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Why Hardware Startups are Making a Massive Comeback

Remember when hardware startups were dismissed as too risky amid software’s reign? Now, they’re surging back-with VC funding for deep tech up 300% since 2020, per PitchBook data.

This renaissance matters: accessible tools like 3D printing, AI design software, and reshored supply chains are slashing barriers, fueling IoT demand and crowdfunding triumphs.

Discover the metrics, enablers, case studies, and bold predictions driving this hardware revival.

From Software Dominance to Hardware Revival

In 2015, software startups captured 78% of VC funding vs just 12% for hardware. By 2023 this flipped to 55% software vs 28% hardware. PitchBook data shows this shift clearly in a timeline: software at $45B and hardware at $8B in 2015, rising to $68B software and $35B hardware by 2023.

The tech industry moved through three key phases in this hardware revival. First, the chip shortage pain from 2020 to 2022 disrupted supply chains and slowed product development. Startups faced delays in semiconductors and consumer electronics, pushing many to rethink strategies.

Second came the recovery boom in 2023, with manufacturing revival in places like the Shenzhen ecosystem. Crowdfunding platforms such as Kickstarter and Indiegogo fueled prototypes and MVPs. Hardware accelerators like HAX and Y Combinator helped refine product-market fit.

Now, the AI hardware surge drives 2024 growth in edge computing, IoT devices, and wearables. As a16z notes, “Hardware is the new software infrastructure”. This innovation boom supports hardware startups in robotics and custom silicon, marking a true massive comeback.

Key Metrics Showing the Comeback

Hardware startup funding hit $35.2B globally in 2023, with median round sizes growing 62% to $15M per CB Insights. This surge marks a massive comeback for the tech industry after years of software dominance. Venture capital now flows into AI hardware and robotics, signaling renewed interest in physical products.

Total funding jumped from $21.6B in 2022 to $35.2B in 2023, a 63% increase. Deal counts rose from 892 to 1,247, up 40%. Unicorns created doubled from 7 to 14, a 100% growth, per Crunchbase and PitchBook data.

Metric20222023GrowthSource
Total Funding$21.6B$35.2B+63%Crunchbase/PitchBook
Deal Count8921,247+40%Crunchbase/PitchBook
Unicorns Created714+100%Crunchbase/PitchBook

Key sectors drove this startup resurgence. AI hardware captured $8.2B, robotics $4.1B, and consumer electronics $3.9B. Founders can track these metrics to benchmark progress in product development and secure VC funding.

Experts recommend monitoring deal count growth for early signals of market traction. Hardware accelerators like Y Combinator and HAX use similar data to select promising teams. This data underscores the innovation boom in semiconductors and IoT devices.

Technological Enablers Driving Accessibility

Prototyping costs dropped 85% since 2018 due to accessible 3D printing ($50/kg filament vs $500/kg formerly) and AI design tools. Hardware startups now build prototypes for $25K instead of $250K. This shift fuels the massive comeback in the tech industry.

3D printing resolution at 50m matches industrial standards at low cost. AI simulation accuracy near 98% cuts physical testing needs. Modular platforms like the $35 Raspberry Pi speed up MVP development.

These enablers lower barriers for hardware innovation. Startups iterate faster toward product-market fit. Venture capital flows to accessible IoT devices and wearables.

Supply chain recovery and Shenzhen ecosystem aid scaling. Crowdfunding on Kickstarter thrives with cheap prototypes. This drives the startup resurgence in consumer electronics.

Advancements in 3D Printing and Rapid Prototyping

Consumer 3D printers now achieve 25m layer precision rivaling $100K industrial machines, enabling $200 prototypes vs $20K historically. Startups print functional parts in-house. This cuts time to MVP.

Workflow starts with CAD design, then slicing in PrusaSlicer, printing in 4 hours, and post-processing. Teams test ergonomics and fit quickly. Industrial design improves with real parts.

