Software vs. Hardware Business Models

Much of my consulting practice centers on working with early stage software companies. But I have substantial hardware market experience in my background, and I do take on consulting assignments with hardware companies.

So what are the differences and similarities between successful software and hardware businesses?

CAPITAL REQUIREMENTS
One of the larger differences is that software companies generally require much lower capital to reach profitability and continued growth. This is primarily because of the lack of need to invest in expensive semiconductor development tools, semiconductor masks, manufacturing plants/equipment, manufacturing engineering personnel, unfinished goods inventory, higher cost of finished goods inventory, etc. So except for startups backed by substantial institutional capital, it’s much easier to startup software companies compared to their hardware counterparts.  Read more...