The road to recurring revenue for hardware startups – TechCrunch
HaaS is the future of the industry
If you look With the most successful startups today, you will find plenty of evidence that the Hardware-enabled service (Haas) model works: Peloton, Particle, Latch and Igloohome are dependent on subscriptions in addition to product sales. Even technology giants like Apple are quickly reinventing themselves as service providers.
If you are currently relying on equipment sales, the prospect of a change in your overall business model may seem daunting.
At the MinuteWe are building smart home monitors (privacy-protected noise, movement and temperature monitoring) and have recently made the transition despite the lack of resources for the process. Here are the seven lessons we learned:
- It’s a question of when – not when.
- The transition will have an impact across the organization.
- Your current and future target group can be different.
- The price should reflect the value for the customer. Your earnings should grow with them.
- Avoid making your free offer compete with your premium offers.
- Be transparent (internal and external) about the changes. Overcommunication.
- Start the process early, contact your team regularly and set measurable goals.
Why subscriptions are the future of industry (and your startup)
Hardware has an advantage over software: customers know that your product is costly. In this way, hardware startups can generate revenue on their first iteration. However, this is not sustainable because the company is growing and has to be innovative: the software and user experience has to be continuously improved and supported excellently, just like with a pure software startup.
For this reason, most hardware startups eventually start a subscription model and limit free availability. Established companies too – think Strava or to wink– often have to radically restrict free functions after years of operation.
Experienced founders and financial markets prefer subscription models and recurring revenue. Market valuation multipliers are usually much higher for companies that benefit from service revenue as well as sales.