Thinking About Adding Hardware to Your Startup? Think Again
Advice to would-be entrepreneurs: stick to software, or be prepared for a long, hard haul
Elon Musk once said that being an entrepreneur sometimes feels like “eating glass and staring into the abyss of death.” That said, it is universally acknowledged that being an internet entrepreneur is a walk in the park compared with being a hardware entrepreneur.
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Developing and selling hardware is a nightmare. The life cycle of hardware products is considerably longer and more expensive than that of software, so companies need to raise more money along the process and stand a higher risk of running out of it. And let’s not forget about pains such as scalability issues, inventory, shipping, installation, and customer support.
Still, many entrepreneurs are tempted to combine hardware in their product, which is fine, so long as they take into consideration the implications. Among other challenges, hardware entrepreneurs will likely find it more difficult to find mentors and support for hardware-related issues.
That said, many new startups have hardware as their core offering, and are (hopefully) ready for the hard road ahead. To internet entrepreneurs considering combining their software solution with a hardware component, I typically give one piece of advice: think long and hard about this move. Here is why.
Every entrepreneur is also an investor. Even if you don’t put any money into your venture, you are going to invest a lot of something equally valuable—your time. The most promising startups require many months of hard work before getting funded, and these are long months during which you, the founder, are going to work without pay. This means that you must be financially strong enough to pass this period.
As a rule of thumb, due to the reasons mentioned above, if you decide to add hardware to the mix, you should be ready for a longer period of uncertainty. This means you need to be able to survive without an investment longer and that’s a decision that many entrepreneurs, unfortunately, make without careful consideration.
But money is not the only issue here. As I previously wrote, entrepreneurs have an internal “biological clock” that poses a separate—and very serious—risk for the startup. Things happen. Founders may stop liking each other. Disagreements about the right way to advance may arise. One of the founders can suddenly get an offer he cannot refuse and move on.
Time, in general, is not the entrepreneur’s friend. Technology may change. The stock markets can crash. New competitors with a much better solution can appear and change the game. Laws and regulations can change. By choosing to work with hardware you are simply increasing the gamble, in a field where your chances are slim to begin with.
Sometimes, the solution can be to start lean and grow gradually based on the new information you will collect along the way. Just as an example, a startup that plans to develop a software-hardware product that helps athletes to collect training data and compare with their friends, can start with using the existing capabilities of users’ mobile devices.
If there is no lean version of your product and you don’t have a choice but diving into the physical world of hardware, make sure you take everything into consideration and that your partners do the same. Most startups fail not because the idea was not good enough, but because they didn’t have enough “fuel” to stay until the end.
Adv. Zachi Zach serves as a senior counsel to Tel Aviv-based law firm Pearl Cohen Zedek Latzer Baratz. He is also a co-founder of digital advertising outfit Brave People Ltd. and e-commerce platform Boom25 (UK) Ltd. He is the author of The Online Startup blog .