Hardware Startups: What You Need to Know Before You Start

Posted by Neha Palacherla /October 10, 2013 / Hot Topics

There’s a lot of talk about the “hardware comeback” in the startup space. Excitement around everything from wearable tech to 3D printing to smoke detectors is abound, but the reality is that the hardware ecosystem is still nascent and there are a lot of things entrepreneurs need to think as they start a company (or even a side project).

You might have gone to some meetups and networked with people in the hardware startup world. These are the big ones:

Now you want to start a meaningful side project or maybe go all in on a company. So what do you do next?


1. Find the Right People

Here’s the first place people often go wrong. They wait until they have a fully-formed idea that they are insanely emotionally attached to before they start looking for people to work with. Start looking for potential cofounders first, before you even quit your job – 6-12 months before you’re ready.

Meet other people that have complementary skill sets. Obviously the FounderDating network  is a great way to do that and you can and should also reach out to your own network. Talk to them, start side projects together to figure out what your deal makers and breakers are. In hardware this is even more important since you have so many components that need to come together – design, business, mechanical engineer, software engineer, electrical engineering. We’re not advocating for a big founding team, but you do need the right folks.


2. Tinkering and prototyping

Once you have an idea (note: this is AN idea, not necessarily THE idea) and some potential partners who can work with you, do some customer development. Think about the consumer base–do you have one and how big is it? It’s fun to jump into a project, but it doesn’t make sense to burn money if the market isn’t there. Talk to your potential users about what they really need. Fill out the business model canvas first, and put together a pitch deck. Steve Blank has an awesome free course on Udacity. And take his advice from the customer development manifesto too: “There Are No Facts Inside Your Building, So Get Outside.”

Now it’s time to find a space to start working on your ideas to see how they translate to the real world. Building a prototype doesn’t have to be expensive. After all, this is just an initial version of your final product. This includes everything from using CNC tools, to just modeling on the computer using CAD, to using a 3D printer. If you’re in the electronic world, you’ll likely want to use development boards to start hacking something together. Some that can help get you started are arduino, raspberry pi and beagle boards.

TechShop founder Jim Newton also emphasizes that working in a shared space gets “all these smart, creative inventive people working on a project with you…and really upgrades your idea.” Find a space that will provide the resources that can help you create the prototype around which you can grow your company.


3. Seeking funding

Once you have the prototype you’ll be doing more customer development and iterating on that for a little while.  If you’ve validated that there is demand, you have a partner and your prototype is ready to go, you’re probably ready to look for some money. But where do you look first?

A lot of hardware ideas have found crowdfunding successful, through sites like Indiegogo, Kickstarter and Dragon Innovation.  While crowdfunding is a whole post in and of itself, this approach can kill two birds with one stone–you raise money and develop a customer base at the same time. Then again, if you go out too early you could hear crickets. It’s important to have a small loyal following first.  According to Indiegogo, “The first 30% of a new project’s goal comes from it’s existing fans or inner circle.”

Incubators and accelerators also provide financial backing, along with guidance and mentoring. These are some programs that help hardwares companies get started:

Of course, there’s the traditional route of just looking for investors you know or that you know of. The trick is to look for those who have invested in similar ventures. This is also where networking and being a part of the community helps. If you meet and get to know those investing in hardware startups, you have a good chance at getting them to invest in you and your partners as well.


4. Manufacturing

Once you have a prototype generating excitement with a customer base and some funding, it’s time to get the product you’ve been designing manufactured.

Before you get started manufacturing, get your product certified at a lab. Find out what kind of certification your product needs. For example, most electronics that transmit data need FCC certifications. Set up some time to get your product tested at an accredited testing lab (here’s a list) and work with them to determine which tests you’ll need to run. It’ll cost some money and take a couple weeks but this is to ensure that your product meets safety standards.

Find a manufacturer you can trust and then take the leap. It’s likely that one of you will have to live in China for half the year, traveling back and forth to oversee the production stage. As Liam Casey of PCH International says, “It’s not that simple to just take the final assembly and just transplant it.”

These are some resources that can help with production and manufacturing:

A good rule we’ve heard is that if you can’t talk to the head of the manufacturing facility, they are too big for you.


5. Shipping and Distribution

It’s finally ready!  Now it’s time to get your product to the customer. At the beginning direct sales are fine, but eventually you’ll probably have to go through retail channels, which means you also have to think about margins. Take into account the volume of your product. As Alfred Lui says, “Shipping 1,000 and 15,000 are two totally different problems. You can fit 1,000 boxes of small gadgets in your basement but you’ll need to rent a space to store 15,000.”

And what happens if someone wants to return something or has a complaint? You’ll need to have customer support ready – even if it’s makeshift (Read: you checking emails). Being able to make a great product is one thing, but being able to get it out to the consumer and sever them is a whole process in and of itself.


6. Do it all again

So your product is finally in the hands of consumers, but this is just the beginning. What makes a hardware company sustainable is the ability to adapt its technology over time. Look at where Fitbit started, with the clip on device and now is sold out of it’s or Jawbone starting with headsets and now making a top selling quantified-self bracelet. This is only the first version of your product. Back to step 2.


These are just some of the key areas and associated resources you need to know about starting when embarking down the road of  a hardware company. There’s a comprehensive list of resources on this Reddit post as well. Shout out to Carson Darling, Alfred Lui and Jack Al-Kahwati for helping contribute to this post! 


Ready to get started on your hardware side-project or company? Don’t skip step one and find your cofounder! Apply to join FounderDating and start connecting with handpicked entrepreneurs – apply now.