PrinterPriceBuild VolumeSpeedBest For
Prusa MK4$799250x210x220mm250mm/sHobbyist prototypes
Bambu Lab X1$1,199256x256x256mm500mm/sFast iterations
Formlabs Form 4$4,500200x125x210mm40mm/hrHigh-detail resins

Framework Laptop iterated 17 prototype versions in 3 months using in-house 3D printing. This approach suits modular hardware like upgradeable PCs. Startups reach demo days faster.

AI-Powered Design Tools and Simulation Software

Autodesk Fusion 360 with Generative Design cut Rabbit R1’s enclosure optimization from 40hrs to 2hrs, reducing material use 32%. AI tools handle complex topology optimization. Hardware teams focus on UX.

Workflow imports CAD, sets constraints, and AI generates 100+ options. Select and iterate in minutes. This aids AI hardware like edge computing devices.

  • Fusion 360 ($545/yr, topology optimization)
  • Ansys Discovery ($3K/yr, real-time CFD)
  • nTopology ($10K/yr, lattice structures)
  • SimScale (free tier, cloud FEA)
  • PhysicsX (AI-first, undisclosed pricing)

These tools predict thermal management and structural strength. Rabbit R1 and Humane AI Pin used them for enclosures. Startups validate designs pre-prototype, aiding VC funding pitches.

Modular Hardware Platforms (e.g., Raspberry Pi, Arduino)

Raspberry Pi 5 (8GB, $80) now delivers 2.4x performance of 2012 original, enabling $500 IoT prototypes vs $10K custom boards. Platforms cut BOM costs. Firmware testing speeds up.

Over 65M Raspberry Pi sold with 200K+ Arduino libraries build ecosystems. Nothing Phone used Pi for early firmware testing. This supports smart home devices.

PlatformPriceGPIOComputeBest Use
Raspberry Pi 5$60-8040Quad-core ARMIoT, AI vision
Arduino Uno R4$301432-bit ARMSensors, actuators
Jetson Nano$9940472GFLOPSML edge
ESP32$636Dual-core 240MHzWiFi connectivity
BeagleBone$6065Dual-core ARMIndustrial control

Use these for robotics and wearables prototypes. Open source hardware accelerates innovation. Hardware accelerators like HAX leverage them for scaling.

Supply Chain Transformations

Lead times dropped from 52 weeks during the 2021 chip shortage peak to 12-16 weeks in 2024, per Flex Manufacturing Index. Hardware startups now benefit from this faster pace in product development.

Companies have built inventory buffers from 3 to 6 months. They diversified suppliers from 3 to 7 on average. Regional hubs in Shenzhen, Mexico, and the US reduce risks, as noted in Deloitte 2024 Supply Chain Report.

This recovery supports the massive comeback of hardware startups. Founders can prototype MVPs quicker and scale to production. AI hardware and wearables see shorter paths from idea to market.

Supply chain optimization draws venture capital back to the tech industry. Startups like those in Y Combinator or HAX leverage these changes for innovation booms in IoT devices and robotics.

Reshoring and Nearshoring Trends

US semiconductor capacity will grow 203% by 2032 via CHIPS Act’s $52B subsidies, creating 115K jobs per Semiconductor Industry Association. This shift aids hardware startups in building resilient operations.

Reshoring boosts US capacity from $280B to $500B. Mexico sees 30% growth in electronics, while Vietnam hits 25%. These trends cut delays for consumer electronics.

Examples include Framework with US assembly and Nothing expanding in India. Incentives like IRA tax credits up to 25% and CHIPS grants, such as $8.5B for Intel or $6.6B for TSMC, lower entry barriers. Startups gain from manufacturing revival.

Nearshoring supports scaling production for edge computing and edge AI. Founders should explore these hubs for prototypes and MVPs to achieve product-market fit faster.

