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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.
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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:
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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: 
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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.
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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.
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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. SOSV is currently investing from SOSV IV, our $277M fund, and SOSV Growth I, our $100M growth fund.SOSV has over $1B in assets under management.

Is HAX a Chinese fund?

Nope. HAX is a part of SOSV which is an American VC fund headquartered in Princeton, NJ. We have offices in Shenzhen, because it's the world’s strongest manufacturing ecosystem, as well as Tokyo and San Francisco.

the program

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

When a team is admitted to the HAX program they are automatically introduced to our teams in Shenzhen and San Francisco. Our team in Shenzhen is focused on working through engineering, design and manufacturing challenges. While these are the main focus areas towards the beginning of the program, you will also work with our San Francisco based staff on  advancing your marketing, sales and next-round fundraising efforts.

Within 4-8 months (depending on the level of technical complexity of your product) we sufficiently de-risk the cost, performance and manufacturing challenges of the hard-tech you're working on, so you are in a position to start converting customers and raising your next round of capital.

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:
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i) Engineering: We have a team of MEs and EEs to help construct prototyping experiments and execute towards manufacturability. 
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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.
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iv) Creative: The creative team helps you with creating branding, sales and marketing assets to support your narrative.
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v) Biz Dev: Our business development team mobilizes our corporate and LP connections to help you secure pilots and win customer contracts. 
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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:
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i) Run multiple prototyping cycles to reach EVT within the program and prepare for DVT.
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ii) Finish an industrial version that takes manufacturability and human factors into account. 
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iii) Fix your BOM, engage in vendor selection and scope out your supply chain. 
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iv) Create sales and marketing assets like demo videos, website explanations, dashboards, product photographs and decks.
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iv) Deliver on early pilots or convert pilots to paying customers.
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v) Set overall company strategy leading up to your onward funding round.
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vi) Identify key hires (especially on the hardware side).

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. We’ve adapted to our new reality much like everyone else, and have brought almost 40 teams into the program in a purely-digital fashion since the beginning of the pandemic.

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.
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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?

As a billion dollar fund, a majority of our capital is invested at the later stages. We can invest in follow-on rounds usually up to a Series C/D, through SOSV IV or our new growth fund, SOSV Growth I. 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).

application

 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: 
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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). 
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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. 
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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. 

Logistics

How often do cohorts start?

We invest into teams on a rolling basis, and typically admit 3-4 teams every month between March-December.

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

Yes. We have an internal Slack channel, 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. 

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