I have worked in a number of hardware based startups, still do, and most have been product led or at least try to be. There isn't a one size fits all answer for what I think you are asking, and without more details it is unlikely anyone can give you great insights.
Generically, most hardware based companies today are really software services or data companies that have a hardware "interface" product. e.g. pick a consumer wearable product, what's really the product there? the hardware? or the users data? The answer is generally the user's data and insights that can be pulled from that data. So product led there generally starts with the insights and data, the hardware is just a means to acquire it.
My main point is unless you are selling primarily disconnected hardware, e.g. a non-connected toaster, you almost always are focused on the software services and data around the product and the hardware is just the bow you wrap it in to get what really is your product. So being product led for hardware isn't so different than SaaS or others. The one key difference is part of the user experience is the hardware, so you spend more time around optimizing the hardware and convincing customers why your shiny object is the one they need to buy. In the end though, usually those reasons to buy still boil down to the insights that come from the software. Hence you are still looking at all those growth metrics, engagement etc that most SaaS or software based business are watching.
If you are a truly non-connected or have severely limited software in the product then I'd have some different comments, but those are pretty rare in today's market.
There's a presumption that all hardware consumers are simply looking for a cheaper thing that does what they already have. Cheaper isn't always better when it comes to products that aren't meant for "everyone," even b2c product markets can easily be stratified.
I wouldn't say "complement hardware with software," (although in many cases, it is a good idea - but let's be honest software, like hardware, can be copied and sold at a lower margin) - but instead "complement your hardware with a thorough understanding of where you want to be in your market." You may find that there's less money trying to capture and keep customers who want the cheapest product than to find a good spot somewhere in the middle or top-end of a market.
I see a lot of poor thinking in some products, where cost is nearly the primary focus - where the hardware product is something to be thrown away when the next model comes out, because it is stripped to its barest essentials. That's a difficult position to hold - it's much better to think about where your product will need to be in a few years, and make sure that it can grow (add-ons, upgrades, etc.) without needing to be replaced. Not much different than software in that sense.
I'm not sure how one starts a hardware company these days without being a software developer (there's usually more firmware work than electronics...) - but I see it happen all of the time, people don't really care how good the firmware/software is, as long as it works, it would seem.
I have never taken a hardware product to market, but I did have key roles at VC-funded companies, co-founded a company we got funded, and in 2005 did the VC tour on a hardware product.
What I'll say --- and again, don't take my word for it --- is that what you're saying may be the opposite of true. Hardware companies have a higher cost of sales, supply chain issues, worse margins, and must carry inventory (sometimes millions of dollars worth) to fulfill customers. The "hardware" part of what we were doing was, for the VCs that got into real due diligence, the least attractive part of what we were doing.
You may have a resume that is a mile long in hardware, and that may mitigate some of the concern.
Firstly, as you can see from many replies here, this being HN some people think hardware startups are companies that put software on computers and sell the computers (e.g. developing a raspberry pi based tool for something). Let's call this hardware-lite.
It's obviously a bit of a 'spectrum', but I'd say a 'real' hardware startup would be one that develops new hardware, like Tesla, General Fusion, a robotics company, etc - really anything where the innovation is in the hardware, and if software is developed (usually will be) then it sits on top of that novel hardware. Let's call this case 'hardware-heavy'.
In the hardware-lite case, you're basically starting a software company that needs to set up a supply chain for a few parts, built by others, which provides the most cost-effective platform for your software to run on. You might then package that up, brand it, and sell it. This can be relatively capital nonintensive.
In the hardware-heavy case, you'll probably need quite a lot of capital. This will be needed for you to patent your invention(s), prototype your devices repeatedly until you've arrived at something commercially viable, set up a small batch manufacturing process to produce small volumes of prototypes. With hardware, when you ship something anyone can take it apart and reverse engineer it. Every time you replicate your product, it takes time and money - unlike software.
Tons of commenters here will be able to give you excellent advice about the hardware-lite model, because this is HN. I suspect there is less experience of hardware-heavy business models here.
There is always room for a product start up. Force10, Fire-eye, etc., prove that. And products are monumentally cool. My brother-in-law is the product start up guy, and we always marvel at the low barrier to entry I have (as a services startup guy). The issue is that a hardware start up requires an order of magnitude or more more resources to get off the ground than a software startup.
Consider the process for developing the product. For software, that's a development issue. For hardware, it's (usually) also a development issue, but it's also a logistics issue. Where do you get the components? Who is going to assemble it? How are you going to make sure they don't suck? How are you going to get over the regulatory compliance issues in all the markets you want to sell to (like FCC certs, ROHS in the EU)? How are you going to package and ship. Do you use a channel model to support sales/deployment/support or do you build that yourself?
