Sense-checking the viability of a hardware or wearables startup
Someone somewhere is working on the one device you need to wear to quantify everything you do, authenticate you, change the way you interact with the world and give you what seem like superpowers.
From a technical point of view the creation of this watch, bracelet, armband or baseball cap is a foregone conclusion. Conventional wisdom says that there will be a consolidation to a small number of devices or ‘platform’ devices that do things most people want.
The prevailing model for determining whether people want a hardware product has been to use a compelling video as part of Kickstarter or pre-sales campaign to assess demand. These videos paint a picture of all the possible use-cases of a device, to impress upon a viewer what the product ‘could be’. For these companies, running a pre-sales campaign is a great way to get the cash needed to build product, and determine that there are some people who want it. Some of these campaigns also pass on execution-related risk to the customer, by collecting cash first, and shipping when the product is ready, if ever. The pre-sales campaign is used as a proxy for product market fit.
This is a weak approximation.
For some startups raising money using pre-sales, and following-on with massive rounds of venture funding, it’s easy to obscure the fact that most people don’t want your product or service.
It’s pretty straight-forward to sense check product market fit for wearables/hardware:
1. Look at the distribution of pre-sales for a given product — is the target consumer buying the product, or are sales going to developers who want to tinker? If the real customer doesn’t care about the product, it’s dead.
2. If the product is a platform and relies on developers to build software that is interesting to your end consumer — are these developers sticking around? If developers don’t care to build on the platform (or can’t build things customers care about), it’s dead.
The two schools of thought I’ve come across on the topic of product market fit with hardware are as follows:
1. So what? The soft-landings in wearables/hardware are amazing right now!
There have been some relatively recent large exits, where great teams have been snapped up. By and large, these acquisitions have happened to onboard world-class expertise in a specific domain, or as strategic investments that pre-empt competitors. Are these events truly more predictable, and repeatable than what you see with software companies?
2. So what? Take a long-view, these companies will figure it out eventually!
To be sure, this is a really exciting time in the history of wearables/hardware.
Some companies have managed to raise boat-loads of cash selling the ‘broad adoption’ vision of products that don’t really make sense. The plus-side is that this cash offers up is some optionality for switching/broadening product focus down the road.
This begs the question, are these companies really in the business of ‘lean R&D’? I actually like the idea of this — but worry that investors in this space are going to be shell-shocked by the losses they rack up vs. their investments that are closer to product market fit.
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I work on growth and product at Stylekick with a team that has a knack for building great consumer products.
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