The days of consumer hardware company's access to startup capital is over. With so many high profile VC backed (Fitbit, GoPro, Hello, Juicero, Coin, Pearl, ect.) and kickstarted (Lily.ai, Pebble) failures, no one is willing to risk it.
+ SimpliSafe raised $57M from Sequoia
+ Ring raised $100M+ from DFJ
+ Formlabs raised $50M from Foundry
+ Sphero raised $23M in April
+ Anki raised $52.5M in PE
I'm not sure what the future holds for Anki/Sphero, but the first three examples have what GoPro/FitBit didn't — a clear recurring business model. This is a good blog post on the subject:
https://blog.bolt.io/the-3-business-models-that-matter-for-c...
Simplisafe raised the $57m in 2014 and seems to have been able to make a sustainable business without VC money. Form Labs is seemingly (with the rest of 3D printing) moving away from consumer to B2B focus.
I find Sphero/Anki raises surprising and wouldn't be surprised if they had Chinese Funds leading the rounds.
We use SimpliSafe at work. It solves far more problems than the "commodity hardware" issue. It solves the alarm ecosystem and shitty contracts that legacy carriers like ADT trap you into. It's definitely a good model going forward, as you noted.
EDIT: Additionally, it solves a "boring" problem, which not many companies want to tackle. Yet there's tons and tons of stable recurring revenue in this space that requires almost no additional innovation. Just stability, no-bullshit, and good customer service.
VC mechanics are the opposite of this, they are built for hype-based financial engineering to sell companies to richer and richer investor groups. Product and revenue is secondary.
I'm interning at a recently (12 months ago) acquired standout in the e-commerce provider field, and yesterday I was at a talk where the CTO/co-founder attributed their now multibillion dollar business to the exact same thing.
There are plenty of dumb problems that people just want to not worry about.
I will say, the downside is they spent about 7 or 8 years before going public, and another 4-5 before being acquired (for about 4.5x their IPO price). It wasn't quick money, because you can't prove stability in a year or two, but it is a very powerful business model.
https://thewaltdisneycompany.com/the-walt-disney-company-ann...
Which pretty much assures increased growth as they produce more toys for Disney IP. Who knows they could also be using the tech in their parks or for production purposes.
> What makes today’s hardware successes like GoPro, Arista, Fitbit, Nest, Dropcam, Zayo, and Oculus different?
GoPro, Fitbit, Nest, Dropcam (part of Nest) are struggling. Hardware is hard.
I understand that their new products may not be selling that well (lots of cash for a CO detector / camera / etc) but what about the thermostat business where they have partnerships with most every energy provider and their setup process / support is great? What articles did I miss?
I ask because of self-interest: I just installed a couple and I appreciate them, and I'd hate to see the software support fall by the wayside / be decommissioned by their parent company.
EDIT: I'm reading about not enough revenue on the acquisition price and leadership issues, but I find it hard to believe a company with a solid thermostat product being sold in outlets across the country would collapse, especially given the current utility partnership incentives. That said, I've been surprised before.
Second rush to market for their smoke detector Protect caused a debacle when it was discovered it was far too easy to silence a real alarm so they were all recalled, etc.
Third Nest has no relationship or respect in the home HVAC industry. Pretty much every HVAC tech and owner I've spoken to has a strong dislike for Nest. And while installing the Nest isn't that hard eventually everyone is going to have HVAC issues that need professional repair and people will get an earful about their Nest. This gets around quickly.
Of course now there's more competition also by traditional HVAC companies like Honeywell. Although I had a Nest in my previous house when I purchased a smart thermostat for my son for his house warming I purchased a Honeywell just for the reasons above.
The technology component of Jawbone or Fitbit was, even in 2007, very very basic and hardly novel. There is literally nothing in Jawbone or Fitbit that is super novel: their sensors aren't ground breaking, their algorithms are (presumably) meh, etc.
VC's hope that these companies will mature to become superstars and achieve the level of tech quality of Qualcomm, FB, GE, Intel, Google, etc. in their respective markets. This didn't happen with Jawbone or Fitbit.
Yes, you can tell Apple Watch what kind of workout you're about to do and it will record it. But what's described on that page is automatically detecting and recording a type of workout based on motion. Fitbit has better technology to better serve the consumer.