Consider the support issues. For software, it's a test/patch/deploy issue. For hardware, it's probably that, plus how do you stock spares? How do you deploy a tech to service a customer? How do you handle a bad production run? Where is the feedback loop between reliability in the field vs the test environment? If you use one, how do you support the channel?
Hardware companies have (1) greater costs to get off the ground (2) longer periods of development (3) higher incremental cost per sale (so harder to scale) (4) slower iteration speed, and (5) just overall a lot riskier than pure software. A VC fund is going to see a startup with a groundbreaking innovate hardware device next to one building a cookie cutter SaaS app and still invest in the latter, because it just makes more business sense for them. No one outside of Apple/Google/Microsoft and the like is pouring 10 years and billions of dollars towards releasing a new device.
A lot of comments here have focused on implementation details. Let's ignore FPGAs, startup costs, etc... One huge advantage of hardware, is that you actually have something you can sell. As an interesting hardware startup archetype, consider Body Bugg:
Long story short, they built a device to monitor health, but realized, only after being harassed by clients, that the real market was weight loss. Like ebay, they literally had clients begging them for a product.
Personally, I'd love to work at a hardware startup :)
I think a better question would be: What parts of the hardware market are suited for startups, given the various capital needs and industry landscape. I'd actually be very interested to hear from people about that.
This is not surprising to me. I've worked in this space, and I think consumer hardware startups are just incredibly hard. I just finished my stint at one (https://www.electricobjects.com/) last year after we failed to raise series B.
Why are consumer hardware startups hard?
- Consumers have high expectations and want high quality products from the get go.
- Quality products are incredibly capital intensive, resulting in much shorter runways.
- Building a quality product often times means partnering with an expensive design firm + hiring the engineering talent to back it up.
- Margins are much lower than a typical SAAS. This makes it less appealing for VCs than a pure software play.
- Scaling hardware is harder than scaling software. Lead times are long. The right decisions have to be made ahead of time. Any missteps or problems with your suppliers will delay your launch. If this happens around Black Friday / Christmas -- it's a big deal.
- Not only do delays impact your sales, they will also delay fundraises for much needed cash infusions.
I think you mean "It's not like a [software] startup now where it's mostly software." There are still hardware startups where people are populating boards and assembling products. The goal is to quickly get through that stage, but in the beginning, not everyone can afford the large order requirements for outsourced manufacturing.
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.
Indeed. The main differences are 1) lead times 2) financial risk. Everything is slower and costs more when you go from software to hardware. Like 10-100x.
The difference that most shocked me is just how unmotivated manufacturers and resellers will be to get your business. You have to audition, and sometimes plead, to give them money. The reason is because the cost of taking on a customer for hardware can be very high. This is much less true for software.
This maybe true of consumer product companies, but a lot of "hardware" companies aren't either consumer or product companies, they are service companies. For example, SpaceX builds neat hardware, but sells launch services. They deliver a complete service with their own hardware + software + services.
This is becoming more and more common model in many industries, and is a much harder business to copy.
The reason that a larger number of hardware startups have recently appeared is quite simple - these are mostly actually software companies. Modern hardware that a startup might produce - IoT stuff, small computers etc - are essentially bare-minimum hardware wrappers around black-box chips.
The complexity of developing hardware is driven by the number of discrete components used. Every additional resistor is a resistor which can be fitted wrong. Every additional analogue circuit built using discrete components is a huge risk. To build cheap hardware, you avoid all that as much as possible by building PCBs which just wire up highly functional ICs.
In essence your hardware company then becomes a software company.
Generically, most hardware based companies today are really software services or data companies that have a hardware "interface" product. e.g. pick a consumer wearable product, what's really the product there? the hardware? or the users data? The answer is generally the user's data and insights that can be pulled from that data. So product led there generally starts with the insights and data, the hardware is just a means to acquire it.
My main point is unless you are selling primarily disconnected hardware, e.g. a non-connected toaster, you almost always are focused on the software services and data around the product and the hardware is just the bow you wrap it in to get what really is your product. So being product led for hardware isn't so different than SaaS or others. The one key difference is part of the user experience is the hardware, so you spend more time around optimizing the hardware and convincing customers why your shiny object is the one they need to buy. In the end though, usually those reasons to buy still boil down to the insights that come from the software. Hence you are still looking at all those growth metrics, engagement etc that most SaaS or software based business are watching.
If you are a truly non-connected or have severely limited software in the product then I'd have some different comments, but those are pretty rare in today's market.
reply