"Can you found a hardware firm with the same low investment as for software?"
If you were to say, build a <b>crude</b> prototype with the hopes of selling it for mass production would you have a hope of getting this done, or is this one of those areas that <i>need</i> big money VC funding to even get off the ground?
Yes, we will fund hardware companies with only an idea in some cases. However, the cost and time required to make a prototype has come down so much that most applicants have something built.
Hardware startups have been bought before. This isn't a unique event.
I worked for a hardware startup for a couple of years and VCs being cautious about the category is very well deserved.
It is easily an order of magnitude harder to develop a successful hardware product than a success software product. And even after you've sold a million of them a design defect could show itself that makes all million of them break and destroys your entire company overnight.
Really depends. I started a small (consumer electronics) hardware startup. Bootstrapped and producing small quantities. There are ways to make it work.
> I’m a developer with an idea for a new type of personal device.
Many sensible recommendations on this thread. The key differences between hardware and software-only projects usually boils down to cost and rate of iteration. Non-trivial hardware projects are capital intensive, plain and simple.
There are also costs and time-consuming aspects that tend to be very foreign for someone not in the space. A typical example of this is making molds for plastic parts and, in general, NRE's (Non-recurring Engineering fees). Sure, 3D printing can reduce these needs for some projects, however, at some point in time, most products require an investment in tooling and production hardware.
Beyond the prototyping stage it might be difficult or impossible to just build one or a few of anything. For example, if your product needs a custom aluminum extrusion you will have to pay for a die and then likely run somewhere between hundreds to thousands of pounds of aluminum through that die as a minimum order requirement.
It sounds like the project you are discussing is multidisciplinary. This could mean that a single engineer is unlikely to be able to help you. You might consider talking to an engineering/product-design company who could cover multiple domains. Also, because there is a software layer, regardless of the fact that you might do that work yourself, whoever you work with has to understand this as well. Unless you have dealt with embedded systems, you might actually need to have them explain how to approach certain aspects of a n IoT project. Here's a couple of options depending on the degree of help you might need:
Bottom line, if you have funding it should not be very difficult to find help. Trying to produce a non-trivial consumer-electronics product without money is nearly impossible.
Kickstarter?
The problem there is simple: If your idea is good, it will be cloned by some Chinese company before your funding period is over. There are many stories of entrepreneurs waking up to a bad clone of their product being sold in the open market for a quarter of the price they need to even begin to justify making it in the first place. I remember talking to a guy who listed an innovative 3D printer on KS. By the time the campaign was over, so was his business. The Chinese cloned enough of it from what he presented on KS that he shipped the units he owed and was forced to printing books about 3D printing. Be careful.
And then there's the regulatory part of every project. You will have to deal with UL, FCC, TUV, CE, etc. This is important and, yes, if you don't want to waste lots of time and lots of money, this requires expertise as well.
This brings me to intellectual property. I have a love/hate relationship with patents. However, in real life, in real business and in some industries, if you don't have them for protection you might as well not even enter. This is a tough realization for most engineers. Patents take time and are expensive to author. Patents might also cause you to delay introduction of your product (Example: If you disclose a product publicly anywhere in the world, you lose the ability to apply for and obtain a patent in Europe). Do you need one or more patents to protect yourself? If so, you might want to pay for an hour with a patent attorney and learn a bit about the realities of negotiating that landscape. The US Patent and Trademark office has a series of really nice webinars from which you can learn:
NDA's. Same feelings on my part about NDA's. Sometimes they are necessary. Their relationship to the ability to patent inventions could be important. Sadly, at some point, every entrepreneur learns that having access to legal advice might be just as important as having a good idea and the technical chops to execute. I don't have any real advice regarding NDA's. Randomly downloader boilerplates can be dangerous. It is possible to create an NDA that is legally worthless by not understanding how to write one from a legal perspective. I sometimes get NDA's that are laughable. The good news is that you can sign these all they long because they are barely good as toilet paper.
It probably also depends on what you are trying to build. His initial example of building chips would probably be nearly impossible without a pretty big up front investment.
If you are building something with software, it is a lot more likely that you could self fund.
