The simplest and most traditional business model for a hardware product is as follows: You sell it for more money than it cost you to make. But is that the only way? What happens when you add software to the product?
Correct me if I am wrong. It would appear that Particle adheres to the hybrid model. I would be interested to hear about the challenges Particle has faced with this model.
Yes that’s correct, Particle has a hybrid business model (hardware purchase + subscription). Since we’re providing a platform that is used to power other IoT products, the most important factor for our pricing model is that it matches the business models of the companies building products on our platform reasonably well. Our hybrid model works well for us because it matches with *most* companies who would want to build a product on our platform (specifically we match pretty well with business models #3 - #6). The biggest challenge with the business model is when that match doesn’t exist, in particular for companies operating under a traditional “hardware purchase” business model. When we’re talking with companies who haven’t figured out their own recurring revenue business model, we try to help them identify sources of recurring revenue up front; if their business doesn’t allow for that, it’s unlikely their IoT product or project is going to be successful in the long term.
Hi Waleed - can you tell me a bit more about what you’d like to see covered in future issues? I don’t know if these business models can be compared abstractly in terms of their metrics because it depends on the underlying business and its performance (although any non-subscription business would have $0 ARR, so that one at least is straightforward)
Nice write up! Would help to include examples of successes and failures in each business model type.
In particular, #1 has some good successes even with ‘smart’ features (Moment Lens camera app and Teenage Engineering mixers come to mind. Oura is in this group, and not dead yet too).
One other thing to consider is refresh cycles, how often will new versions come out or replacements be required.
Definitely hoping to include some examples in future issues – specifically by interviewing founders/executives from those teams. One of the challenges with good benchmarking is that there aren’t a ton of great public company examples to pull from; most of the success stories are private companies. Hoping I can get some folks to share some details in an interview.
Correct me if I am wrong. It would appear that Particle adheres to the hybrid model. I would be interested to hear about the challenges Particle has faced with this model.
Yes that’s correct, Particle has a hybrid business model (hardware purchase + subscription). Since we’re providing a platform that is used to power other IoT products, the most important factor for our pricing model is that it matches the business models of the companies building products on our platform reasonably well. Our hybrid model works well for us because it matches with *most* companies who would want to build a product on our platform (specifically we match pretty well with business models #3 - #6). The biggest challenge with the business model is when that match doesn’t exist, in particular for companies operating under a traditional “hardware purchase” business model. When we’re talking with companies who haven’t figured out their own recurring revenue business model, we try to help them identify sources of recurring revenue up front; if their business doesn’t allow for that, it’s unlikely their IoT product or project is going to be successful in the long term.
Well said Zach! It would also help if you include financial comparison (ARR/ROI/... etc) between the different models.
Hi Waleed - can you tell me a bit more about what you’d like to see covered in future issues? I don’t know if these business models can be compared abstractly in terms of their metrics because it depends on the underlying business and its performance (although any non-subscription business would have $0 ARR, so that one at least is straightforward)
Nice write up! Would help to include examples of successes and failures in each business model type.
In particular, #1 has some good successes even with ‘smart’ features (Moment Lens camera app and Teenage Engineering mixers come to mind. Oura is in this group, and not dead yet too).
One other thing to consider is refresh cycles, how often will new versions come out or replacements be required.
Definitely hoping to include some examples in future issues – specifically by interviewing founders/executives from those teams. One of the challenges with good benchmarking is that there aren’t a ton of great public company examples to pull from; most of the success stories are private companies. Hoping I can get some folks to share some details in an interview.