Venture capitalists hate investing in hardware startups for a myriad of reasons. Design and iteration are more difficult. Margins are low. Manufacturing issues are unpredictable. Inventory is expensive to hold and manage. Shipping is costly and cumbersome.
But this paradigm is shifting and venture should think twice before dismissing hardware companies out of hand.
These hardware trends have already anointed a pack of notable hardware successes. Nest, a personalized wi-fi controlled thermostat is now shipping 50,000 thermostats a month. Pebble, which originally turned to Kickstarter because venture firms weren’t interested, just raised $15M in venture funding and plans to make 15,000 watches a week. FitBit raised additional capital at a $300M-plus valuation. These are merely the first of many successes to come. Early-stage VCs would be remiss to let the next ones pass them by.
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