The inevitable 'competition from lower cost manufacturers' is a likely fear among many hackers today, but one extremely good point that Chris makes is to complement hardware with software. Scaling with hardware can seem tough, especially with competition from lower cost manufacturers, but incorporating software gives companies an edge AND hopefully the ability to scale.
But playing devils advocate, it may be tough for startups to find the resources to have a hybrid hardware/software company from the beginning. It just seems like a daunting idea to start a hardware company. BUT, with crowdfunding having become so popular, startups may be able to raise enough money through initial sales from their hardware that they are able to put that money towards creating unique software.
Sorry for all the back and forth, just was thinking/writing out loud!
I can see how hardware would benefit from someone taking a risk with investment. It's better to sell hardware at the price point it would be at if you are doing it large scale to test the market, even if you are selling it at a loss. However, it sounds like you are almost beyond that point and know there is a demand and at what price, but it was probably hard to compete for investment (and talent) when investors were willing to throw money at zany schemes with hopes of unicorns. I hope for you, once investors become more careful again, that a business with something more proven and where the cash was managed sensibly will be exactly the type of company that most investors will be keen on. This was roughly the situation after the dotcom boom, except investors were poorer and less confident (well, I hope). I also think investors will have to increase their appetite for hardware, because IoT and autonomous vehicles are showing a lot of promise. I also think money that would normally go to unconventional oil and gas projects would be seeking something new. Good luck!
Understood, my model is to buy existing solid hardware in volume based on orders received and load them with my own software(and UI) for certain vertical markets. Making hardware is a totally different market where cash burning is real and fast, small players simply can not afford.
The few ideas I have are for very niche needs (think homesteaders / permies) and I already make enough money writing software for others that the risk of investing in hardware for a tiny, tech-averse market makes it a foolish risk / payoff proposition.
Everything else I could want hardware-wise already has a startup that I would rather support than compete with.
Hardware is an order of magnitude (or nine, twelve) more difficult than a software startup. Expensive rev'ing, long turn arounds, supply chain mayhem, overseas production, profits thinner than the paper they are printed on.
The hardware graveyard of kickstarter is chock full of dreamy eyed hardware guys for good reason.
i'm not an angel, but i would think that at least some would be. depends on the idea, just like software.
the problem of software vs hardware, though, is simply the fact that software will scale easier than an item that you must manufacture/produce/distribute. give someone $5k (for example) and a software company will probably be able to run further with it than a hardware company.
1) can you not do any hardware yourself, and choose to license it to someone else?
2) if you must do hardware yourself, can you have anyway of scoping product, doing google adwords, anything to assess demand and product fit?
The hardware business is BRUTAL. It is going to be exceedingly tough to get financing for your project, given high capital requirements and low profit margins.
As someone who has made a living in software for 20+ years, I'd love to be involved in a hardware startup right now. I mean, the kind of thing where a small group, say about 5 people, pool their resources together, get some boards made, develop some great apps for it, bundle it in a box with knobs and buttons on it, and sell it on.
To me, it just seems like the nature progress of software industry: to make computers so important that eventually, hardware is cheaper to ship than software. Eventually.
It's impossible to bootstrap a hardware company. You need capital, otherwise you'll never get out of the tar pit that is small-scale production. So hardware companies will always be much harder than software companies, if only for this reason.
Launching a new startup that sells hardware is more difficult, due to the increased capital requirements, but I don't see any reason to think that it can't be done, IF you can identify a legitimate need and produce a solution for that need, that creates value for the user. Whether or not you need to write in Assembly I don't know, but if working in C floats your boat, just imagine all the "things" you could build that might - for example - embed an Arduino to solve some problem.
OTOH, if you don't necessarily need to get all the way down to the hardware, but just want to solve hard problems that go beyond doing CRUD webapps, there are all sorts of avenues open to you. AI / machine learning stuff, systems level programming for middleware, VOIP stuff, and gosh-knows-what-else. Just keep your eyes and ears open, think outside the box (yeah, yeah, I know, cliche warning), and keep looking for opportunities.
If you were to say, build a <b>crude</b> prototype with the hopes of selling it for mass production would you have a hope of getting this done, or is this one of those areas that <i>need</i> big money VC funding to even get off the ground?
reply