Looking to bring your hardware product to market? You’re facing hard odds: 97% of hardware startups fail (Startup Genome Report).
But you probably also see the opportunity.
The global IoT market will hit $1.6 trillion by 2025 (McKinsey).
This guide will help you navigate the complex journey from concept to market-ready product.
The surge in connected devices over the last decade has created unprecedented opportunities for hardware startups. From smart home technology to industrial IoT, entrepreneurs are transforming traditional industries through innovative hardware solutions.
Why Hardware Development Requires Different Strategies
Unlike software, hardware development requires significant upfront investment. You can’t “move fast and break things” when physical components and manufacturing are involved. Each iteration costs time and money, making early decisions critical to your success.
Three key factors shape today’s hardware landscape:
- Supply Chain Complexity: Component shortages and long lead times affect 67% of hardware startups (Gartner)
- Rising Customer Expectations: 82% of consumers expect smart products to work seamlessly from day one (Consumer Technology Association)
- Manufacturing Challenges: The average hardware startup underestimates production costs by 40% (Hardware Development Index)
Why Now is Different
Despite these challenges, we’re in a golden age for hardware development. New technologies and manufacturing approaches have changed the game:
“Today’s hardware startups can leverage advanced prototyping, cloud computing, and AI to move faster than ever before. The question isn’t whether you can build it – it’s whether you’re building the right thing, the right way.”
– Graham Nelson, Founder & CEO of NEDlabs
What we’ll cover:
- Essential Pre-Development Checklist for Hardware Startups
– Feasibility Assessment for Hardware Products
– Product & Market Validation: The Dream
– What’s Your Competitive Advantage?
- Building Your Hardware Development Foundation
– Building Your Hardware Development Dream Team
– How Do You Protect Your IP?
– What’s Your Development Budget?
- How to Choose the Right Hardware Development Partner
– Hardware Development: In-house vs. Outsourced Comparison
– Evaluating Partner Capabilities
– Setting Expectations
- Managing Your Hardware Development
– A Hardware Founder’s Role: Key Responsibilities
– Critical Decision Points
– Communication Best Practices
Essential Pre-Development Checklist for Hardware Startups
After seeing the challenges in today’s hardware landscape, you might be wondering if your idea is viable. Let’s break down the three critical questions you need to answer before diving into development.
1. Feasibility Assessment for Hardware Products
Isn’t this part of development? Yes and no.
Technical feasibility isn’t just about whether something can be built – it’s about whether it can be built within reasonable time and cost constraints. Having a strong understanding of your constraints before hiring a team goes a long way.
At NEDlabs, we evaluate technical feasibility across a few dimensions:
Core Technology: Core technology evaluation starts with a basic question: Can existing components meet your performance requirements? Or will truly novel R&D be required to investigate whether this is possible or not. This is what most people think of when “feasibility assessment” is mentioned.
Constraints: Physical limitations often create the biggest technical challenges. You must balance user experience expectations versus functional requirements (battery life, component sizes, etc.). It is often physical constraints that push a team to innovate in core technology.
Integration Complexity: Most hardware products today aren’t standalone devices – they’re sophisticated systems requiring multiple technologies to work together. Higher integration complexity means higher risk. Integration complexity can be taken care of with time and money – but these are very real constraints for most companies.
Download our interactive Product Requirements Document (PRD) guide to make smarter development decisions and avoid costly mistakes from day one.
2. Product & Market Validation: The Dream
Hardware development requires significant investment. It would be a no-brainer if you knew that people would buy it afterwards.
But how do you do that?
There are many articles and debates on validating your idea, but here are five elements that will help you frame your thinking on this subject.
- Target User Identification
- Clear user persona
- Specific use cases
- Key pain points
- Current solutions they use
- Price Sensitivity
- Maximum price users will pay
- Cost to manufacture
- Distribution costs
- Margin requirements
- Competition Analysis
- Direct competitors
- Indirect solutions
- Competitive advantages
- Market gaps
- Market Size Verification
- Total addressable market
- Serviceable market
- Target market share
- Growth potential
- Distribution Strategy
- Channel requirements
- Partner expectations
- Logistics needs
- Support infrastructure
There are a thousand and one articles on product and market validation, go read them and do the work. Your technical team, whether outsourced or in-house, will love you for doing this. Not only will it de-risk your investment, it will also provide key inputs for the product development process.