Improved Global Logistics Post-Pandemic

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Ocean freight rates fell 85% from $20K per 40ft container in 2021 to $2.8K in 2024, with Shanghai to LA transit at 28 days versus 67 days at peak. This eases supply chain pressures for hardware ventures.

Key improvements include digital freight platforms like Flexport, air cargo capacity up 40%, and blockchain tracking via TradeLens. On-time delivery rose from 72% to 91%, with inventory turns from 4.2 to 5.8.

Humane AI Pin shipped 10K units on day one using Flexport. Such tools help startups manage crowdfunding campaigns on Kickstarter or Indiegogo with reliable logistics.

Post-pandemic logistics favor the startup resurgence. Hardware teams can focus on firmware development and UX design instead of delays, boosting gross margins.

Declining Component Costs and Economies of Scale

DRAM prices dropped 45% year-over-year to $1.85/GB, while MCU costs fell 28% to $0.89/unit per DigiKey 2024 pricing index. These drops aid hardware innovation in tight budgets.

Component2022 Price2024 PriceChange
MCU 32-bit$1.25$0.89-29%
Display OLED$28$19-32%
Battery LiPo$12$8-33%

A wearable BOM fell from $89 to $62, a 30% saving. Scaling from 10K to 100K units cuts costs 42% through tooling amortization, key for hardware margins.

Startups like Rabbit R1 benefit from lower BOM costs. Focus on volume production with ODM partners to optimize yields and reduce NRE expenses.

Funding Landscape Evolution

Hardware VC allocations rose from 8% in 2020 to 24% in 2023, with $4.2B deep tech investments per HAX Hardware Report. Venture capitalists now chase 10x hardware multiples after years of software dominance. This shift fuels the massive comeback of hardware startups in areas like AI hardware and IoT devices.

Specialized funds such as Bolt and Hardware Club lead the charge with tailored support for product development and manufacturing. Corporate VC arms have pivoted too, from Intel to Qualcomm, backing semiconductors and edge computing. These moves signal a broader VC pivot toward physical innovation.

Founders benefit from this evolution through faster access to capital for prototypes and scaling production. Examples include investments in wearables and robotics, where supply chain recovery post-chip shortage boosts confidence. The result is a thriving ecosystem for hardware entrepreneurship.

Strategic investors now prioritize deep tech with real-world impact, from custom silicon to sustainable hardware. This funding surge helps startups achieve product-market fit and navigate global manufacturing challenges.

VC Shift Toward Deep Tech and Hardware

a16z launched a $600M hardware fund in 2023; Khosla raised $1.4B for deep tech; ride-hailing valuations now beat SaaS multiples at 12x versus 8x. Top VCs embrace the physical world thesis, as Trae Stephens of Founders Fund notes its 100x TAM. This drives deals in semiconductors and robotics.

FirmHardware Deals 2023Notable InvestmentsCheck Size
a16z18Hadrian, Rabbit R1$10-50M
Lux Capital14Form Energy, PsiQuantum$15-40M
Founders Fund9Anduril, Shield AI$20-60M

Hadrian’s $90M Series A for factory-as-service highlights strong returns in manufacturing revival. VCs now fund hardware innovation like ASIC design and FPGA prototyping to capture edge AI markets.

Startups gain from larger checks that cover BOM costs and NRE expenses. Focus on gross margins through supply chain optimization, as seen in EV batteries and smart home devices.

Rise of Hardware-Specific Accelerators and Funds

HAX accelerated 300+ startups raising $2B+ total; Y Combinator’s hardware batch grew from 4% to 18% of portfolio. These programs provide hands-on support for MVP development and Shenzhen ecosystem access. They accelerate the startup resurgence in consumer electronics.

ProgramDurationEquityFacilitiesSuccess Rate
HAX6mo8%Shenzhen labs85%
YC Hardware3mo7%Network92%
Bolt VC12mo10%$50K stipend78%

Formlabs from YC W12 reached a $779M valuation through 3D printing breakthroughs. Accelerators offer demo days and angel investor intros, vital for hardware demo traction.

