I second this. I've worked for several early stage HW start-ups (ASIC development). VC backed ones ended up in a weird state of not being able to move from proof of concept to production because at that point the VCs were out of patience and wanted returns for their money. Having spent 10s if millions and now, 2-3 years later, requiring even more didn't align with what they were used to. This ended badly for these companies, all with great potential. Lucky ones could get acquired for a meaningful amount.

Bootstrapped companies were much better but they lacked the capital to develop their own products, so they were often reliant on one big customer. Growth was slow but more organic.

> VCs were out of patience and wanted returns for their money. Having spent 10s if millions and now, 2-3 years later, requiring even more didn't align with what they were used to.

Those numbers seem quaint now compared to OpenAI's "can we borrow $1B, actually $10B, hang on we need $50B, sorry we meant $500B, also we might need $7T" investment death spiral. Maybe when this is over VCs will be glad for how cheap and low-risk hardware development is, relatively speaking.

Yeah but HW isn't sexy if it's not for AI or quantum computing. I hope their behaviour changes.

I think it's a good thing. I've personally never been a huge fan of the culture that developed around VC (which sounds a little funny coming from someone who's been on Hackernews for ten years I guess) so it means there's a nice little niche for people who want to go a little slower.

Put on some ambient music, grab a trackball, do some CAD, don't think about equity.

But hardware is super capital intensive, right? So the right kind of investor could add significant value if they were aligned.

That's often potential customers. It's common to have other HW companies invest in HW start ups. Unfortunately there are not many good VCs for HW development. Even the ones marketing themselves as much don't like the meager returns in 5 to 10 years.

Might be a ridiculous question (I'm a software guy,) but is it at all possible to go the other way and increase the velocity of shipping and iterating on hardware to make it fit into the standard VC timelines?

I guess the problem is that you can't just ship updates over the Internet unlike software/apps, hence recalls for physical products.

Even before that, your customers don't buy anything with a bug. It's a whole different business model.

Very valid question. The whole industry is trying to do it, mainly with the hope of increasing profit margins to SW levels. But there are fundamental issues that is in the way (this is valid for ASIC design):

- We only use models to simulate the chip, and this is at best partial. Verification coverage if the code is one thing. There are thousands of effects from power supply network to thermals, reliability (device aging, electromigration etc) and a bunch of analog stuff which has weird failure modes which is almost impossible to fully cover before shipping it. So, we never actually know what would fail before tapeout. - Tapeour cost is immense. A full mask cost of an advanced node is easily $10 Million or more. You can always go to an MPW, but then they are rare for advanced nodes (1-2 times per year), putting an immense pressure on schedules. - Chip production takes time. For old nodes ~3 months, advanced nodes it's getting close to ~5 months. - Package design, test PCB design, their production takes a lot of time and money too. Typically package costs as much as the silicon to produce if the design is heavily IO limited and uses and advanced packaging solution. - Lab test preperation and test itself takes time. Typically you would need months of test to get a meaningful picture of the issues. You woul need to go through temperature and voltage cycles, on/off cycles etc. This of course depends on the end application. Automotive and data centers are quite demanding. - There is a lot of competition for pretty nuch the same product and there is a lot of vender lock-in as the customers don't want to redesign their system ever.

So at the end, if you are designing a complex ASIC, you will spend a lot of money and time per tapeout cycle. If you have a big issue, your customer will go to the next guy. You lost them for forever (or for this product cycle of 4-5 years, if you are lucky but that's death sentence for a start-up). Now you are tens of millions in negative without your main customer. Again, if you are lucky you can either find another customer or repurpose your design. This is increasingly difficult as complex chips often aim a narrow market. This makes everyone very risk averse, including your customers.

For less complex chips in old process technology nodes things can be sped up, and is already being sped up, by a lot of IP reuse or buying ready silicon proven IPs. The problem there is, the time to market isn't the determining factor anymore as anyone can make a functional chip relatively quickly, but what matters is who can do it cheapest. There's a reason why most audio codecs and 1Gbit ethernet PHYs in PCs are Realtek. This type of products aren't attractive for start-ups.

It's often a happy middle ground of these with a niche application which resonates well with the experience and the talent of the engineering team makes a good beginnings of a HW start-up. Even with the best team, you need minimum 2 years to show something though.

> But hardware is super capital intensive, right?

Depends on what hardware, who is developing it, and for who. Proof of concept is almost always cheap enough to make. Beauty of HW is that you get PMF straight away - even if you have the worst completely broken product, but it it brings value to someone, they will pay for it. From there you can bootstrap, take on credit etc. Capital intense part can wait - refinement, certifications, patents, packaging, documentation, mass production etc. This is of course all under assumption that the core team knows how to build everything, if you're outsourcing in the prototype phase then you're probably toast anyway.

> So the right kind of investor could add significant value if they were aligned.

I always perceived value of investors to be everything but the money. If you need just the money then get a loan.

True in theory.

Not in practice.

> the right kind of investor could add significant value if they were aligned

Those investors rarely brand themselves as VCs. To their portfolio companies or LPs.