What is HAX?

What is HAX?

HAX invests in companies innovating at the intersection of the physical and digital. We back entrepreneurs reshaping industries, improving health or creating novel consumer experiences using sensor data, robotic automation, biochemistry and material science with software-driven intelligence.

We initially support founders with pre-seed capital of $250k and lots of hands on support around engineering, design, sourcing, business development, marketing and fundraising. Afterwards, we continue being a channel of support and can deploy follow-on investment up until Series C. We are a part of SOSV.

What types of companies does HAX look to back?

We have a bias towards technical teams building products for validated problems in three main areas:

i) B2B: These companies use sensor data to improve communications and unlock efficiencies for businesses, create new industrial processes or build automation for a variety of use cases. To share a few examples, our B2B portfolio companies are developing IoT platforms, enabling new insights from the factory floor, networking wifi anywhere, building robots for retail intelligence, cleaning floors, creating novel materials for chemical separation and making mining operations more efficient.

ii)  Health: Our healthcare companies are solving pressing problems to make healthcare more effective, accessible and affordable using data and novel treatment protocols. They are building solutions for sleep disorders, mental health, urine analysis, molecular diagnostics and other important use cases.

iii) Consumer: We look to back consumer companies that are using a combination of sensors, connectivity and unique insight to solve pressing customer problems or creating novel experiences. Headphones that adapt to your personal hearing profile, STEM robotics kits that want to take on LEGO, cradles that learn your babies’ movement patterns and put them back to sleep and a complete reimagining of dry-cleaning are a few examples.

What makes HAX different from other programs?

Three main things: 

i) We only invest in hardware companies. Our unique focus lets us offer very specialized, targeted help to companies building solutions at the intersection of the physical and digital. We’ve invested in 230 companies and counting through to gain very deep experience within our vertical.

ii) Hands-on help. We have a team of mechanical engineers, electrical engineers, industrial designers, sourcing staff, creatives and business development specialists that actually execute on prototyping, DFM, strategy, sales and marketing alongside you.

iii) Onward funding and continued support. We can continue supporting teams with follow-on financing of up to $4M over your company’s lifetime. We also provide continued access to our facilities in Shenzhen to help teams with manufacturing + R&D runs out of our facility in Shenzhen.

What’s the difference between HAX and SOSV?

HAX is the hardware investment team of SOSV. HAX is a part of the $277M SOSV fund which has over $750M in AUM.

Is HAX a Chinese fund?

Nope. HAX is a part of SOSV which is an American VC fund headquartered in Princeton, NJ. We do have an office in Shenzhen because it's the world’s strongest manufacturing ecosystem.

the program

What’s the difference between the Shenzhen and San Francisco stages?

When a team is admitted to the HAX program they’re automatically admitted to both stages of the program. The Shenzhen stage is focused on engineering, design and manufacturing challenges. While these are the main focus areas, you also start advancing your marketing, sales and fundraising prep work with us in SZ.

Within 4-8 months (depending on the level of technical complexity of your product) we sufficiently de-risk the cost, performance and manufacturing challenges so you are in a position to start converting customers. With this progress, teams then move to San Francisco where we help you close a funding round. 

Why is the program between 4-8 months in Shenzhen and between 2-3 months in San Francisco?

We understand different teams have different requirements based on the complexity of their technologies, their sales cycles and various other constraints. So we’ve purposely kept the program flexible to help you hit your goals. You have a maximum of up to 8 months in Shenzhen and a maximum of up to 3 months in San Francisco within the defined program structure. After your time in the program is done, we continue supporting you as an alumni company. More on these points below. 

What support does HAX offer?

We recognize that building a physical product involves a variety of challenges and we try to help founders with full stack support in:

i) Engineering: We have a team of MEs and EEs to help construct prototyping experiments and execute towards manufacturability. 

ii) Industrial Design: Our industrial designers work through interaction, usability and aesthetic challenges with your product. 
iii) Sourcing: We help you source production grade parts for your prototyping. This process also helps you understand the Shenzhen supply chain.

iv) Creative: The creative team helps you with creating branding, sales and marketing assets to support your narrative.

v) Biz Dev: Our business development team mobilizes our corporate and LP connections to help you secure pilots and win customer contracts. 

vi) Fundraising and Strategy: We work with you to lay the groundwork for growth and further fundraising for your company. 

Where can I hope to be by the end of the program?

Rough framework:

i) Run multiple prototyping cycles to reach EVT within the program and prepare for DVT.

ii) Finish an industrial version that takes manufacturability and human factors into account. 

iii) Fix your BOM, engage in vendor selection and scope out your supply chain. 

iv) Create sales and marketing assets like demo videos, website explanations, dashboards, product photographs and decks.

iv) Deliver on early pilots or convert pilots to paying customers.

v) Set overall company strategy leading up to your onward funding round.

vi) Identify key hires (especially on the hardware side).

Do I have to relocate to Shenzhen?

We are flexible with how much time you relocate to Shenzhen for but yes you do. Of course we appreciate that you might have to be in and out to tend to customers, be with your family, take investor meetings etc but it's imperative to have the founding team and important employees be in Shenzhen together for at least a month. We insist on this for two reasons:

i) once teams have a real understanding of manufacturing challenges by being on the ground, it helps align everyone on milestones for the next year

ii) a big part of the reason as to why we run the program is to do active diligence; it becomes much harder for us to invest in you after HAX without having worked with you. After the initial month, it's fine for just the technical team to remain in Shenzhen.

What if San Francisco is not relevant to my plans?

