SOJOURNERS

Hard Tech To Disrupt The Future

“Affordable robotics, AI-driven sensor fusion, uninterrupted connectivity and supermaterials are merging into the technology stack to unlock massive new tranches of value for customers.’

Hard Technologies, such as autonomous vehicles, robotics and additive manufacturing, are poised to disrupt a wide range of traditional industries, from manufacturing and logistics to automotive and food. As they transform these industries, they will likely attract VC and public investor interest.

What Is Hard Tech

Hard Technology refers to key and core technology that requires long-term research and development and continuous efforts and investment. It mainly include areas like optoelectronic chips, artificial intelligence, aerospace, biotechnology, information technology, new materials, new energy and smart manufacturing.

Modern Hard Tech start-ups are not just guys making a piece of hardware in a garage for fun. These are advanced, cohesive teams of like-minded people, who are building market-ready products to solve specific customer problems. They’re using dedicated hardware designs with core technologies (IP) transferred from research labs and seamlessly integrated with cloud software.

Hard Tech Is Poised To Disrupt Traditional Industries

The tech landscape is changing dramatically. A lot of hard, tangible technologies that were previously ignored are really starting to see their heyday.

Hard tech is probably affecting mobility the most right now because the way that we move people and goods has fundamentally changed, and continues to do so.

Robotics is not only disrupting, but also enabling a lot of traditional manufacturing industries, and in effect, it’s controlling labour costs.

Additive, or 3D, manufacturing is changing the way that most businesses are thinking about developing and delivering products to the end market.

Private And Public Markets Are On Pause

On the investing side of the equation, we’ve noticed that venture capitalists and Round B and C investors are getting involved in hard tech, primarily focusing on unit economics. However, the IPO market has been challenged this year. Last year, there were about 120 tech IPOs, while this year there have been only six across all industries, and just one in technology.

Public markets have always offered great opportunities for companies to continue their evolution and capital raising process. But last year’s choppiness prompted many private companies to do other things such as extend their runway, reduce capital consumption, or go back to the private market again – often to inside investors – because they don’t want to have to battle over valuations in the current environment.

Hard Tech Has A Strong IPO Pipeline

As the market returns to health and investors start to become more comfortable with equity values in the marketplace, we’re likely to see more secondary offerings, as well as equity-linked issuances like convertible debt, for example.

Specifically, technology IPOs have a very strong pipeline, and a lot of the hard tech companies to which we refer in concept are going to actually lead the way for the next class of IPOs in technology.

Whether it’s mobility, robotics, additive manufacturing or the plethora of other technologies capturing investors’ attention, we are very optimistic about hard technologies and believe they are going to define the technology landscape going forward.

Challenges Of Hard Tech

If you want to build a Hard Tech startup, be prepared to think through how to deal with these challenges:

  1. The capital requirements to build a production facility and maintain inventory are orders of magnitude larger than writing software.
  2. The time required to scale from prototype to test to production are multiples of getting a software product out the door.
  3. A software bug can be fixed with a patch in a few days. Even a small chemical production problem is a disaster.
  4. Founders are usually scientists with little business skills. Even with a business person as co-founder, that usually means sales and marketing, not building and operating a factory and dealing with supply chain issues.
  5. Acquisitions tend to be based on a small multiple of EBITDA rather than a huge multiple of revenues.

In other words, hardtech costs more, takes longer, has a higher risk of failure, and pays out less on success. No wonder the VCs stay away.

Final Thoughts

Building a Hard Tech startup is nearly impossible. But do it anyway. Because the world needs real physical solutions to hard problems far more than another piece of software.

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Interested in Management, Design or Technology Consulting, contact anil.kg.26@gmail.com
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