THIS is why hardware is HARD!

The graveyard of failed startups is a fascinating place to visit.

In the news this week is Ready Robotics collapse, Soft Robotics transition away from grippers, and the general decrying of “hardware is hard!”.

This is not unique to hardware, and it’s lazy thinking to focus on purely hardware and ‘higher capital requirements’ as the reasons for company collapse. Frequently the financial constraints on hardware companies can be avoided if you have experienced people on board (including ON your board - do your investors have the experience you need???).

Payroll is the other significant cost that often brings startups undone, and the inability to hit the right scaling metrics vs funding. Startups with seed rounds and good traction were particularly unlucky in the last two years as the financial downturn killed a lot of Series A funding, or delayed it for a much longer period than expected.

The art of the hardware startup is in carefully balancing incoming finance with product expenses and minimizing the risk of getting overextended in any area, which can include supply chain bottle necks, inventory storage, dependency on one large customer, predatory lending practices and investor/advisors who are looking for a fast exit not a sustainable business.

One of the clear and present dangers to robotics startups is lack of experience in the founding teams. One of the reasons that robotics is succeeding and growing is that many founders now have two, three or four hardware startups under their belts, whether it’s robotics or consumer products or manufacturing machinery.

Startup Failure Statistics

• The failure rate for new startups is currently 90%.
• 10% of new businesses don’t survive the first year.
• First-time startup founders have a success rate of 18%.
• The average cost of launching a startup is $3,000.
• Payroll is one of the highest costs a business incurs.
• 34% of small businesses that fail lack the proper product-market fit.
• 22% of startups that fail don’t have a sound marketing strategy.
• The average venture capital firm receives more than 1,000 proposals per year.
• Approximately 30% of startups with venture backing end up failing.
• Around 75% of all fintech startups crash within two decades.
• Startups in the technology industry have the highest failure rate in the United States.

Stats derived from Department of Labor Statistics.

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Nearly 30,000 new products are introduced each year, and 95% of them fail according to Clayton Christensen, a professor at Harvard Business School. And no business is immune to this harrowing statistic, which includes misfires from companies like Google and Amazon. The tech giant’s Google Glass project received millions in investment but quickly disappeared from view. And Amazon has quietly closed all of their checkout-less shops in the last few months.

These large organizations can afford the luxury of a multimillion-dollar misstep in their product development. Ultimately, any innovation roadmap consists of a long trail of trial and error. However, for startups or small businesses that offer just one unique product, this type of error can be lethal. If the product fails, so does the company. In fact, 92% of startups fold in their first three years for that same reason.

Some of the reasons for product failure

1. Late entry to market
2. Rapidly changing customer Preferences
3. Lack of Innovation
4. Bugs and Glitches
5. Overemphasizing on originality while ignoring improvements
6. Lack of constant iteration
7. Poor product promotion and positioning

Read the story of Dextrous Robotics and the rest of the Robots&Startups news at...

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