Startups are subject to something like infant mortality: before they're established, one thing going wrong can kill the company. Hardware companies seem to be subject to infant mortality their whole lives.
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I think the reason is that the evolution of the product is so discontinuous. The company has to keep shipping, and customers to keep buying, new products. Which in practice is like relaunching the company each time.
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I don't know if there is an answer to this, but if there were a way for hardware companies to evolve more the way software companies do, they'd be a lot more resilient.
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Hardware manufacturing = infrastructure which increases sunk cost and decreases flexibility.
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There's a physical limit to how much unit cost declines as production volume decreases. But (1) long development times mean getting the product right is itself a long term barrier, and (2) leverage automated production, which is a benefit to costs, and also a barrier to entry
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You can't do that with a carbon fibre airplane though of course.
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There is also a big incentive problem in hardware companies that is hardly talked about: they need things to break for you to buy a new one.
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I was early at Meraki, which got sold to Cisco for $1.2B (back the a
$B was big). We solved this problem by making the hw 50% (and cheap) and requiring a subscription. Over time, majority of revenue was licensing.Thanks. Twitter will use this to make your timeline better. UndoUndo
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One huge reason is inventory cost. Especially with expensive non-essential HW, which tends to be seasonal. One bad estimate can cost enough to sink a company.
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Game studios are like that too
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For us it's been about pivoting every year keeping the faith.
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