A Successful Kickstarter Campaign Almost Bankrupted This Startup

Hardware is hard.

In fact, sometimes the simplest and most straightforward ideas turn out to be the hardest to implement.

Today I’d like you to meet Kyohi Kang the founder and CEO of Atmoph. Atmoph is a programmable window which can display the sights and sounds of hundreds of scenic places from all over the world. It's an exciting project, and the team attracted a great deal of early interest. They even ran one of the most successful Kickstarter campaigns and a smaller, but still successful, Japanese campaign on Makuake.

But this success almost bankrupted them.

Kyohi and I discuss how this happened and how other startups can avoid falling into the same trap.

We also discuss Kyoto and the fledgeling startup ecosystem that is just starting to spread its wings there.

And we'll dive into detail about why, unlike most other startups, Atmoph has decided to remain a hardware startup rather than pivoting to software and licensing when presented with that option.

It’s a great discussion, and I think you’ll enjoy it.

Show Notes

What are digital windows and who wants to use them? What happens when the Kickstarter money runs out? What are the important differences between crowdfunding in Japan and the US What hardware startups really need to know about crowdfunding How you can be bankrupted by crowdfunding too well How to maintain sales momentum after the crowdfunding period ends Why you have to choose to be a hardware company or a software company. The dangers of trying to do both. Why the founders left Tokyo to start a company in Kyoto How the Osaka and Kyoto startups communities are different

Links from the Founder

Check out Atmoph - You won't really get it until you see it. Friend Kyuhi on Facebook Follow him on Twitter @kyohik Atmoph's Social Sites

AtMpoh on Twitter AtMpoh on Facebook AtMpoh on Instagram

[shareaholic app="share_buttons" id="7994466"] Leave a comment Transcript Welcome to Disrupting Japan, straight talk from Japan's most successful entrepreneurs.

I'm Tim Romero and thanks for joining me.

You know, I was moderating a discussion panel at the big Hakusuka event last month and before things kicked off, I sat down at a café with Kyohi Kang, the found of Atmoph. Now, Atmoph is one of those ideas that is so obvious once you see it that you're sure that someone has thought of it before. In fact, you're pretty sure that you've thought of it before.

We did, right? And yet, Atmoph seems to be the only company in the world that is producing this product. What is it? Well, I'm getting to that.

You'll hear a lot of the details during the interview and it's always challenging to describe something so intensely visual on an audio podcast, but Atmoph is literally a window onto the world. It's a 27-inch diameter monitor that's mounted in a picture frame and it displays the sights and sounds of, well, anywhere, really: a window onto a Polynesian beach, a Roman Piazza - anywhere.

Kyohi and I also talk about how Atmoph's very successful Kickstarter campaign almost bankrupted his company and since the team has run crowdfunding campaigns in both the US and Japan, we'll go over some of the most important differences between the platforms in both countries, and more importantly, the important differences about the customers and the customer expectations in both countries, and even though we met in Osaka, we talk a lot about Kyoto.

Kyoto has the potential to become one of the most important startup communities in Japan. It's not quite there yet but there's a lot of promising signs and a lot of promising startups, for that matter.

But you know, Kyohi tells that story much better than I can. So let's get right to the interview.

[Interview]

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Tim: So I'm sitting here with Kyohi Kang of Atmoph and it's kind of a digital window, so thanks for sitting down with me.

Kyohi: Thank you for inviting for this interview.

Tim: I think you guys have got a really, really interesting product but you can probably explain it a lot better than just a digital window, so tell us a little bit about what Atmoph is.

Kyohi: We are calling "digital window" but the concept is very simple and you can hang on your wall, and it's a 27-inch display and once you hang it on your wall, you can see a view of the world, and every content is filmed by us in 4K and you can see such as views in Iceland, France, Germany, and also Hawaii, Japan, anywhere in the world.

Tim: And it also has sound as well, right?

Kyohi: Right. It has one speaker inside so that you can feel as if you are actually there like Hawaiian beaches, sound of the waves, sound of the birds.

Tim: Now, I've noticed that - I mean, looking around the world, there are lots of kind of digital picture frames for still images, but Atmoph seems to be one of the very, very few companies that has brought a video window type of a concept to market. Why do you think that is?

