Building Hardware Teams from Scratch
After my time at World, I recently started advising a couple of very promising startups on bringing their hardware programs from zero to one. I want to share a few takeaways while they’re still fresh — they might be helpful for someone jumping into leading a hardware effort, or for a non-hardware founder who wants to understand what matters in the beginning.
What are the core tasks for the first 30 days as you take over or lead a hardware team?
First — interview your co-founders or the founding team. It’s critical to truly understand what the company wants to achieve with its hardware program and why there’s no way around it. What truly unique user experience does the business want to unlock?
Second — try to avoid it. Once you understand what the business wants to achieve, you as the hardware person should be the biggest advocate against custom hardware. Yes, this might not seem great for your job — but you’re probably the only one who understands the challenge, the timeline, and the landscape of off-the-shelf solutions. Your job is to enable the business, the magical user experience, the unique value proposition in the shortest and most economical way possible. You must love the result, not the sophisticated way to get there. Once you truly understand what a custom solution unlocks, you’ll know what to build.
Third — understand the space you’re operating in, especially quantity-wise. Start with the question: what unlocks the revenue? There are business models like Waymo, Whoop, or scooter companies where the hardware is the instrument to create recurring revenue through retention and layering services on top. Not through the sale alone. Ask yourself whether there’s a direct correlation between hardware sales and lifetime revenue per customer. In an Apple-style model there is; in a Whoop-style model there isn’t. If the hardware is just a means to build service revenue, be very careful with quantity forecasts for your suppliers. In such models, you never want to push your business to change strategy just because the warehouse is full of product. It’s your job to keep hardware what it is — a means to an end.
Fourth — are you building a product or still validating assumptions? This is super important. If the business is still uncertain about certain user experience or scientific assumptions, speed is more important than manufacturability. This is probably the most obvious point, but I still think it’s critical to keep in mind.
Fifth — understand your quantity profile early. This goes hand in hand with point three. Building a supply chain for a $1M hardware program is very different from $10M or $100M. And building a $1M program doesn’t mean you’re not ambitious — it may just mean you’re building for a service business or operating in a scientific space.
From answers to strategy
With those answers in hand, build your strategy step by step.
Start by drafting a high-level product requirements document and getting sign-off from all stakeholders. As part of that process, identify the user stories and assumptions that people don’t yet feel comfortable about — those should be clarified as soon as possible. Try to stitch together multiple off-the-shelf solutions and divide and conquer. Speed matters more than nice form and function at this stage. For materials and design questions, lean on model makers — there’s a very deep supply chain in Korea and China. For functional questions, try to isolate the assumptions and propose how you can test those experiences with off-the-shelf components.
Up to this point, you still haven’t started developing anything resembling a final product.
Designing your value chain
What you should always have in-house is someone with deep experience in the relevant field for your product — a strong product owner who is a former developer and a capable leader and project manager. That should always be the first hire on a hardware team. An electrical or mechanical engineer without direction might seem like progress, but progress in the wrong direction is very costly.
Next, decide how much engineering competence to keep in-house. Only internalize functions where you’re confident there’s a long-term need and where that work truly impacts the user day in, day out. I would always try to hire aggressively, but also source engineering service providers with the same priority. And you always want at least one supply chain person on your team — I’ve never seen top talent in that role cost the company anything. They’ll hammer on prices, lead time and cash flow day in, day out, and the right hire will make up their salary many times over.
A note on contract manufacturing economics: always try to calculate the maximum profit for a manufacturing partner. If you have a product with a target BOM cost of $100, assume 5% profit for a potential contract manufacturer, and target quantities of 10k per year — while that feels like a huge commitment to you ($1M spent), it’s only a $50k-per-year business for the CM. As you can imagine, you might not get their A-team. In that case, consider a different structure: look for a smaller manufacturing partner who’s hungry for this type of revenue, and split the engineering work either in-house or through a separate vendor.
One note on Asia-based supply chains. There are product categories where you need to make it work with a vendor over there — like designing and shipping a smartphone. But don’t exclude Western supply chain strategies too early. Being able to be on-site in a couple of hours is sometimes worth a lot of money and months of time.
Putting it all together
Once you’ve worked through these points, you should have a clear picture of: what functions to keep in-house versus outsource, Asia versus Western supply chain, whether to go with a vertically integrated contract manufacturer or split engineering and manufacturing (or even manufacture in-house), and your quantity profile.
There’s no single right answer here. What I wanted to do with this post is share some of the thinking I go through when designing these departments at companies. Enjoy the ride — building a product from scratch, seeing it come off the line and land in the hands of your customers is, at least to me, the most exciting experience out there!