So You’re Thinking About a Hardware Startup…

All startups encounter challenges, even wildly successful startups have their own obstacles. There are areas that a Hardware Startup has to worry about that a traditional tech startup focusing on software does not.

Have you ever heard the word “supply chain” in a software startup? Probably not, because they aren’t worried about moving physical products around the world. This presents hurdles in other areas as well, like cash flow and product quality that has huge impacts on hardware startups.

Here are a few different hardware challenges, along with some resources that may help:

Supply Chain – Managing a supply chain is not just as simple as placing a purchase order for components.  Supply chain encompasses everything that it takes to get the correct product in your hands. A simplified way I explain it is with the 3 R’s: the right part, at the right place, at the right time.  If any one of those three encounter issues, you could be stuck waiting for parts to arrive or having to rework the wrong part. Here is a recent blog post from Canary that talks about some of the implications of supply chain.

Cash Flow is King – Cash is an important factor in any business, but as a Hardware Startup, cash flow can make or break you. Be careful not to underestimate the amount of cash you will need, and don’t overlook the total spend when evaluating unit cost. Basically, don’t overrun your headlights. Vendors may require payment up front for components, then you have to extend credit terms to your customers. Factoring that time in, you could be paying for materials months in advance of when you will be paid for them. I’ve always enjoyed Marc Barro’s blog, and I think he provides a lot of valuable information in his How To Fund A Hardware Startup post.

Product Quality – While I don’t believe that anyone ever sets out to build a product that is low quality, whether it’s software or hardware if you are taking the leap into starting your own business you don’t want a reputation of delivering a product that doesn’t live up to it’s expectations.  One of the scariest terms for a Hardware Startup should be “Product Recall”.  You can’t update a physical product via the cloud. Taking a quote from The Ultimate Guide to Bootstrapping a Hardware Startups:

Quality is everything: get samples often, test them completely, keep a log of change requests and hold your manufacturing partner accountable to deliver the best quality product. There are no shortcuts here, only painful product returns.

While this is by no means a complete list of the challenges you will face, these are three that tend to be painful if the lessons are learned the hard way.

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