Here I am, over two and a half years later, and to date, Revel has built not one, but two pieces of proprietary hardware!

By Lisa Falzone (Founder & CEO, Revel Systems)

When I finally took the leap into Silicon Valley entrepreneur-dom, hardware was certainly the last thing on my mind. I had started a software company, after all — the award-winning leader in the iPad point of sale space, Revel Systems. Sure, hardware was a necessary component, but we could just buy all that. Right? Why venture into the unknown?

Because we’re entrepreneurs, and that’s what we do. When there is no other option, create a solution.

And at the time, there was no other option. We needed a way to run credit cards with a 100% through put rate. We needed the highest levels of encryption security. The only option at the time was Square, but in the end their “dongle” wasn’t really an option at all. It has reliability issues. It didn’t encrypt on the card swipe — the industry standard. We something it to meet our customers needs and standards.

So we made our own. It wasn’t easy, but nothing worth going for is. Hardware is particularly difficult, with so many unseen costs that most prototypes crash before they ever make it to production. And someone always makes it cheaper. Trust me (and keep reading). And you don’t want to be the one at the end of the day stuck out of pocket.

Here I am, over two and a half years later, and to date, Revel has built not one, but two pieces of proprietary hardware! But our first was definitely the most challenging. Engineers from Stanford and industry experts all said what we were the crazy ones. But Steve Jobs once told me (well, maybe the world) “while some may see them as the crazy ones, we see genius.” Genius may be a stretch, but the opportunity definitely wasn’t.

We were trying to connect a card swipe for taking credit cards to the 30-pin connector from Apple which first required Apple’s layout. Due to the nature of what we were trying to accomplish, we were basically going to try to hack Apple. Yes, $200B Apple (they would, of course, go on to triple in value).

Luckily, the first way to create is with tools. And Google is a great tool. In seconds, we were able to access the necessary information. Never start from scratch, as the saying goes, because somebody’s probably already thought of it. There were countless hacks for the Apple 30-pin on Google, but now we had to take this, and apply it to a credit card reader.

We actually used the Apple camera kit as our co-processor, which helped us bypass all the apple rules. We simply hacked an existing chip to gain access to Apple’s proprietary controls, and then… we connected the first ever Card Swipe unit to the 30-pin connector that the Apple iPad has ever seen.

Now we just had to reproduce it. In quantity.

Now, at the time, we only made the units we needed to sell, because at $415/unit all in, it was kinda expensive for a struggling entrepreneur. It certainly wasn’t the cheap option, but the demand was there. We had companies willing to pay $1,000/unit! A rule of thumb I’ve come to live by: Never create something without demand. And if you make 100% profit on your device, then you’ll be able to cover all of your unforeseen expenses, because believe me, there will be some.

The 100% rule has become a part of our M.O. here at Revel. The unfortunate truth, as I mentioned above, is that if a product is as hot as ours was at the time, someone will probably make it cheaper, and faster. And we aren’t a card swipe company, we’re a point of sale company. We knew that if we invested in making thousands of units, we’d be beat out and hung to dry, which could have very well been the end of Revel Systems.

So we just built for the customers we had coming in the door, and actually hoped someone one come and do the inevitable. Then we could sell our end product (point of sale systems) cheaper, and get back to our main focus. A few months later, MagTek, leader of the credit card swipe industry, did just that. IDtech soon followed. Then everyone else with a card swipe followed suit.

Today, Revel still has the best card swipe for a Point of Sale on the Apple iPad then any of our competitors (don’t give up too much girls 😉 ). But quality pays, and though we still have a high end product, we have been able to get the quality we need, at the price that is good for our customers, and good for our business. At $400 a pop, Square certainly has us beat (free), but the consumer can see the difference. And it pays to differentiate, as I’ve learned time and again over my tenure as CEO.

That being said… we still only ever buy enough units to last about a month in advance. Cause you never know when another entrepreneur will come along and see things differently.

And hopefully we’ll still be hiring!

Women 2.0 readers: What are some other women-led hardware startups that you’re rooting for?

About the guest blogger: Lisa Falzone is Founder and CEO of Revel Systems, an enterprise point of sale system built on the iPad for retail, grocery and restaurant locations. Clients include Popeyes, Illy Coffee, Belkin and Little Cesars. She has raised $3.7M in venture capital and pioneered partnerships with the Geek Squad / Best Buy NASDAQ BBY and has created a Revel marketplace by having the point of sale connected into Facebook, Twitter, Groupon, Levelup and many more. Follow her on Twitter at @LisaFalzone.