3. What’s Your Competitive Advantage?
VC firms will notoriously ask, why you? (meaning, what makes you the right person to lead this company)
Which is important. We know most companies are not built for VC money, but we ask a similar question, why will customers choose your product?
Be honest with yourself. A few that we see time and time again:
Technical Advantages
- Patent potential: Novel solutions that can be protected
- Performance metrics: Measurable improvements over existing solutions
- Feature integration: Unique combinations of capabilities
- Cost efficiency: Better price-performance ratio
Market Advantages
- Distribution strength: Access to target customers
- User experience: Better overall product experience
- Price positioning: Sustainable pricing strategy
- Brand positioning: Clear differentiation in the market
The best hardware products solve real problems in unique ways. But technical innovation alone is often not enough – advantages in the market go a long way.
Each of these elements requires consideration before diving into development. Next, we’ll explore how to build the foundation for successful development once you’re ready.
Building Your Hardware Development Foundation: Team, IP & Budget
Now that you’ve validated your concept’s technical feasibility and market potential, it’s time to assemble the resources you’ll need for successful development. This foundation determines how efficiently you can move from concept to market.
Foundations: Building Your Hardware Development Dream Team
Hardware development requires multiple disciplines working in harmony. Our experience has shown that team composition is often the difference between success and failure.
Most hardware products need expertise in multiple areas, technical and non-technical including:
- Industrial design and user experience
- Mechanical engineering
- Embedded systems and firmware development
- Software development
- Manufacture and quality control
- Sourcing and supply chain logistics
- Project management
- Regulatory compliance
Most startups can’t—and shouldn’t—try to hire all these roles internally. There are multiple ways to tackle product development, here is a hybrid approach we recommend:
- Start with Internal Expertise
Your strongest position is having at least one technical founder or early hire who is an expert in your product’s core technology. This person should:
- Drive product strategy and user experience
- Lead technical development in their area of expertise
- Manage development partners & supporting contractors
- Translate business goals into contractor deliverables
This can be the CEO, CTO, product team, etc.. – having subject matter expertise in-house goes a long way.
- Strategic Development Partners
For most startups, partnering with development firms makes a lot of sense for fast, temporary, skilled, equipped talent. When choosing development partners, look for:
- Experience in your product category with your style of product
- Quality of work done as seen in their portfolio projects
- Speed of execution and capacity / timeline to take on projects
- Cost of typical project to be in line with your budget
Between quality, speed, and cost – you’ll only ever get two. More on this in “Choose the Right Development Partner”
- Expert Advisors
Build relationships with industry veterans who can guide critical decisions. While you may not be able to hire them full-time, monthly or quarterly advisory sessions can:
- Validate technical approaches
- Identify potential pitfalls
- Guide strategic decisions
- Connect you with key resources
Schedule regular check-ins with advisors to review progress and tackle specific challenges. Even a few hours per month of expert guidance can prevent costly mistakes.
Get Expert Guidance on Your Hardware Project
Schedule a free 30-minute consultation to evaluate your product’s technical feasibility and development requirements.
Foundations: How Do You Protect Your IP?
Many founders rush to file patents without considering whether they’re truly necessary. Let’s examine when patents make sense and how to approach them strategically.
Should You Patent Your Innovation?
Patents make sense when:
- Your innovation offers a unique technical solution that can’t be easily replicated
- You plan to manufacture for more than 3-5 years (patents take time)
- You have the resources to defend your patent ($300K+ in legal fees)
- The patent could increase your company’s value for acquisition
- You need protection in key markets where you’ll manufacture or sell
Patents might not be worth pursuing if:
- Your advantage comes from speed to market or brand strength
- Your innovation will be outdated before the patent is granted
- You lack resources to enforce patent rights
- The innovation is easily designed around
We’re not patent experts, but our team has a couple and has been involved in patents here and there. Here are some basics you should know:
Patents 101: A Practical Guide
Before diving into patent strategy, understand that patents represent a trade: you get exclusive rights to your invention for a limited time in exchange for publicly disclosing how it works. This disclosure becomes public knowledge after the patent expires, usually 20 years from filing.
A patent strategy balances protection and practicality. Here’s how to approach it:
- Start Early
- File provisional patents before public disclosure: US and Canada have a 12-month (grace period) to file patents worldwide, but Europe and China have no such thing.
- Document all development work and innovations: Keep detailed lab notebooks, dated sketches, and records of testing.