Yes, you can track sleep with a third-party Apple Watch app if you're careful about when you recharge the device. But that page says "your Fitbit tracker can record your time spent in light, deep & REM sleep, as well as your time awake, then distills that information in easy-to-reach graphs in the Fitbit app."
There have been niche products that supposedly tracked sleep stages but they've been reviewed as inaccurate. Fitbit has unique ownership of this technology and major players haven't even claimed to compete with it.
That page doesn't say specifically, but my recollection is that it's otherwise every 10 minutes if you're still. In non-workout mode they don't measure heart rate if you're moving; presumably not accurate enough.
All-day heart-rate monitoring can only be claimed by devices with a battery life of at least a day.
When the iPhone first came out, the way you measured your heart rate was by putting your finger over the camera on the back of the phone.
Right, but that's why the products become commoditized. The inventors get an early burst of success and easy money, but everyone else figures out how to make similar products very quickly.
Even smartphones are commoditized. The iPhone and the Samsung phones are the rare examples of commodity hardware that can beat the competition on the strength of their software experiences. The other companies are fighting tooth and nail in a textbook example of a commoditized market where the profits are difficult to eke out.
Actually, no. Pulse-oximeters were always quite cheap. Also, Casio had heart rate (although not continuous) monitors on some of their watches for many years.
They swooped in but wouldn't say that they won. At least in the UK I seem to see more people with a Fitbit than with an Apple Watch.
So I haven't worked at a hardware start-up but it seemed pretty difficult even before these companies to raise funding versus a pure software play. I'm not necessarily convinced this makes it easier or harder. Is there a specific reason you think it will be harder now?
Also, for what it's worth, Fitbit and GoPro are still going. I'm convinced Fitbit can get back on the growth curve as long as they can get a new product out the door that consumers want. Tall order for sure but I don't count them as a failure yet.
GoPro want to move to doing software more so than hardware. Considering their software has always considered to be lackluster to borderline terrible I'm less convinced they will turn it around but also not yet willing to say they're a failure.
as soon as the iPod came out way back in the day, the criticism was that it would soon be copied. No one ever did, and I worked in the music business at the time and was familiar with everything on the market. nothing ever came close, apple made a ton of money.
it's a common thing to say that it's not defensible/can be copied, but I don't see that happening always.
Also, one of the iPod's major interface innovations was the click wheel - IIRC they've patented the hell out of that, so no one was about to launch a competitor.
If you take a look at the context of their question, they are asking why no one has killed the iPod by copying it.
I suppose the answer is probably as said by rokhayakebe elsewhere in this thread, "Copying the hardware is easy. Copying the ecosystem is a different challenge."
and, of course, as another reply says the software has always been a big part of the iPod.
But now, the economy of Shenzhen has matured to the point where squeezing every ounce of production is no longer sustainable, and thus is forced to innovate. Perhaps that explains the number of hardware startups there: it's an advantage to be closely located to the manufacturer of your parts. That was also once true for Silicon Valley.
Maybe the failure of many hardware startups now can be attributed to manufacturing jobs being outsourced.
I think the patent durations of hardware should be shorter, just like many here think that they should be shorter (if existant at all) for software.
Part of the issue with durations in hardware is development time. It would be nice if the duration could take into account the date of first sale rather than just the inception of the idea.
Memory is hazy, but I seem to recall that without the iTunes store/application you had to either mess around ripping CDs, or use illegal downloads.
The one hardware innovation the iPod had was to use the teeny hard drives just coming on to the market at the time, when everyone else was using flash. Flash was the right solution ultimately, but for a while the HD worked around the problem that Flash was too small for a decent set of songs. Reputedly Jobs decided to take most of the volume supply of the small drives initially, preventing copycats from executing.
Apple had complete control of the small form factor harddrives. Noone else could get their hands on them. There were other MP3 players before iPod, but they were either too big, or couldn't hold enough music.
By the time flash storage caught up, it was more about fashion.
Not sure why you got down voted, but here's an up vote.
Apple, however, hasn't rested on their laurels. They have kept innovating. If they had slowed down at all, the others would have eaten their lunch.
The ipod was really a story about iTunes, I think, rather than the hardware.
No problems with Shenzhen companies running Kickstarters, after all they can probably have much better relationships with the factories than Westerners are likely to.
https://www.kickstarter.com/projects/ufactory/uarm-put-a-min...
