Don't Build Hardware Startups Used to Be Standard Advice

Don't build hardware startups.

Why play on "hard mode"? Investors won't fund them.

...until now?

For many years, startups (and the VCs that fund them) have focused on software - and with good reason! SaaS as a business model really was a revolution. High margins, repeatable playbooks, what's not to like?

But there was a nagging suspicion that perhaps some VC funding would be better spent on companies building real-world products.

In the last couple years, it seems as though investors have increasingly warmed to that view.

We took a look at the share of capital invested into startups on Carta year over year, split by sector. I grouped 4 of these sectors together under the assumption that they are building real world products: Biotech, Hardware, Energy, and Medical Devices.

(Obviously there are other sectors that touch the real world as well, but this keeps things clear).

In 2019, these four sectors took a 16.7% share of all priced round capital invested into Carta startups.

𝗙𝗮𝘀𝘁 𝗳𝗼𝗿𝘄𝗮𝗿𝗱 𝘁𝗼 𝟮𝟬𝟮𝟯, 𝘁𝗵𝗼𝘀𝗲 𝘀𝗮𝗺𝗲 𝗶𝗻𝗱𝘂𝘀𝘁𝗿𝗶𝗲𝘀 𝗷𝘂𝗺𝗽𝗲𝗱 𝘂𝗽 𝘁𝗼 𝗮 𝟯𝟰.𝟰% 𝘀𝗵𝗮𝗿𝗲. 𝗔𝗻𝗱 𝟮𝟬𝟮𝟰 𝗵𝗮𝘀 𝘀𝘁𝗮𝗿𝘁𝗲𝗱 𝗼𝗳𝗳 𝘄𝗶𝘁𝗵 𝗮𝗻 𝗲𝘃𝗲𝗻 𝗹𝗮𝗿𝗴𝗲𝗿 𝗶𝗻𝗰𝗿𝗲𝗮𝘀𝗲.

Caveat - yes, this is happening against a backdrop of declining investment into startups overall. So perhaps these "atoms" industries are merely holding up better than their software peers rather than actively taking in a greater absolute dollar figure.

Hey, gotta start somewhere.

And no shade to our software friends - SaaS and assorted satellite sectors aren't going anywhere. But I think it's pretty awesome to see founders and investors become more and more interested in playing on hard mode 🙏

#cartadata #founders #startups #fundraising #biotech #hardware