Why hardware startups stall between prototype and production

Many hardware businesses reach a working prototype and then stop. Here are the most common reasons, and what investors can do about it.

A working prototype is a real achievement. It’s proof of concept, something to show investors and customers, and often the moment a business feels it’s “nearly there”. But for many hardware companies, the gap between prototype and production turns out to be wider than anyone expected.

These are the reasons we see most often.

The prototype was built to prove a concept, not to be manufactured. Prototypes are often made with methods, materials and levels of hand finishing that don’t scale. Turning one into a producible product may mean significant redesign.

Engineering and DFM come too late. When manufacturing considerations are left until after the design is “done”, changes are expensive and demoralising.

Underestimated costs. Tooling, certification, minimum order quantities and working capital are commonly under-budgeted, and the business runs short of funds before production starts.

No manufacturing experience in the team. Founders are frequently strong on the product idea and the market, but haven’t run a production programme before. They don’t know what they don’t know.

Poor supplier choices. A manufacturer selected on price alone, or on the strength of a slick sales pitch, may not have the capability or capacity the product needs.

Quality issues discovered late. Without a clear quality plan, problems surface in the first production batch, when they are most costly.

Loss of momentum. Each of these problems eats time. And in hardware, time is cash.

For investors, the important thing is that these are largely predictable problems. They can be anticipated and planned for. Questions worth asking of a hardware portfolio company include: Has the design been reviewed for manufacture? Have suppliers been audited? Is there a realistic budget for tooling and first production? Who in the team has done this before?

Where the answer is “no one”, the fix is not necessarily a new hire. It can be access to experienced external capability, brought in at the right time.

If you have portfolio companies at this stage, we’d be pleased to talk about how we can support them.