Three Challenges the Hardware Industry Faces in 2016

2016 is the year many thought leaders in tech space are urging caution, expecting markets to cool drastically and urging startups to stay afloat by minimizing burn rate. Yet at the same time, the hardware industry is the fastest growing sector in the market, with investment up 30x since 2010.
At this important precipice, what does the future hold for hardware companies?
To better understand where the hardware industry opportunities are, what are perceived as the greatest challenges, and what it means to be a hardware founder today, we surveyed over 200 hardware companies and uncovered a lot of interesting information. Here are the highlights.

Hardware Companies are Working to Build Products Faster

In our report, we found on average most companies budget one to three months to build a functional prototype. Similarly, the majority of companies budget just three to six months to go from functional prototype to production.
If you’re not familiar with hardware development lifecycles, just know that this kind of schedule is incredibly fast (and ambitious) compared with what was possible just five years ago. Hardware startups are increasingly seeking to become leaner in order to get to market faster and maximize capital investment.
But while companies are working hard to be lean and build faster, the outcomes don’t always match expectations. Data shows that about four out of five VC-backed crowdfunding projects were late in 2014, and of the late projects (total cohort of 91 companies), 30 percent still hadn’t shipped in Q1 2015.
Hardware companies setting ambitious schedules to get to market faster, and that’s fantastic and important, but there are clearly still obstacles in the way preventing companies from building as fast as they’d like to.
What are these obstacles and how can we overcome them? Well, there are many, and I won’t mention them all in this post, but one of the major ones we’re focusing on at Fictiv is prototyping speed. Iterating on a physical product is inherently slower than iterating on a digital product, but if we can help companies to iterate daily vs weekly, that’s a huge step forward.

Hardware Companies Seek Access to Better Tools

One of the key factors that has contributed to massive growth in the hardware sector is an increase in the number of tools available to hardware companies for prototyping and development.
We asked companies which tools they leverage in the development of their products and saw that 91% of companies use 3D printing, 58% use Breadboards, 51% use Arduino, and much more. (Honorable mention goes out to the tried-and-true duct tape, used by 46% of survey takers!)
On the design side of things, there are a large variety of CAD programs available, but according to our results, Solidworks still reigns supreme, used by 70% of our survey takers.
While there’s been a big uptick in the number of tools available, we need to continue to teach a wider audience how to use these tools most effectively. Arduino and Adafruit, for example, are doing a fantastic job educating people on the electronics side, Dragon Innovation is teaching young companies how to work with manufacturers in China, and on our blog we’re educating engineers and designs on how to prototype on the mechanical side of things.
However, access to tools is not enough to make a successful hardware company—we need to document and decodify the knowledge around how to best use these tools and manufacture products at scale.

Raising Capital is Top of Mind

We polled companies on the greatest challenge in bringing a successful product to market and 28% said funding & resources was #1.
And they’re not alone—this feeling is being echoed by thought leaders across the venture capital space. For example, Mark Suster, partner at Upfront Ventures, cautions: “I suspect 2016 will be the year that the more heated private tech markets cool.” Similarly, Fred Wilson, co-founder of Union Square Ventures, recently projected that “Markdown Mania will hit the venture capital sector as VC firms follow Fidelity’s lead and start aggressively taking down the valuations in their portfolios.”
In response to VC’s urging caution this year, minimizing burn rate and staying lean is the mantra for hardware startups in 2016.
The good news is that hardware is still the fastest growing sector in the industry and investment has been increasing at astounding rates: Investment in hardware is up 30x since 2010 and venture capital dollars in IoT have gone from $1.8 billion in 2013 to $2.9 billion in 2014 and $3.44 billion in 2015.
To stay lean, hardware companies should consider burn rate and optimize for speed in the prototyping stage of development. Often we see cost-conscious startups skimp on up-front costs rather than considering the cost of wasted time, which ultimately comes down to burn rate (people are your biggest expense). So every time you order a 3D printed part, for example, the true cost of that part is really (part cost + (lead time x daily burn rate)).

Main Takeaways

The evidence from our State of Hardware Report points toward incredible potential for the hardware industry. More and more companies are building innovative products, we have better tools and technologies for prototyping, and the community is strong and passionate about open-source knowledge.
But we still have a ways to go before hardware development can truly to accessible to everyone. We hope this snapshot of information points the community in the right direction to understand how to make hardware universally accessible so we can continue to build better tools and resources for truly democratized hardware development.

Rivals launch “Don’t Comcast the Internet” to oppose TWC merger

In the current debate over how the U.S. should oversee the internet, the worst case scenario for many is the web reinvented as cable TV: a service where subscribers pay a lot of money for a limited number of channels, and in which the distributor chooses which shows can even appear on the platform.

Rivals of the telco giant [company]Comcast[/company] fear this is exactly what the company is trying cook up through acquiring its next largest competitor, [company]Time Warner Cable[/company]. The proposed merger is already unpopular with consumer groups, and now industry opponents are going into high gear to try a stop it.

On Monday, a consortium of smaller phone and broadband companies launched a campaign called “Don’t Comcast The Internet” to draw attention to a parade of potential horribles that could arise if regulators allow the merger.

At an event in Washington to kick off the campaign, the group presented antitrust authorities who predicted that a combined Comcast-TWC would stifle would-be competitors. One way it could allegedly do so is by using its market power to pressure content partners to keep their content — which is the lifeblood of both TV and broadband — away from new entrants.

The group also warned of danger to another part of the internet, predicting that younger internet and content companies would struggle to obtain permission from Comcast-TWC to appear before subscribers in the first place.

Nick Grossman of venture capital firm Union Square Ventures said he worried that start-ups could find themselves asking “Will Comcast greenlight it?” as a pre-condition to launching their business on the internet.

Others worried that the Comcast would exploit its set-top box to control the user experience and business ecosystem, much as Microsoft exploited its operating system monopoly in the 1990s.

It’s too soon of course to say if all — or any — of these dire predictions might come to pass. The FCC and the Justice Department still appear to be months away from finishing a review of the merger, a process that Comcast VP David Cohen had earlier predicted would be finished by the end of 2014.

In recent months, however, Comcast critics appear to have gained momentum as approval for the merger, which once seemed a near-sure thing, has come under growing doubt.

Comcast, meanwhile, appeared unfazed by the appearance of the coalition, offering the following statement:

“There’s no real news here — just another group of existing opponents making the same arguments they have already made at the FCC for months, many of which weren’t found to be credible in our past transaction reviews, and all of which we’ve refuted directly with evidence in the FCC record.  The real facts remain the same:  consumers don’t lose choice in the broadband or video markets.  Consumers will see real benefits in faster broadband speeds and better video products, and a host of other benefits.  And there are no transaction-specific harms to this merger.”

The “Don’t Comcast the Internet” crowd consists of industry umbrella groups Comptel, ITTA (The Independent Telephone & Telecommunications Alliance) and NTCA–The Rural Broadband Association. It’s not the first anti-Comcast posse to spring up of late: content providers like Netflix and Dish launched an initiative late last year called “Stop Mega Comcast” to point out the alleged downsides of the deal.

This story was updated on Tuesday at 12:30pm ET to include Comcast’s statement.

Data Darwinism: reactions & reflections

My post, “Uber, Data Darwinism and the future of work” sparked a conversation. Here is a sampling of the reaction and reflection from the blog world.

Exclusive: Wattpad makes it easier for authors to go mobile

Community-writing site Wattpad says over 70% of time spent on the service comes from users on tablets or smartphones. One of its most requested features is the ability to write and edit stories from mobile devices. So the company is rolling out “Create” functionality for Android.