- Choose Your Strategy
- Provisional patents: Buy 12 months of protection while developing or marketing. Think of it as a placeholder that costs less money and effort.
- The PCT (Patent Cooperation Treaty) provides 18-30 months of additional protection and needs to be filed within the 12 month provisional patent timeline. This covers 150+ member countries including Canada, US, UK, Australia, China, and Japan.
- Design patents: Protect unique visual elements. These are cheaper and faster to obtain than utility patents but only cover how something looks.
- Utility patents: Protect functional aspects. These are what most people think of as patents – they protect how something works.
- International patents: Secure rights only in countries where you file, cost considerably more, and require significant detail.
- Protect Your Rights During Development
- Use strong NDAs with all partners and employees: Have agreements signed before discussing innovations.
- Clear IP ownership terms in development agreements: Specify who owns what before work begins.
- Document who contributed to inventions: Track everyone involved in development. This matters for determining true inventors on patent applications.
- Keep source code and design files secure: Use version control and restricted access. Once information becomes public, you can’t patent it.
- Common Mistakes to Avoid
- Any sort of public disclosure of technical details before filing: General marketing materials or high level product descriptions likely won’t prevent patents.
- Insufficient documentation of the invention: Vague descriptions or missing technical details can make patents unenforceable.
- Not searching existing patents thoroughly: Spending time and money trying to patent something already protected or disclosed.
- Filing too broad or too narrow claims: Balance is key – too broad won’t be granted, too narrow won’t provide useful protection.
Patents are just one part of IP protection. Consider trade secrets (like Coca-Cola’s formula), trademarks (for your brand), and copyrights (for software) as part of your overall IP strategy.
Always consult a qualified patent attorney about your specific situation. This guide provides general insight but shouldn’t replace professional legal advice.
Foundations: What’s Your Development Budget?
One of the most common pitfalls in hardware development is underestimating costs. Through our experience with dozens of products, we’ve learned that successful budgeting means looking beyond obvious engineering expenses. You’ll typically need 20-30% of your budget for initial design and prototyping, 40-60% for refinement and integration, and 20-30% for production preparation and certification.
Direct development costs form your budget’s foundation, covering engineering time, prototyping expenses, testing equipment, and certification fees. However, it’s the hidden costs that often surprise founders – tool development, regulatory compliance, supply chain setup, and manufacturing preparation. Always reserve 15-25% of your budget for unexpected challenges.
For a comprehensive breakdown of hardware development costs and budgeting strategies, read our detailed guide: “A Founder’s Guide to Understanding Hardware Development Costs.” You’ll learn about hidden expenses, planning frameworks, and how to protect your development investment.
How to Choose the Right Development Partner
One of your most critical decisions is choosing what you’ll do in-house and what you will outsource. This choice impacts your timeline, budget, and likelihood of success.
Hardware Development: In-house vs. Outsourced Comparison
The decision between building internal capabilities and partnering with development firms isn’t always straightforward.
Building your own development team offers significant advantages. In-house development gives you complete control over the process, direct ownership of all decisions, team knowledge retention, and potentially faster iterations.
However, this path also comes with considerable challenges. You’ll face higher fixed costs, longer ramp-up time, the need to manage multiple disciplines, and greater risk in specialized areas.
As we discussed earlier, using a hybrid team model can give you a happy medium. In fact, 85% of successful hardware companies did just that (Engineering Management Review).
So how do you know who to work with?
Evaluating Partner Capabilities
When assessing potential development partners, we see founders making 1 common mistake: get the biggest company with the largest portfolio.
Technical expertise comes first yes, but looking beyond general capabilities is crucial. Before committing to a partnership, ask these essential questions:
- Have they built products similar to yours? Or solved similar challenges? (standard technical expertise)
- How do they handle design changes? (standard project management experience)
- Are the projects in their portfolio similar in size and scale to mine?
- This is important because a company that is used to working on larger projects will likely give a smaller project less time and resources. Conversely, if a company’s past projects are smaller, your project will take priority over others.
- What is their pricing structure?
- A fixed price model will shift risk to them, which works if they’ve done a project very similar, but incentivizes the team to get the job done quickly. A time and materials model will shift risk to you, the client, but allow the team to focus on doing a good job rather than just getting it out the door.
- What is their timeline?
- Can they start right away and how many people do they have to dedicate to your project?
The best development partner isn’t always the biggest or most experienced. Look for one that matches your needs and working style.
