Aug 17, 2016 · 27m · 20vc
20VC: Why Hardware Is Actually Software Wrapped In Plastic & "Of Course Hardware Is Hard, Everything Is Hard" with Ben Einstein, Founder & General Partner @ Bolt VC
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gold bands on the timeline = statements, start to end. Hover to read, click to jump. CC turns on captions
Host Harry Stebbings interviews Ben Einstein, founder and General Partner at Bolt VC, to examine the macroeconomic forces driving the hardware revolution, software-wrapped hardware business models, and operational advice for hardware founders.
How this conversation actually went
Every chapter scored 0–10 on four independent dynamics. Hover any point for the reasoning behind the score. Harry holds 21.9% of the talking time here. How this is scored →
Harry as informed peer 2.8 Guest teaching 3.5 Guest disagreement 1.3 Harry pushing back 1.3
speaking balance: gold is Harry, purple is the guest (3 minute bins)
Sharpest disagreement ▶ 4:45 Dismissing 'Hardware is Hard' Cliché
Ben forcefully rejects the popular industry narrative that 'hardware is hard', insisting that everything in startups is hard and attributing hardware struggles to lack of community knowledge transfer rather than inherent difficulty.
Hardest push from Harry ▶ 7:14 Challenging Contract Manufacturing Supply Chain RisksHarry interjects to question whether outsourcing manufacturing to overseas vendors like Shenzhen inherently creates severe supply chain and quality assurance risks compared to owning the full stack.
Biggest teaching moment ▶ 18:40 Jawbone vs. Fitbit Brand Strategy BreakdownBen educates Harry on how Jawbone diluted its brand positioning by building horizontal Bluetooth gadgets, whereas Fitbit succeeded by focusing laser-like on health and lifestyle outcomes.
Harry holds his own ▶ 11:01 Identifying Fitbit's Premium Subscription PlayHarry demonstrates his own background and expertise in SaaS by jumping in to highlight how Fitbit monetizes premium recurring software subscriptions on top of wristband sales.
the scores for every segment, with the reasoning behind each
| Chapter | Topic | Harry as informed peer | Guest teaching | Guest disagreement | Harry pushing back | Why |
|---|---|---|---|---|---|---|
| Ben Einstein's Background and Founding Bolt VC | 2 | 3 | 2 | 1 | Harry opens by praising Ben's blog and asking about his transition from product design to venture capital. Ben explains his background and dismisses the common phrase 'hardware is hard', arguing that everything in startups is hard and the real issue is lack of knowledge transfer. | |
| Market Drivers Powering the Hardware Startup Explosion | 4 | 4 | 1 | 3 | Harry probes the market drivers behind the hardware explosion, and pushes back on contract manufacturing by raising supply chain and quality control risks. Ben acknowledges the risk but details how the cost-benefit ratio and smartphone component supply chains fundamentally enable modern hardware startups. | |
| The Shift to Recurring Revenue and Software-Wrapped Hardware | 4 | 3 | 1 | 1 | Harry demonstrates strong SaaS knowledge by bringing up Fitbit's high-margin subscription software layer before Ben expands on it. Ben explains how hardware acts as a Trojan horse to deliver software services, citing Dropcam and Ring as classic examples. | |
| Three Fundamental Business Models in Modern Hardware | 2 | 4 | 1 | 0 | Harry asks Ben to break down the three fundamental business models in modern hardware. Ben delivers an educational monologue detailing Hardware as a Service, Consumables, and Hardware-Enabled Services using companies like Meraki, Cuvée, and Dropcam. | |
| The Vital Role of Brand in Consumer Hardware Success | 3 | 4 | 1 | 1 | Harry highlights the importance of brand in consumer hardware using GoPro as an example. Ben elaborates on how brand represents the core promise to consumers, contrasting Fitbit's clear health branding against Jawbone's unfocused horizontal product line. | |
| Quick Fire Round: Books, Misconceptions, and Venture Reality | 2 | 3 | 2 | 2 | In the quick fire round, Harry asks about books, venture misconceptions, and fundraising dynamics. Ben points out counterintuitive risks of raising too much early capital and shares his frustrations with the long feedback loops in venture capital. |
Statements from this episode (14)
Einstein: Hardware startups fail due to founder inexperience, not inherent difficulty
“And so the big, Problem with hardware being quote unquote hard is, is not the inherent nature of hardware. It's the fact that most people that are in the startup community have never done it before. And so they don't know what to look for when they're trying t…”
Einstein: Crowdfunding and 3D printing are minor drivers of hardware boom
“The press loves to call attention to, I think these sort of sexy, cool trends things like crowdfunding and three printing and that kind of stuff, which I actually, I think is actually a very small part of the story.”
Einstein: Contract manufacturing benefits far outweigh supply chain friction
“The cost benefit analysis of not having to deal with, you know, hiring and firing workers and people stealing stuff and you know, all the capex you need in order to build it and yada, yada, yada is totally worth it. Versus the supply chain management issues th…”
Einstein: Growing hardware startups must focus on supply chain over manufacturing
“Really what actually happens with most hardware companies now, their core focus as they grow is actually less about hardcore manufacturing and molding and quality control. And it's more about gaining expertise in your own supply chain.”
Einstein: Hardware is a Trojan horse for software in new environments
“So really hardware is this really great Trojan horse to get software into places that it can't currently exist.”
Einstein: Hiring software armies is a death sentence for incumbent hardware firms
“So I think most of the big companies are really struggling with this and, you know, having to hire armies and armies of software people To sort of help augment their existing product line is, is usually a sort of death sentence for many of these big companies,…”
Einstein: Dropcam achieved a 35% attach rate on its $10/month subscription
“And then they, you know, I think Dropcam had about a 35% tax rate on a 10 dollar a month service.”
Einstein: Hardware-enabled services will yield the most consumer hardware devices
“There's a category, which is probably the most interesting and we'll see the most devices, especially in the consumer space, which we call sort of hardware enabled services.”
Einstein: Hardware products must be designed around recurring revenue strategy
“You redesigned a product based on how you're going to monetize its recurring revenue going forward.”
Einstein: Brand is the most critical element for consumer hardware companies
“Yeah, a hundred percent agree with you when it comes to consumer products, that brand is, it's actually the most important thing. And it's a little bit of a red herring because brand encompasses so much of what a company is. You know, it's really, I think peop…”
Einstein: Jawbone failed to match Fitbit due to unfocused brand positioning
“Jawbone really built a horizontal, you know, Bluetooth business, right? So all their products have Bluetooth, they build speakers, they have headsets, they have they have the up tracker, the, you know, the sort of Fitbit clone. Fitbit is laser focused on a bra…”
Einstein: Early hardware prototyping should prioritize speed over quality
“Always build more build more than you ever think. Definitely caring less about quality and more about speed, and especially in the beginning and using those prototypes to actually talk to humans about how they would use them which is a very important part of p…”