Kyohi: There are many digital art frame companies out there but we wanted to have a window, like a virtual window. In nature, everything is moving, like wind and also the fires and birds flying, so to feel as if it's real, we thought it should be moving.

Tim: So the idea is kind of the window out into the world, so if I had Atmoph installed and it was looking out into a Hawaiian beach, would I see like, the scene changing at different times of the day?

Kyohi: Yes, yes, indeed. There are many locations and also many seasons, and many different times, so you can see in the morning or sunset, or nighttime.

Tim: So tell me about your customers. Who is using Atmoph?

Kyohi: From last year, we started shipping and about half of our customers is purchasing our window because there is some kind of closeness in their environment, like from their window, they can only see the next buildings or highways.

Tim: So most of your customers, I mean, is it consumers or is it office space?

Kyohi: 70% is consumer. The rest is restaurants, bars, and clinics, offices.

Tim: Well, I could see why this would be very attractive to restaurants in particular, especially in Japan. There’s so many basement Italian restaurants that you could have a window out on Florence or something.

Kyohi: Actually, there are many, really many places, café or bar without any window, so yeah, they should be all our targets.

Tim: That seems to be almost a perfect target for you. So let's back up a bit. So this started out, well, it started out as an idea, but back in 2015, you launched a very successful Kickstarter campaign.

Kyohi: Yes, we did.

Tim: How did that go? Running a Kickstarter campaign from Japan has got to be somewhat challenging.

Kyohi: It was all about challenging because at that time, doing Kickstarter in Japan was very rare, so it was hard to do, and for us, that was our first crowdfunding project, so everything was very tough. The reason we needed to do crowdfunding was we didn't have enough money to do the manufacturing production. Also, many people are asking, nobody would want a digital window, everybody said. So I needed to prove at least some customers should buy.

Tim: And how much did you raise on Kickstarter?

Kyohi: About US$160,000.

Tim: Okay, so that's a substantial raise, more than enough to get the product through the first batch of production.

Kyohi: Yes, we thought, but we needed more money because making injection molding, it costs a lot, and also, to do a project for crowdfunding, we need to reduce the price because it's a kind of presale.

Tim: Well, you mentioned that it wasn't quite enough money but you did deliver the products, so how did you do that?

Kyohi: Yes, Kickstarter campaign was good and also, after that, we did another crowdfunding in Japan too.

Tim: That's right, you ran a Makuake.

Kyohi: A Makuake. Yes, we did that too but it seemed okay, but to make enough products, we needed to collect more and we asked for some governmental bank for startups’ loan, and also, one year later, we did first round of VC funding, US$1 million, approximately.

Tim: Was the VC funding after you delivered the product or while you were still in –

Kyohi: While.

Tim: Oh, wow. So you needed that funding in order to fulfill the Kickstarter promises.l?

Kyohi: Right, right.

Tim: What turned out to be a difficult part? What did you underestimate?

Kyohi: We underestimated too many things. First, it was our first time doing production, so we needed to find good manufacturers but it was very hard, so each time we visit and find, they said, "We can't do this, we can't do this in small batch,” or something.

Tim: So did you do your manufacturing in Japan or in China?

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Kyohi: Yes, in Japan.

Tim: In Japan?

Kyohi: Yes, actually, but we have about five manufacturers coordinating each other. So assembling is in Nara, next to Kyoto, and the board production is in Osaka, and some plastic parts and cable are near Shanghai, so all products gathered in Nara and assemble.

Tim: Almost all of the hardware products on not just Kickstarter but the hardware startups tend to outsource to China.

Kyohi: Yes.

Tim: Why did you decide to have your manufacturing in Japan even though you knew the costs were going to be much higher?

Kyohi: Yes, because actually, it sounds we are better, because we didn't have enough money. To do manufacturing in China, we needed to travel often to do the negotiation or see actual product going on, but we didn't have money. We needed to save our money, so we were based in Kyoto, so there are many manufacturers in Kansai area because in the past, Panasonic manufacturing, there are many bunch of them, so we thought it's easier and also cheaper,