Perhaps most importantly, understand who will actually work on your project. Is it the leadership that you’ve heard about or a fresh new junior. Who will be your point of contact and how often will they be updating you?
At NEDlabs, we believe that senior engineering talent should be leading development and managing all decisions. Our client arrangements vary from taking on all development, to working closely with client team members on certain aspects of development.
Every development team is different. Find what’s right for you.
Setting Expectations
Clear expectations form the foundation of successful partnerships. While every project is unique, certain elements require documentation and agreement from both parties.
Start with project scope. This isn’t just about deliverables – it’s about creating a shared understanding of success. Discuss and agree on:
- Detailed deliverables and success criteria
- Frequency of updates and communication channels
- What to do in the case of changes
Finally, ensure robust IP protection. Your partner should have clear processes for:
- Handling confidential information
- Managing IP development
- Documenting innovations
Remember, the goal isn’t just to find a capable partner – it’s to find one who can integrate with your team and vision while bringing specialized expertise to the table.
KEY TAKEAWAYS
– Start with your core competency and partner for other expertise
– When choosing a development partner, look for proper fit based on your priorities
– Setting expectations at the start goes a long way for all parties
In the next section, we’ll explore how to effectively manage your development process once you’ve selected your partner.
Managing Your Hardware Development Team
With your development partner selected and expectations set, success now depends on effective project management. Your role as founder during development is crucial, even with experienced partners handling the technical work.
A Hardware Founder’s Role: Key Responsibilities
Many founders struggle to find the right level of involvement during development. Too much oversight can slow progress, while too little can lead to misalignment. Through our experience with companies like Otto and Tactalis, we’ve identified patterns that lead to successful founder involvement.
Understand your primary responsibilities. As founder, you’re uniquely positioned to make decisions that impact product-market fit. This includes feature prioritization, user experience choices, market positioning decisions, and cost-performance tradeoffs. These aren’t just business decisions – they shape the technical development process.
Share vision and knowledge. When working with development partners, establishing clear communication channels isn’t enough – you need to actively share market feedback, connect technical and business teams, and facilitate quick decisions when needed. These connections ensure technical development stays aligned with market needs. Sharing your vision and getting buy in from your partners also ensures full commitment from all your key partnerships.
Critical Decision Points
Every hardware development project has key moments that require founder attention. Understanding these decision points helps you plan your involvement for maximum impact.
Technical milestones form the backbone of your development timeline. These typically include architecture approval, prototype validation, design freeze decisions, and production readiness assessments. Each requires careful consideration of multiple factors.
The founder’s deep understanding of user needs and market dynamics help guide key decisions. Making a trade off such as focusing on off-the-shelf components to get to market faster requires market and company insights only a founder can have.
Communication Best Practices
Effective communication during development requires more than just regular meetings – it needs structure and purpose.
Regular updates can create transparency, but having intentional communication (both ways) for major updates ensures you build trust with your team, discuss future impact, and have full stakeholder buy in.
Remember, your role as founder isn’t to make every decision – it’s to ensure the right decisions are made at the right time by the right people. Focus your attention on strategic choices that impact product-market fit, while enabling your development team to solve technical challenges efficiently.
Summary
Hardware development requires strategic planning and careful execution. We explored the critical elements of successful product development: validating your concept before investing heavily, building the right team structure, protecting your IP effectively, and managing development with purpose.
The key to success lies in making informed decisions early and maintaining focus on real market needs. While 97% of hardware startups fail, you can beat these odds by understanding the landscape, planning strategically, and working with experienced partners who complement your strengths.
P.S. – Whenever you’re ready, here are 3 ways we can help you:
Dive Deeper with Our Cost Guide – If you found this guide helpful, you’ll want to read our next article: “Understanding Costs for Hardware Development.” You’ll learn how to budget effectively, spot hidden costs early, and optimize your development spending without compromising quality.
Get Our Free Planning Guide – Ready to start planning your hardware project? Our Hardware Development Planning Guide gives you the tools we use with our own clients. This practical resource includes project planning templates, requirements checklists, and timeline frameworks. It’s designed to help you ask the right questions and capture critical requirements before you invest in development.
Talk to Our Team – Sometimes the best way to move forward is to get another perspective. Schedule a 30-minute discovery call with our team to discuss your project. We’ll help you understand the technical requirements, identify potential challenges, and outline practical next steps.
