model and so much better as a model for both us as a company and for the customers buying the product that we know it's a winning model.

15:41And so we see that as this north star for us that we continuously move ourselves towards as we go down this road

The Most Important Secret to Survive

15:52map. The key lesson is don't give up. That resiliency is the single most important trait and you're going to have to pull rabbits out of hats over and over again in a startup. And as long as you are still willing to reach your hand into the hat and find another rabbit, you should keep going.

16:21[Music]