The reason that a larger number of hardware startups have recently appeared is quite simple - these are mostly actually software companies. Modern hardware that a startup might produce - IoT stuff, small computers etc - are essentially bare-minimum hardware wrappers around black-box chips.<p>The complexity of developing hardware is driven by the number of discrete components used. Every additional resistor is a resistor which can be fitted wrong. Every additional analogue circuit built using discrete components is a huge risk. To build cheap hardware, you avoid all that as much as possible by building PCBs which just wire up highly functional ICs.<p>In essence your hardware company then becomes a software company.
I am a broken record. So many brilliant people (RMS comes to mind) have fallen into the trap of thinking that hardware dev for general computing (not including rocketry and other such hardware) is so inexpensive that it's going to be super easy. But that's not the case [1] because hardware is a totally different beast than software. It won't be any more open, or any less expensive; at least, not for a long time.<p>[1]: <a href="http://www.mauve.plus.com/opensourcehw.txt" rel="nofollow">http://www.mauve.plus.com/opensourcehw.txt</a>
Not until software lottery tickets quit returning 10x+.<p>Who, in their right mind, would invest in hardware? NRE kills--especially in <i>mechanical</i> engineering which actually seems to be regressing. Machining companies now charge a fortune for things which my grandfather used to do <i>by hand</i> in his garage in about an hour. Not to mention how <i>long</i> it takes to get an injection mold (14 weeks is not uncommon).<p>For the price of a couple injection molds, I can flog a gaggle of stupid 20-somethings living in squalor for about a year. No contest as to which has a better probability of cashing out.<p>In addition, who is going to buy out a hardware startup? Hardware really doesn't fit the Yahooglezoft strategy, so now your exits are very limited. Even worse, hardware acquirers tend to be rational about things like costs and profit.<p>Finally, everybody who does hardware tries to create the cloud back end and then get <i>anybody else</i> to do the hardware while they extract the rent.<p>So, longer timelines to cash out with higher risk. Yeah, don't think so.<p>Now, the <i>upside</i> is that if you do manage to get a product out, you have an actual <i>barrier to entry</i>. 2 guys and a dog in the Ukraine can't just clone you.<p>While I love the manufacturing incubators, they don't solve the fundamental problem of not knowing how to run machines. The existence of a CNC machine or a TIG welder doesn't magically make you a machinist or a welder. Being able to run a CNC machine doesn't mean you know how to make an injection mold.<p>Most people fail horribly simply at making a PCB board, and those are <i>totally straightforward</i>.<p>Read Andrew "bunnie" Huang's blog for a taste of all the little sh*t that can go wrong in manufacturing:
<a href="http://www.bunniestudios.com/" rel="nofollow">http://www.bunniestudios.com/</a>
@sama actually addressed HW on his recent AMA here [0] but as with software startups, you have to broaden your view of a hardware startup -- if you include ventures focused on fundamental semiconductor technology, both analog and digital; tools for design, prototyping and verification; semiconductor intellectual property as well as end products, there are quite a few potential $10B opportunities[1]. I believe @sama is considering the full range of investment options. Not all investments in this segment are capital intensive.<p>[0] <a href="https://news.ycombinator.com/item?id=9238839" rel="nofollow">https://news.ycombinator.com/item?id=9238839</a>
[1] <a href="http://blog.semiconductors.org/blog/what-end-use-applications-drove-semiconductor-sales-in-2014" rel="nofollow">http://blog.semiconductors.org/blog/what-end-use-application...</a>
Is calculated valuation (not market cap!) the only metric relevant to a VC when talking about the size of a company?<p>What about MRR, YRR, profits, number of employees, revenue/profit per employee?<p>The only ones profiting from high valuations are VCs' themselves. Therefor one should be really skeptical when reading such articles.
There are a few companies around that have the resources to copy the product of any moderately successful hardware startup. Apple, Samsung, Xitomi, Microsoft, and others can just straight up clone the clever parts of your hardware and wrap it in a package that you could never afford to compete with. That obviously doesn't mean you can't have any success - building a $hundreds-of-millions company is definitely possible, but taking it to the $billions will be a few orders of magnitude harder.<p>[1] Fitbit did movement tracking well, and now there's Microsoft Band, Nike Fuelband, etc. Pebble popularised smartwatches and now there's Moto 360 and Apple Watch. And so on. And Fitbit and Pebble weren't the first movers in their markets, there'll be smaller companies who failed by being too early.
I like Sam's line: "I always tell my partners that our job is to fund all the companies we can that can be worth $10 billion or more. That’s such a difficult constraint we can’t have any other constraints."
The softwarization of hardware is the key trend, agreed.<p>The software-defined radio/network/storage etc are happening quickly now.<p>For the low-end hardware, e.g. the IoT field, the wearable market etc, the software is also key, for instance, they need the cloud platform to be effective and useful these days.<p>We just need more workshop/factories to turn the (low quantity) hardware-design into real products with high quality, which is still very challenging and a bottleneck.
Not trivializing the article, or it's point. Interesting though is that the subject (hardware) reminded me of an app I wrote that lets me quickly model system availability on my phone. My astonishment at the time was that such a simple modeling tool isn't available in any app store (maybe today, couldn't find anything a year or so ago).<p>There are sooo many tools, let alone basic productivity apps that just don't exist yet. And here we are, breathless and panting, moving onto the next big thing - hardware, biotech... Hey its all good stuff. Except for the part where I can't create a simple DB-like table on my phone and have that sync (securely!) with my other devices - <i>without</i> making me create a Dropbox account, or wanting to up-sell me in the app, or get all social on me. Basic, simple and <i>honest</i> apps. Like the Code Vault app I had on my Nokia Communicator in 2001.
Im looking forward to tabletop micro-foundries that can create ICs. Its a ways off and I'm sure people will say it is impossible, but it will happen eventually and then it will be very obvious how similar software and hardware are.<p>I think you have to anticipate a gradual movement towards total programabiltiy of reality.
$10B? That's awfully large, and closing the door on a lot of ideas. What if you just want to solve an important problem by selling a product profitably and don't want to grow to enormous size? I guess you look somewhere other than Y Combinator to get started.