How Many Hardware Companies Fail Each Year
[Editor's Note: Anup Chathoth is CEO of Seattle startup Ubi Interactive, maker of virtual interactive whiteboard technology and a graduate of the Kinect Techstars Seattle accelerator. In this guest post, he shares lessons learned in the hardware business.]
If you talk to entrepreneurs or investors, or anyone else in the startup ecosystem, the most common refrain when it comes to hardware is that information technology is hard. There is some truth to this, given the inherent challenges of the hardware business organization.
- Hardware requires significant capital expenditure to produce a working prototype. A laptop and a couple of hackers cannot make it happen. Y'all need to build actual physical products, which cost time, coin and crave an ecosystem of partners.
- Product iteration cycles for hardware eat significantly more than resource and time than software products require.
This is not to say that things haven't inverse in recent years. Low-toll development platforms such as Raspberry Pi enable quick prototyping. Standardization in areas such as wireless radio modules eliminate the demand to develop custom modules. Crowdfunding provides an excellent mode to validate early market demand and besides enhance money for inventory.
But even with these changes, hardware is still a barbarous business organization for many startups. A report from CB Insights analyzed 400 failed hardware startups, and found that the summit ii reasons they fail are 1) lack of consumer demand and 2) a high burn down rate.
In other words, many hardware startups raise money on an idea, non on a production. The actual production sometimes ends up too plush (Coolest Cooler) or fifty-fifty impossible to manufacture (Lily Drones). Even if startups end upwards shipping the product, it frequently disappointed customers, hurting need. Instance in point: headphone maker Human, the Seattle startup that failed after five years of development and a reasonably successful crowdfunding campaign. Helmet maker Vicis was some other promising Seattle hardware startup that also ran out of money.
Software and SaaS startups avoid these early, expensive mistakes by applying the lean startup method, shortening product development cycles and iterating rapidly based on feedback to achieve product-marketplace fit. This arroyo is even more than important in hardware, because every mistake costs more fourth dimension and money.
Hardware startups get tons of tips for being lean. But the problem is that this advice is not actionable. A duct-taped Raspberry Pi prototype is not enough as a minimum viable product (MVP). Y'all need to develop a prototype that appears almost product ready, is stable enough to garner reliable feedback, and demonstrates the core value of your product. Yous need to become this into the hands of your client and start iterating your production earlier you burn through your capital.
This is possible. Hither is the playbook every hardware entrepreneur, especially in the consumer hardware and IoT space, needs to follow.
Tweak, don't make: When the original squad at Tesla prepare out to make Roadster, they very soon realized that they did not have the knowledge or resource to build an entire car. Instead, they'd simply build on peak of, and within, an existing car, the Lotus Elise. This holds true for most hardware startups. Do not prepare out to build an unabridged car. Build only your engine, that key new feature that delivers your cadre value.
Given how standardized hardware has become these days, you volition find a product in the market that matches very closely what yous want in your MVP. All you need is to fit your own engine inside.
Go to Cathay: This may be the nigh controversial role. Don't waste your time trying to figure this out yourself, sitting in Seattle or Silicon Valley. In one case you know your MVP and the product you want to tweak, take that flying to Shenzhen. The city is packed with contained pattern houses (IDH), each specializing in different verticals. They, of course, accept engineering resource for software and hardware. Only most chiefly, each of IDH has close relationships with manufacturers who are well versed in the supply concatenation ecosystem. Everything they produce is designed to industry. They have figured out 90% of the details of the production you want to build.
Ideally you should find the IDH that designed the original product that you are tweaking or appropriating. Be prepared to spend weeks with them. Be prepared to slumber in their office, be prepared to drinkable with them every night. Learn everything you can about the design and components of the product you are building.
Design to manufacture the epitome: Come home with a ready-to-manufacture version of your MVP. It may still take 3D printed internals and hand-soldered components. But information technology should exist already designed to manufacture and gear up to be "play tested" by your customers.
Proceed iterating: In one case you do play testing or field-testing, become dorsum to China again. Rinse and repeat until yous know your MVP is ready to go to mass production (MP). You typically will accept to go through multiple phases of Product Validation Testing (PVT) earlier yous are set up for MP. Since yous are tweaking a production that went through MP before, you lot will be surprised by how much you save in time and coin during each of these iterations.
Y'all now accept given yourself the reward but software companies had earlier. You are in a position to iterate your MVP quickly and cheaply, incorporating client feedback while at the same time keeping information technology ready to manufacture.
And then hardware is not hard. It's different, and doable, if you follow the correct playbook.
0 Response to "How Many Hardware Companies Fail Each Year"
Post a Comment