Back in 2010 Wired editor-in-chief Chris Anderson highlighted a major shift both in the ecosystem and in the manufacturing sector in his article “In the next industrial revolution, atoms are the new bits”. Six years later, joining the hardware revolution has only gotten easier.

The hardware revolution has given birth to a more hardware-friendly environment…

Tools, like 3D printers or CAD programs, that used to be only accessible and affordable by big companies, are now available to everyone. With such low-cost design and manufacturing tools, prototyping costs have almost been reduced to zero. The maker mindset has also spread all around the world: in just 10 years, the number of makerspaces has grown up to almost 1,400 active spaces, 14 times as many as in 2006. Even governments are getting involved. In the US, the White House has launched Mayors Maker Challenge in May 2014 to encourage the support of makers. This same year it also hosted the first White House Maker Faire.

In parallel, we’ve observed a rising number of hardware projects on crowdfunding platforms like Indiegogo or Kickstarter. Matt Witheiler, at the time General Partner at Flybridge Capital Partners, gathered some data for TechCrunch in 2015. A total of 128 hardware companies pre-sold nearly $70 million in products in Q1 2015, almost 35% of the total dollars hardware projects had raised since Indiegogo and Kickstarter first launched over five years before.

The idea itself of preordering a device has even spread enough among society to enable startups to get thousands of units preordered directly on their website. As a matter of fact, Lily Robotics obtained 60,000 pre-orders for a total amount of $34 million in 2015. With the simplification and the adoption of e-commerce, individuals are now more than ever familiar with the idea of buying something online without having ever seen the product on a store’s shelves. But whether you choose to take preorders or go for a crowdfunding campaign, this will be just the first step on a long journey.

Thankfully low-volume manufacturing has become more and more available and manufacturing is expanding globally. If building your own factory has become out of fashion (except for some companies like Tesla), it’s because manufacturers are now ready to produce a small batch of a thousand units in exchange of higher margins. In a few decades, outsourcing the production has become the new paradigm for every hardware startup, and with the opening and simplification of the supply chain, the time has come for a new industrial organizational model.

But even with such major steps in the hardware world, the whole ecosystem has been pretty slow to grow in favor of hardware startups. Compared to software, a hardware startup requires significantly more precision to scale and be successful. The whole ecosystem is still more favorable to software startups than it is for hardware startups. Software funding is indeed way more important than the hardware funding and that money has led to more resources being dedicated to the ecosystem. Unlike software, a hardware entrepreneur needs more than just incredible luck. Natural selection is a truth in this industry and you really need to have a perfect hand to win: you need to excel in marketing, branding, distribution, manufacturing, supply chain and logistics.

Scaling has remained the biggest challenge for hardware startups…

The experience to scale is maybe what has been lacking these last few years. We’ve seen amazing innovations come to life through the hardware revolution. Companies like Fitbit, Bluesmart and Flic have proven there is a demand for innovative ideas, but bringing an idea to reality is a totally different story. Projects like Coolest Cooler, Zano or Robot Dragonfly are what we can call scaling ‘failures’. And even when startups are able to ship their product, it’s often with important delays. Nevertheless, these examples mustn’t hide the fact that every week hundreds of startups launch their ideas on Indiegogo or Kickstarter, many of which are going on to raise significant money in presales and will be successful startups.

As the ecosystem matures, scaling is eventually getting easier…

But today, six years after Anderson’s Wired piece, the ecosystem has finally matured to a place where startups can actually find resources to scale.

Hardware can be capital intensive. Fortunately, investments in hardware and more especially in consumer electronics have gained momentum since 2007. Even if this bullish trend seems very paltry compared to investments in software investors are now more and more inclined to invest in hardware. Well known venture capital firms such as Andreessen Horowitz, Khosla Ventures, Spark Capital or First Round, count at least between ten and fifteen hardware startups in their current portfolio. Between 2010 and 2015 the number of deals in consumer electronics has grown from 39 to 268 and the total amount of dollars VC firms have poured into consumer electronics startups has exploded from $273M to $1,389M in five years.

