Give Hardware a Chance

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We have already seen the rise of hardware startups through companies that we have screened, seen on Kickstarter or watched graduate from the most recent Y-Combinator class.  Most of these companies are still in their infancy, so questions of sustainability still remain, but their initial success is a positive indicator.

The underlying question for hardware startups is scalability. Could the next Kickstarter project eventually compete with a major hardware producer? Some on Wall Street seem to think so, as 3D printing startup Form Labs was flooded with calls from Wall Street Analysts asking about the future of the company, during their Kickstarter campaign. Some even contended that drops in 3D Systems (DDD) stock price were attributable to Form Labs Kickstarter campaign. 3D Systems seemed to take notice as well, they recently filed a lawsuit against the fledging startup. As 3D Systems demonstrated, large corporations will staunchly defend their market share, which could be dangerous for future hardware startups.

Another issue facing hardware startups is the ubiquity of the mobile device. The perverseness of the mobile device is leading a lot of new hardware to become focused on its interaction with the mobile device rather than it own platform. While mobile accessories are an exciting field, focusing on mobile as a platform rather than a channel is limiting for future hardware innovation.

Its not all bad news though, startups have the benefit of building hardware for niche markets, or other markets that larger companies would deem too small or too risky.  Apple demonstrated  both with the personal computer and the iPhone, that products can define the scalability of the market rather scalability determining the viability of the product.

Lawsuits aside, it is an exciting time to be a hardware startup.

3 Comments

  • Vidyuth Srinivasan wrote: 03/13/2014 10:39 PM

    Hi Ed,

    Great read. As a co-founder of an early stage hardware startup myself, I'd add that distribution based on your market could be a key challenge as well.
    Also, your point on scalability I think is a little generalized because:
    - Manufacturing scalability isn't that hard nowadays with enough funds
    - Business model scalability is usually solved once there is enough demand generation, as more demand means more production at lower costs (again, with enough funds)
    - The real problem with scalability is customer acquisition, the step that leads to demand generation. I am slowly realizing how hard it is to go beyond a few alpha users for our product, and it seems like a mountainous challenge in future!

    Anyway, thanks for the article and for the hope, nice read!

    Reply
  • Edward wrote: 03/18/2014 9:50 PM

    Hello Vidyuth,

    Thank you for your comment. I agree that customer acquisition continues to be challenging for hardware startups, but the growing availability of distribution tools and services promises to help entrepreneur overcome those hurdles. On the crowdfunding side, kickstarter and Indiegogo serve to greatly amplify any customer acquisition efforts, especially as journalists are increasingly receptive to stories about new hardware projects. Also, there are now PR firms who specialize in crowdfunding efforts and only charge based upon total raised, as opposed to unaffordable flat fees (check out Fundzinger). Tools for hardware companies are not as readily available after the crowd-funding stage, but platforms like Grand st are still helpful to companies trying to cut through the noise.

    Please reach out if you would like to discuss further (Edward at launch dash capital dot com)

    Reply
    • Vidyuth Srinivasan wrote: 01/26/2017 2:27 AM

      Wow,

      Was doing some vanity searches and stumbled upon this, 3 years later! Luckily for us, we are still in existence, figured out scaling and customer acquisition and are in good health. Your advice, even 3 years on, is so on point. Thanks for helping guide businesses like us through the murky waters. 🙂

      Reply

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