Sam Altman: Why Hardware Could Yield the Next $10B Startups • Hacker News Board

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#21

Post by nsnick » Wed, Mar 25, 2015, 5:01 PM UTC

striking wrote: post #5

nsnick wrote: post #3

Earlier quoted context omitted.

All this means is that they are going to need a lot more investment than a software company.

It's not just cost, it's also cycle time (as mentioned in the article.) To "do" hardware requires a company to be fully formed, with engineers of all kinds, before they can even really begin. They can get a minimal MVP using a Teensy board or something from mbed, but beyond that, for anything of any serious complexity, they have to build out a company.

Given enough investment you can hire the engineers you need. Maybe I should have said that all it requires is more money earlier.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#22

Post by larrys » Wed, Mar 25, 2015, 5:04 PM UTC

rebootthesystem wrote: post #14

leoedin wrote: post #8

The reason that a larger number of hardware startups have recently appeared is quite simple - these are mostly actually software companies. Modern hardware that a startup might produce - IoT stuff, small computers etc - are essentially bare-minimum hardware wrappers around black-box chips. The complexity of developing hardware is driven by the number of discrete components used. Every additional resistor is a resisto…

> The complexity of developing hardware is driven by the number of discrete components used Sorry, that's not even close to being true. Interesting how on HN "hardware" seems to mean "a board with chips". You know, like a Raspberri Pi. That is one type of hardware but not, I dare say, where the $10B (and maybe even $10M) startups would exist. We are developing two hardware products right now. One is an innovative fir…

Also there are little if any "do overs" with hardware. If you manufacture it and you make a mistake and it can't be fixed with software then you have a big problem to deal with.

You will almost certainly find the mentality of people making industrial equipment (or airplanes) different than people who write software where it's just about accepted practice at this point to push products into the channel and fix them later. In a sense your customers become your beta users.

Wasn't always like this (with software). I am getting software updates from Apple it seems every few days. Back in the days of floppy disks and prior to the Internet they had to spend more Q&A time because it would be rather expensive to fix problems with buggy code.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#23

Post by jacquesm » Wed, Mar 25, 2015, 5:08 PM UTC

rebootthesystem wrote: post #14

leoedin wrote: post #8

The reason that a larger number of hardware startups have recently appeared is quite simple - these are mostly actually software companies. Modern hardware that a startup might produce - IoT stuff, small computers etc - are essentially bare-minimum hardware wrappers around black-box chips. The complexity of developing hardware is driven by the number of discrete components used. Every additional resistor is a resisto…

> The complexity of developing hardware is driven by the number of discrete components used Sorry, that's not even close to being true. Interesting how on HN "hardware" seems to mean "a board with chips". You know, like a Raspberri Pi. That is one type of hardware but not, I dare say, where the $10B (and maybe even $10M) startups would exist. We are developing two hardware products right now. One is an innovative fir…

> One is an innovative fire fighting system and the other a CNC machine.

What kind of company developes both fire fighting machines and CNC machines?

Are you employed by a prototyping company or something like that?

The only other set-up I can think of where such a combination could occur is something like Mitsubishi, very interesting!

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#24

Post by jacquesm » Wed, Mar 25, 2015, 5:11 PM UTC

toong wrote: post #17

koops wrote: post #4

$10B? That's awfully large, and closing the door on a lot of ideas. What if you just want to solve an important problem by selling a product profitably and don't want to grow to enormous size? I guess you look somewhere other than Y Combinator to get started.

If you're outlook is a $10M or even $100M valuation, VCs and even angels would not interested.

Plenty of funds would be happy with exits in the $100M range. The billion dollar exits or IPOs are the exception, not the rule and a $50M exit is a damn sight better than a failure. Of course it all depends on when they joined that particular party, the later in the game the higher the exit would have to be to make those investors happy.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#25

Post by jacquesm » Wed, Mar 25, 2015, 5:13 PM UTC

striking wrote: post #2

I am a broken record. So many brilliant people (RMS comes to mind) have fallen into the trap of thinking that hardware dev for general computing (not including rocketry and other such hardware) is so inexpensive that it's going to be super easy. But that's not the case [1] because hardware is a totally different beast than software. It won't be any more open, or any less expensive; at least, not for a long time. [1]:…

FPGAs have opened up a lot of options that previously would have been absolutely un-imaginable without access to significant capital. You can now prototype fairly complex designs for relatively little money.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#26

Post by jkestner » Wed, Mar 25, 2015, 5:17 PM UTC

rebootthesystem wrote: post #14

leoedin wrote: post #8

The reason that a larger number of hardware startups have recently appeared is quite simple - these are mostly actually software companies. Modern hardware that a startup might produce - IoT stuff, small computers etc - are essentially bare-minimum hardware wrappers around black-box chips. The complexity of developing hardware is driven by the number of discrete components used. Every additional resistor is a resisto…

> The complexity of developing hardware is driven by the number of discrete components used Sorry, that's not even close to being true. Interesting how on HN "hardware" seems to mean "a board with chips". You know, like a Raspberri Pi. That is one type of hardware but not, I dare say, where the $10B (and maybe even $10M) startups would exist. We are developing two hardware products right now. One is an innovative fir…

Packaging is best thought of as another hardware product itself. Form and function have to be design-gineered, and materials and parts and assembly have to be corralled into a schedule and budget.

