The largest problem I see is shipping times. If I need to download a new software "part" (library or other), the shipping time is the download time, nearly instant.
If I need new hardware pieces, its either next day shipping, a few days by air-freight or three weeks on a boat from china.
This limits prototype turnover time, and means iterating quick is much harder.
Finally you have the problem that hardware is expensive and an additional cost. A hardware startup has all the same costs as a software company but with the addition of hardware.
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That’s a big part of it. But mostly it’s that your dev+deploy+evaluate cycle is so much slower. With web software you can write a feature or bug-fix and push to prod in minutes - and repeat that many times a day. With hardware each equivalent cycle is weeks or months (especially in my vertical - farms).
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That's what I meant by prototype turnover time, your iteration cycle.
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