Technology

The road to recurring revenue for hardware startups

If you look among the most successful startups today, you will find a lot of evidence that Hardware-enabled service (HaaS) model works: Peloton, particle, latch and iglohome all depend on membership with product sales. Even tech giants like Apple are increasingly reinforcing themselves as service companies.

Nevertheless, if you are currently dependent on device sales, the prospect of changing your entire business model may seem daunting.

On Minut, We are building smart home monitors (privacy-safe noise, speed and temperature monitoring) and have recently transitioned despite the lack of resources on the process. Here are seven lessons we learned:

  1. It is a question of when – what not.
  2. The transition will have a company-wide impact.
  3. Your current and future target audience may vary.
  4. The value should reflect the value for the customer. Your revenue should increase with them.
  5. Avoid free offers that compete with your premium people.
  6. Be transparent (internal and external) about the changes. Communicate more than.
  7. Start the process early, check in regularly with your team and set measurable goals.

Why membership is the future of the industry (and your startup)

Hardware has an advantage over software: Customers understand that your product has a cost. Now, it allows hardware startups to generate revenue with its first iteration, but is irreplaceable as the company grows and needs to innovate: software and user experience needing continuous improvement and excellent support Is, like in a software-only startup.

So we see most hardware startups eventually launching a subscription model and limiting what is available for free. Even established companies – think Strava or Wink– Often the end to limit fundamentally free features after years of operation.

Experienced founders and financial markets favor membership models and recurring revenue. Market valuation is often higher for companies that benefit from service revenue than sales.



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