If you want further proof of this trend just take a look at the famous Y Combinator. Most known for its software unicorns like Dropbox or Stripe, the incubator is getting more and more into hardware; it went from 17 hardware startups in 2014 to 31 in 2015. Is hardware suddenly cool? In his 2012 “Hardware Renaissance” blog post, Paul Graham shares his point of view: “It always was cool. Physical things are great. They just haven’t been as great a way to start a rapidly growing business as software. But that rule may not be permanent. It’s not even that old; it only dates from about 1990. Maybe the advantage of software will turn out to have been temporary. Hackers love to build hardware, and customers love to buy it. So if the ease of shipping hardware even approached the ease of shipping software, we’d see a lot more hardware startups.” The growing number of hardware startup programs is another trend that deserves to be highlighted: PCH Highway1 (US), Hardware.co (Germany), R/GA Accelerator (US), Buildit (Estonia), TechStars (US and Europe), Dragon Innovation (US), HAX (US), Lemnoslabs (US) Bolt (US), NEST VC / Infiniti (China) and of course Startupbootcamp (UK). In addition, the world’s leading manufacturers are finally willing to work with startups properly for scale. Foxconn has for example opened an incubator dedicated to hardware startups. The manufacturer is also more and more involved in startup investments and has already invested hundreds of millions of dollars across Asia.

Ecommerce through Shopify, Squarespace, Celery or others has finally caught on to allow startups to bypass traditional sales channels and go directly to consumers. Even retailers are now focused on finding a way to work with the rising stars of the hardware startups ecosystem: Amazon Launch Pad, Target’s Open House, and the Brookstone Launch initiative are just three examples.

Even if there are pitfalls all along the way, recent big exits have demonstrated that there’s actually a potential prosperous future for hardware startups. Hardware is indeed generating high return and there are figures to prove it:

Hardware Club, an active player of the hardware revolution…

But there’s still a lot of challenges for hardware startups. It’s why at Hardware Club we go even further by connecting hardware entrepreneurs together all around the world. We’re the first community-driven venture firm for hardware startups. We’re neither an accelerator or incubator: we’re a VC fund built on top of a private community and a platform for hardware startups. Our mission is to help our members scale globally by providing investment and support on manufacturing and distribution through our partnerships. We’ve already signed 100+ partnerships both with top manufacturers like Foxconn, Flex or Jabil, and top distributors like Best Buy, Amazon or Brookstone. We make finding the right partner easier and faster.

The starting point? Hardware entrepreneurs meet the same challenges, whether it concerns the sourcing of a manufacturer partner, the scaling of the production, the product launch on the mass market, the selection of strategic distribution partners… Being a hardware entrepreneur can be especially tough and challenging.

As Marc Andreessen famously said, “hardware is haaard, it’s called hardware for a reason ». So one could definitely sometimes feel lonely.

But with more than 170 startups from 27 countries in the club as of today, our members are never alone. They can ask each other for advice, connections and of course we encourage them to share with us and with the community exciting news like a new funding round, their next product launch or any cornerstone event. By pooling knowledge, experience, network and resources, our club members can learn and grow together. We strongly believe the whole is more than the sum of its parts.

To build this community worldwide, we select the most promising startups building innovative hardware technologies or products. We count for example Bluesmart, Hyperloop, Nima, Narrative, Nanoleaf, Misfit, Lima and Canary among our members. As a VC firm we invest in some of the club members. A startup needs to be a club member to receive funding, however we do not invest in every startup of the club. We’ve already invested in multiple startups, including Lima, Prynt, Reach Robotics and Insensi to name a few. Hardware Club is stage, geography and sector agnostic, with offices in San Francisco, Paris and Taipei. For those interested in joining the club you can apply here.

We’re thrilled to join Startupbootcamp IoT | Connected Devices as partner for the first European based Connected Devices, Consumer & Industrial IoT accelerator! This focused program will definitely foster the hardware revolution and through it we look forward to meeting the next hardware entrepreneurs.