GoPro has a similar problem. Outside of special circumstances most smartphone cameras are now good enough for most consumer needs and will only get better. I think they could survive if they target the extreme sports type niche but otherwise I don't see them achieving escape velocity.
Both could be good acquisition targets a la Withings and Nokia. But the number of possible buyers is limited. Microsoft is possibly the only one that comes to mind that doesn't have anything in either space although given the failure of Windows Phone I'm not sure they have the desire to try something similar in a different market.
By 2006 Apple had 72-74% of the MP3 player market, with SanDisk, Creative, Zune, Sony, Samsung, and other accounting for the remainder. I seem to recall most of the damage was done by the iPod Mini.
I guess my point is that there is more going on in the VC space then you'll read about on HN.
What I do know, per your point, investment in and around hardware startups is not publicized. I wonder how some of the networking hardware startups that started the carriers of those I know (and benefited me) would be taken now.
Cisco / Nokia / etc. hardware acquisitions apparently aren't HN sexy.
It doesn't mean that they don't fail tho.
Bringing a hardware product to market costs a minimum of $7m in the US. At Seed/Series A, this is a huge amount of money for investors to swallow.
https://news.ycombinator.com/item?id=14717976
Our first Pavlok took about 2 years, and probably just over $1MM in total costs---but we presold units to cover the float.
There are still waves going on now, and there are probably some startups being founded right now that will get rich off of them. It's just that the waves probably aren't what VCs think they are.
Amazon is putting large ads on the amazon.com homepage for it's products. I don't think if a startup had build exactly the same product they would have been succesful.
Apple had Steve Jobs, who had both a great vision and a cult of personality that made people buy apple products. Apple didn't have another major successful new product since Steve passed.
Google doesn't really have that many successful hardware products, except maybe Chromecast (which benefits integrations with youtube, chrome, etc.), Pixel (which benefited from good timing, the biggest competitor had to recall their flagship phone) and Home (which has less market share than alexa and benefits from Google's NLP technogloy).
Is it even available anywhere outside the U.S.?
This is no different to software, but it's a lot more problematic with hardware. Unless you plan very well, patching hardware is expensive and/or impractical. You're often much better off releasing a basic, but very functional product (i.e. your MVP) and iteratively addressing customer demands with later version.
The second is that selling complex products to consumers is really hard. If you sell stuff to industry the benchmark for smartness is often much much lower.
If your BOM cost is say $200 including labour, then you should be targeting a price of at least $600. That $200 doesn't include the cost of design, tooling and so on. If you bought a $50k CNC machine you want to get some ROI! If you go for a distributor, they're going to take 10-20% (and they may want a volume discount). You might want some room to have sales, or offer bundle discounts to attract customers. You have to ship the product, market it, support it and fund the next iteration. Why go for razor thin margins? If you have a niche, people will pay. Apple have this nailed - they are expensive because they actually price their products sensibly and they're rolling in cash as a result.
That's part of the reason Pebble failed; they were forced (like from pressure from VCs) to expand their business and they really over extended.
But more than that, I think Pebble was dead the moment Apple, Samsung, and the other big players jumped into the market. Pebble's first mover advantage was destroyed almost immediately by the technology and marketing might of those companies.
Software is often harder for big companies and easier for small companies. Hardware works the other way.
https://www.crunchbase.com/organization/pebble https://www.crunchbase.com/organization/lily-robotics#/entit...
The logistics of manufacturing and selling hardware as a small company are truly a nightmare.
Their revenues are falling and their operations losing cash. They have $75 million of cash on their balance sheet, less than their Q1 2017 net loss.
[1] https://www.google.com/finance?q=NASDAQ%3AGPRO&ei=fNBeWcCjCc...
It's possible they're in the process of failing, but it wouldn't surprise me if trying to meet unrealistic expectations caused a large part of their problems.
I think at this point the worst case scenario is that they get bought out by a bigger electronics company because their name brand alone is worth quite a bit.
The sensors & lenses are going to be the same size, from sony and rubber gaskets with a hard plastic shell is not hard to do.
But while we're on your topic, don't forget there is value in brand recognition and trust in a company which isn't a random Chinese vendor. And why do you think the Chinese clones exist at all? They followed the success of GoPro.