Decades after Silicon Valley swung toward software, hardware is hot again.

Young companies churning out everything from cameras to clocks are launching with big backing from local venture capitalists. Among the start-ups, camera maker Lytro Inc. raised $36.7 million earlier this year, in a funding round led by venture firm Andreessen Horowitz. Mobile-payment company Square Inc., which builds a device that allows anyone to accept credit-card payments on a smartphone, raised...