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.