Why Starting a Hardware Startup is not easy?

Gone are the times when people were really well-to-do by just having a job. In this age of inflation and financial distress, surviving on a mere job with a maintained lifestyle has not remained possible anymore. It has become necessary to have multiple income streams in order to enjoy life properly. One of the best ways to earn on the side is to start a startup and once it starts generating enough money to support you, you can even leave your job and take it to the next level.

Many people think of starting a hardware startup but it may not be a very good idea. There are a number of reasons which make it difficult for a new starter especially the one with limited monetary resources and man power.

1. There are Big Names already

When you think of the hardware market, there are a number of established names already in the market. The customer of these products is always brand conscious. Just imagine for a second you will have to compete with the names like Apple, Dell, Hewlett Packard and Sony. All these companies and many more are working in the field and the customer knows their names almost by birth and establishing a new name from the very scratch and then taking it to compete with these monsters of the market is not easy at all. So it may not be easy to start a hardware startup and you may look to something else instead.

2. Starting costs are too much

When going to start a hardware startup, you are talking about investment in the terms of millions of dollars or even more. Just think about it, you will have to set up a complete setup to manufacture the products, store, pack and dispatch them. The setup is nothing less than setting up a complete factory and production unit. If you are planning to start a passive side business, this may not be a good idea to invest in the hardware niche.

3. Proper professionals are highly paid

Manufacturing the hardware components is not a layman’s job. You will have to hire the professionals ranging from electronics engineers to trained hardware craftsmen. None of these professionals will be easy to hire. The properly trained and expert people of the field are among some of the highest paid people in the world and you will have to pay them accordingly to hire their services. This is one more hurdle in starting the hardware startup.

4. Marketing needed is colossal

It is true that any business succeeds by the virtue of great and properly strategized marketing but as the competition in the field increases, so does the need of advertisement and marketing. In the field of hardware, you are going to compete with the brands known to the world for a very long time so you will need to invest quite an amount on the proper marketing and advertisement. This will only increase your investment not giving you any grantees of success.  

5. It is a full time job

Starting a hardware setup is the least passive source of income you may think of. It needs your full attention and time. If you are already having a strict 9 to 5 job, you may not be able to cope with the needs of this new startup and the lack of your attention will land the business in failure. Starting a hardware startup may not be the thing for people looking for a passive source of income with minimal resources and an already tight daily schedule. 

6. Results are not instantaneous

Another drawback of this sort of a startup is that you will not get an instantaneous return for your investment. Most of the starters are looking for immediate results and this on the other hand is a long term investment. If you are already managing the investment for this project from a loan or something and are planning to get instant returns from it, you might not be correct. You may need to start something else instead. This sort of startup may take even years to start generating enough capital and surviving through all that time while still investing from your pocket is not easy.

7. It needs innovation

The hardware market is already saturated. People are getting exactly what they want out there in the market and you may need to introduce something new in order to be successful. The market is already saturated with all the stuff the customers are looking for. Unless you have a really amazing idea, it may not be easy for you to survive in the business.

8. Investors are not much interested

In most of the cases, the startup masterminds like you only have the idea and look for investors to bring the idea to reality. In the case of hardware startups, the investors may not be interested in you very much. Investors are looking for promising investments where the returns are urgent. As we have already established that in case of hardware startup the returns are not urgent, investors may not find it a good idea to invest in your startup and as a result you will have to resort to a bank loan which itself is a bad idea and adds complexity and financial tension to the whole project making it even more difficult to succeed.

9. Profit Margin is not too much

You might be thinking that Apple makes more than 150% clean profit on an iPhone. You are right but you will not be able to make that sort of profits on your own products. The people like Apple and hp are well settled in the market they know how to keep the costs low and the profits high but you cannot do that mainly because you are not an established brand. Having very low profit margin after investing a large sum on the startup is one of the other things making a hardware startup difficult.

Until Next Time
Alto Team