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"hardware startups that have to raise a lot of money before a Series A are... considerably riskier, no?" Why riskier? They have more of a moat don't they? The
by lkrubner 2y ago
"hardware startups that have to raise a lot of money before a Series A are... considerably riskier, no?"
Why riskier? They have more of a moat don't they? The large capitalization needed suggests they will face less competition. It's more difficult for competitors to gather the necessary capital to compete against them?
What I've written here was the conventional wisdom for most of 200 years. Much of the Industrial Revolution played out when merely concentrating together capital was seen as an engine of growth. Rockefeller did not need to sell innovative gasoline, he only needed to use cash flow to buy up monopoly positions, one small region at a time, until he had the cash flow to buy up monopoly positions nationwide. Economies-of-scale meant that merely concentrating together capital was a path to greater profitability.
The last 25 years were an aberration, during which time big companies could be built with small initial investments. But over the course of centuries, the opposite was more common.
- nateglims 2y agoIs the moat that good for HW? The more commodified your product is, the more you risk losing to undifferentiated foreign competitors who have lower input costs.
- bigiain 2y agoAnd hardware marches on while you are trying to get your widget manufactured and shipped. I was at a hardware startup in 2013/14. We had our own board design that was very similar to the RaspberryPi + Arduino that we'd prototyped with (we ended up using a iMX233 and an AT Mega 328). While we were debugging a manufacturing fault (out of spec led controllers), Expressif released the SDK for their at the time practically unknown ESP8862 - which meant 90% of our functionality could now be done with a BOM of around $15 instead of the $90 or so ours was costing us. Our "moat" had been concreted over while we were pulling our hair out trying to ship in time for xmas. (And the business died in arguments, recriminations, fingerpointing, and a lack of ability to find investment to pay for a 2nd production run. And I needed up with another piece of paper saying I had a percentage or two of ownership in something now worth zero dollars...)
- nateglims 2y agoI was doing firmware in IoT/M2M for an engineering services company back then and it was the tail end of "slap a radio on [common product]" projects for that company. I saw a few projects end with the arguments and fingerpointing with inevitable laser focus on what the SOW actually said and it always sucked to end that way.
- johnchristopher 2y ago> But over the course of centuries, the opposite was more common. I believe capital investor like parents invest in the shorter term.