What slips under the radar is what happens after sales: warranties, repairs, replacements, and customer service. These aren’t just line items; they can make or break long-term viability.
The Hidden Layer of Costs
Unlike software, where updates are often digital and low-cost, hardware has a physical lifecycle. A defective unit means returns, logistics, and human touchpoints. These require infrastructure that scales with growth, often faster than revenue does. Smart investors look beyond initial burn rate and factor in operational durability when evaluating companies.
Why Service Matters Most
- Warranty handling isn’t free: Each unit shipped carries an implied liability.
- Repairs and replacements need capital: Spare parts, technical staff, and facilities add up.
- Customer trust is expensive to build, cheap to lose: Poor post-sale service can sink even the most promising brand.
Turning Cost into Competitive Advantage
Handled well, service becomes a moat. Companies win by aligning with customer needs, not just product specs. A robust support system signals reliability and creates stickiness that rivals can’t easily copy.
The good news is that investors who understand this hidden layer can better support founders. By funding not just the product but also the service backbone, they increase the odds of scaling sustainably. For founders, transparently modeling these costs builds credibility and attracts the right kind of capital and backers.
Hardware isn’t just about what you ship; it’s about how you stand by it afterwards. Investors who grasp this nuance see past the shiny demo and into the engine room of a business.