The idea that software is eating hardware, while true on some level for some class of products, is also what leads to lots of startups with solid software backgrounds offering a beautifully designed product that suffers from cost overruns, delays, mechanical and firmware bugs (you think having to test an app across a couple of phones is a pain, try field testing your smart lock). "Move fast and break things" is very different from the mindset needed to build hardware.

Be mindful of the perspective of the authors when reading these tragedies: https://medium.com/@stevekreyos/the-rise-and-fall-of-kreyos-... https://medium.com/@Haje/how-a-half-million-dollar-kickstart...

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#27

Post by jkestner » Wed, Mar 25, 2015, 5:20 PM UTC

rboyd wrote: post #13

striking wrote: post #2

I am a broken record. So many brilliant people (RMS comes to mind) have fallen into the trap of thinking that hardware dev for general computing (not including rocketry and other such hardware) is so inexpensive that it's going to be super easy. But that's not the case [1] because hardware is a totally different beast than software. It won't be any more open, or any less expensive; at least, not for a long time. [1]:…

It is becoming more open and less expensive. The point is that the tools for prototyping, simulating, assembly, and manufacturing are becoming much cheaper. Along with the fact that people are sharing more. I agree that there is no substitute for RTFM. That will always be required. Although, it's layers of abstraction in hardware too. Just like software libraries and frameworks: if someone has published a circuit tha…

Yes, manufacturing is getting cheap enough that the average person can get themselves in a mess of trouble now. It's still got a ways to go before it's cheap enough that they can get themselves out of that mess.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#28

Post by tlb » Wed, Mar 25, 2015, 5:20 PM UTC

philippnagel wrote: post #6

Is calculated valuation (not market cap!) the only metric relevant to a VC when talking about the size of a company? What about MRR, YRR, profits, number of employees, revenue/profit per employee? The only ones profiting from high valuations are VCs' themselves. Therefor one should be really skeptical when reading such articles.

Valuation is people's best estimate of discounted future profits. It's true that the discount rate varies with macroeconomic changes, but rarely by as much as a factor of 2 over the last 20 years.

When trying to express the long-term potential of a business, a factor of 2 is noise. You're lucky if you can get the number of digits right.

MRR/YRR measures the business today, but the long-term prospects are more interesting.

Number of employees or revenue/profit per employee don't measure business potential. Some huge businesses (Wal*mart) have low revenue/employee. Some small businesses (specialty consulting) have high revenue/employee.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#29

Post by jkestner » Wed, Mar 25, 2015, 5:26 PM UTC

larrys wrote: post #22

rebootthesystem wrote: post #14

Earlier quoted context omitted.

> The complexity of developing hardware is driven by the number of discrete components used Sorry, that's not even close to being true. Interesting how on HN "hardware" seems to mean "a board with chips". You know, like a Raspberri Pi. That is one type of hardware but not, I dare say, where the $10B (and maybe even $10M) startups would exist. We are developing two hardware products right now. One is an innovative fir…

Also there are little if any "do overs" with hardware. If you manufacture it and you make a mistake and it can't be fixed with software then you have a big problem to deal with. You will almost certainly find the mentality of people making industrial equipment (or airplanes) different than people who write software where it's just about accepted practice at this point to push products into the channel and fix them la…

At the least, there are a bunch of strategies that you gotta learn to mitigate the cost of do-overs. It's planning for all the things that can go wrong. Trying to decide whether that logo and your heartfelt "Designed in California" should be embossed or debossed on your case? Learn what "tool-safe" means, and when the moldmaker screws up your font, you'll have a cheap fix instead of scrapping your $10K mold.

Re: Sam Altman: Why Hardware Could Yield the Next $10B Startups

#30

Post by TeMPOraL » Wed, Mar 25, 2015, 5:30 PM UTC

leoedin wrote: post #8

The reason that a larger number of hardware startups have recently appeared is quite simple - these are mostly actually software companies. Modern hardware that a startup might produce - IoT stuff, small computers etc - are essentially bare-minimum hardware wrappers around black-box chips. The complexity of developing hardware is driven by the number of discrete components used. Every additional resistor is a resisto…

Moreover, if you look closely at many so-called "hardware companies" (especially IoT ones), you can see that they actually stick a SoC into a nice packaging and build an app and a cloud platform for that, even when it makes no sense whatsoever. Why?

Because that's how they get the money. On the cloud it's easier to keep monetizing your customers, and more importantly, you can literally just point out that you have "A platform! That grows!" and get investor money. They all are software companies - not only because it's easier than hardware, but also because it's easier to get funding.

Some of the companies you'd thought of as hardware ones actually admit it. I recall hearing Estimote guys repeatedly telling that they are not a hardware company - they are a software one, that just happens to make trendy beacons.