Overcoming the Common Challenges That Face Today’s Hardware Startups

It’s no secret that hardware startups are more difficult to fund than their software counterparts.

While software ventures require less capital and, thus, require less risk, venture capitalists are more reluctant to invest in hardware startups that may cost more money in the long run.

But in the past few years, hardware has seen a bit of a comeback: To circumvent the lack of venture capital funding, crowdfunding has become key for would-be startups to test their products for public interest before actually pursuing it, to great success—the most successful Kickstarter campaign ever is the Pebble Time. Maker Faire Toronto has been hosting family-friendly events for the past few years, while companies from the Maker Movement got their own space at Dx3 this week.

Clearly, there is an interest both from entrepreneurs and the public for tangible tech. But is the Toronto hardware tech scene getting any better for would-be founders?

Katherine Hague, VP of PCH International’s The Blueprint, an online resource for hardware startups, wants to help people who want to make hardware but aren’t sure where to start. It’s part of the reason why the co-founder of Shoplocket helped create The Blueprint.

“While we were at Shoplocket we realized there weren’t that many resources for hardware entrepreneurs, and a lot of them were hitting the same obstacles, whether it be crowdfunding, production or manufacturing,” she says. “It made sense to make a separate resource from Shoplocket that could be a content destination for hardware startups.”

Because it takes so many different skill sets to make hardware, there are challenges that entrepreneurs may not expect to come across when starting their first prototypes.

“You can have one developer in a room making a software product, but with hardware oftentimes you require someone with electrical experience, someone with design, someone with graphic design, someone with mechanical,” Hague continues. “And even once you get to your first prototype, you need someone who understands the supply chain and manufacturing that actually gets the product produced.”

While she agrees that crowdfunding is a great method for testing out an idea, Hague warns that many entrepreneurs make the mistake on relying on the funding to get them further than is realistic.

“I think a lot of traps that people fall into is that they think that the money raised from Kickstarter is enough to both sustain their company and do their first production when oftentimes, all the money is going to do is pay for your first shipment while you find alternate sources of funding.”

She also cautions founders from launching crowdfunding campaigns too early, before final pricing points have been established and there is not yet a manufacturing partner, lest they risk shipping to customers later than expected. Instead, Hague says the best hardware companies see crowdfunding as a marketing tool.

All is not doom and gloom for hardware startups, of course; Hague believes the only “missing link” for hardware entrepreneurs to really grow is that there is a lack of awareness of resources available to them, which she hopes will change.

“There’s no real central place that can show you all of these different things available, so we need better ways of showing people everything that’s available in total rather than needing to ask,” she says.

Hardware at the startup level has really only taken off in the last few years, but as products like Vanhawks Valour and the Oculus Rift make huge waves in public discussion, Hague knows the potential in the hardware industry. “I think it’s just going back to our roots. We love things that we can hold that make up the world around us, ” Hague says. “Now all of them can become smart products. There’s nothing more attractive about physical things that we interact with every day.”

Some of Hague’s recommended resources for people looking into hardware startups include The Blueprint for research; HAXLR8R, an accelerator in Shenzhen that publishes helpful slideshows; and Lab IX, a hardware accelerator in Silicon Valley.