Almost 50% of our portfolio is North American or European and raises money in Silicon Valley. However, if you are raising money elsewhere we can continue supporting your efforts from Shenzhen. The HAX investor network extends to China, India, Singapore, Australia and other geographies.

What kind of support can I expect as an alumnus? 

Once you’ve graduated from HAX, you continue having access to our internal channels to stay connected to our founder community. We also make our workshops, biolabs and coworking space available to you till such time as you raise a Series A (up to a certain number of people, of course). Additionally, feel free to reach out to us with any questions regarding your R&D, manufacturing issues, factory negotiations and investor introductions. You might be done with the program but we want you to succeed and are here to help. 

I don’t feel comfortable traveling during COVID. Is HAX still for me?

We are currently running the program remotely. Teams interface with the HAX staff on video calls, messaging and email. This is challenging but we’re adapting to our new reality much like everyone else. Shenzhen has been stable since early March and we’ll bring teams to work with us in China once travel restrictions are lifted. Safety remains our biggest priority.

the deal

How much does HAX invest? At what terms?

Our first investment in your startup is made as part of the HAX program at $250k which converts to 14% equity (which then dilutes down depending on the terms of your next round). We use an instrument called a Fixed Stock Convertible Agreement which doesn’t have a valuation cap and instead specifies our target ownership outright so as to keep cap table calculations clean.

It's important to note that the $250k investment is broken up into $150k in cash and $100k in in-kind support. The investment is paid out at thirty day intervals over the course of the Shenzhen and San Francisco phases. 

Why is part of the investment paid in kind?

This is what it costs us to hire a body of technical, marketing and business staff to support our startups, pay rent for our office space + workshops + bio-lab and maintain prototyping equipment. Over time, we found that startups were spending a lot of our investment dollars on contracting out hardware engineering functions. By creating our own in-house support and sharing it across teams, we’re able to drive these costs down.

Why are the payments tranched?

When building a physical product, things can get overwhelming and teams get tempted to spend their way out of problems. Hardware is capital intensive and we truly believe that founders need to establish constraints, set milestones and figure problems out creatively in the early days of the company. Of course, we are here to help at every step of the way and have no problem making payments should you be running short on account of unforeseen circumstances. 

What sort of follow-on funding does HAX provide?

We can invest in follow-on rounds usually up to a Series C. Across these rounds we can deploy an aggregate total of up to $4M per company. We rarely lead rounds and will most often just ask for a non-voting, observer seat on your board (along with information rights so we know what’s going on and how to help).


 What do I need to apply to HAX?

Every application is different. For instance, we might view a team with deep domain expertise that has built similar products to their new, intended one with a different lens than a team very early in their prototyping process. Similarly, early progress for medical devices looks very different compared to, say, enterprise applications. That being said, there are some common characteristics that we are on the lookout for: 

i) A validated problem: We love it when teams have discovered a large, urgent problem by speaking with lots of potential customers (or from their own personal experience). 

ii) A strong founding team: The typical HAX team has strong engineering ability combined with customer obsession. We like it when teams don’t become too obsessed with product for product’s sake and spend the time to truly understand their customers and the business to be built. 

iii) A working prototype: We want to see what you’ve built so far to get a sense for where you’d be able to get to with our resources. We don’t expect your prototype to be overly polished but we would like it to be a working hypothesis for how your target customer’s problem would ultimately be solved. 

What happens after I apply?

We try and read all applications within two weeks and email prospective founders interview requests soon after. Sometimes this process takes longer when application volumes are very high. If you haven’t heard back from us within a month, please feel free to ask us for feedback. We try and respond to everyone but this is not always possible.

What are some common reasons for rejection?

The most common reasons for rejection are: 
- The problem is not large enough to be a venture-backable company.
- The company is still at concept stage and the team hasn’t submitted a demo of a working prototype.
- The product exists in a very crowded space.
- The product lacks defensibility (with either technology, network effects, high switching costs or some other method).
- The company has been started by a sole founder with a team of contracted engineers with no skin in the game. 
- The product has no relevance to hardware (eg: an e-commerce app). To be clear, we are happy to consider companies that are, say, building software to make robot navigation easier.

What does the interview process look like?

There are a minimum of three and a maximum of four interviews, if you make it to the final stage (all done remotely). Schedules permitting, we try and wrap up all the interviews within two weeks of the first one and then give you a decision. Every year, there seem to be 4-5 companies for whom we have to coordinate diligence with people from outside of HAX and this lengthens the process. We’re always working to make this faster.
Yes absolutely! We’re always happy to stay in touch with teams as they make progress. Some of our best teams were originally rejected, rigorously executed on feedback and were admitted a few months later. 


How often do cohorts start?

Cohorts start every month. We typically admit 3-4 teams every month from March-December.

What type of logistical support does HAX provide for travel and accommodation?

The HAX admin staff helps you apply for visas, get sim cards and open bank accounts when you arrive in Shenzhen. They are also on hand to help you find housing, work through any translation issues and assist with medical emergencies. We understand that relocating abroad, even if it's for a few months, is a big decision and we want you to be excited and not nervous about your move!

Note: We help with finding accommodation through the staff and community. Teams can finance housing from their investment.

Is there a place where I can speak with other founders?

Yes we have internal messaging channels, a founder portal and a wiki to help you stay in touch with the HAX and wider SOSV founder communities.

Are there any perks on offer?

Yes we have a whole host of perks including AWS credits, Solidworks discounts, Hubspot discounts and many others. The total value of these perks stands at $750k per team.