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What are the biggest challenges in starting a hardware company?
“Hardware company” is used too broadly. Both Square and SpaceX are hardware companies, but with very different challenges. It’s like lumping together enterprise Saas, social apps, and AI all together as “software companies”. So I’d think about subcategories and challenges facing each one. I can speak best to the challenges we’ve faced.
First, iterating is harder than with software companies. Especially at the earliest stages, you should be building your product and talking to your users. Part of your goal is to learn how you’re wrong about what features matter and what your users want. For us, we received great advice to ship a few units at lower development cost, and we resorted to using Arduinos and Nintendo Wii remotes and RC airplane batteries to build prototypes that we could sell. You have to emphasize this consciously, though, because big launches and high-dollar preorder campaigns are what get celebrated by the press and investors and it’s easy to get sucked into that.
Second, being wrong is expensive. If you spend months or years and millions of dollars to ship the first unit to a customer or put your products in the wrong stores, you may learn you’re wrong too late and at too high a cost. Be conservative with your cash, timelines, what you promise to customers, what distribution partners you work with, and how the true unit economics work out. Providing great customer service costs money. Having a no-hassle return policy costs money. So be conservative and try to limit the number of ways you can be expensively wrong.
Third, business models matter a lot. One of the very neat things about hardware today is the new types of business models that can be built on top of a physical good thanks to easier distribution, connectivity, and great software. Open your thinking up beyond ideas that are just “build a gadget, sell it at a margin.”
This post was originally from Quora, A place to share knowledge and better understand the world