Participants refine UX design, firmware, and regulatory compliance like FCC certification. This path eases scaling from prototypes to volume production with ODM partners.

Crowdfunding Success Stories (Kickstarter, Indiegogo)

Kickstarter hardware campaigns raised $450M in 2023, 42% of platform total; top 10 averaged $8.2M each. Platforms validate product-market fit for hardware startups via pre-orders. Success stories drive the innovation boom in modular hardware like Framework Laptop.

ProjectPlatformGoalRaisedStatus
Framework Laptop 16Kickstarter$15M$15.1MDelivered
PineTimeIndiegogo$175K$872KDelivered

Key factors include 35-day campaigns, $299-499 price points, and 10K+ backers. Post-crowdfund, many reach profitability by optimizing yields and repeat customers. Examples like Humane AI Pin show crowdfunding as a launchpad.

Founders use funds for injection molding and assembly, building order backlogs. Pair with hardware grants for sustainable paths to hardware unicorns.

Market Demand Shifts

The edge computing market is projected to reach $250 billion by 2028 according to IDC, driving a 35% CAGR for AI inference hardware requirements. This surge reflects growing needs in the tech industry for real-time processing. Hardware startups are capitalizing on this shift during their massive comeback.

IoT connections are exploding from 15 billion in 2022 to 41 billion by 2030. Consumers show strong willingness to pay a 28% premium for innovative hardware, as noted by Deloitte. This demand fuels the startup resurgence with fresh venture capital flowing into product development.

Key drivers include the manufacturing revival and supply chain recovery post-chip shortage. Startups now focus on edge computing and IoT devices, from wearables to robotics. This creates opportunities for hardware innovation and scaling production.

Experts recommend prioritizing product-market fit through prototypes and MVPs. Crowdfunding platforms like Kickstarter help validate ideas early. The result is a vibrant ecosystem supporting hardware unicorns like Rabbit R1 and Humane AI Pin.

Explosion in IoT and Edge Computing Needs

IoT devices grew from 14.9 billion in 2022 to 18.8 billion in 2023, with edge AI processing 75% of data locally per Gartner. This trend demands robust hardware startups to meet the innovation boom. Industrial and consumer applications are leading the charge.

Market breakdowns highlight key segments: consumer IoT at $198 billion, industrial at $214 billion, and edge infrastructure at $61 billion. Hardware winners include NVIDIA Jetson with over 1 million units shipped and Qualcomm RB5 priced at $199. These platforms enable rapid prototyping for embedded systems.

Enterprise examples like Siemens MindSphere connecting over 1 million assets show real-world impact. Startups can leverage NVIDIA Jetson for computer vision hardware and sensor fusion. Focus on power efficiency and connectivity standards like WiFi 6 for success.

  • Develop edge AI prototypes using FPGA for quick iterations.
  • Optimize bill of materials for cost-effective scaling.
  • Partner with hardware accelerators like HAX for supply chain access.

Consumer Appetite for Innovative Physical Products

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The Nothing Phone 2 sold over 500,000 units in three months without US carrier deals, proving strong direct-to-consumer hardware demand. This success underscores the startup resurgence in consumer electronics. Buyers crave unique designs and features.

Trends show consumers favoring unique design and sustainability, with many willing to pay premiums for eco-friendly options. Success metrics include Nothing’s NPS of 72 and Framework’s CSAT of 91. DTC channels like Shopify hardware stores have seen massive growth since 2021.

Hardware startups like Framework Laptop and Fairphone excel with modular, upgradeable designs. Emphasize right-to-repair and sustainable materials for competitive edges. Integrate software for superior user experience and battery life.

Practical steps include launching on Indiegogo for pre-orders and tracking net promoter scores. Build ecosystems with developer kits to foster loyalty. This approach drives repeat customers and healthy gross margins in the hardware comeback.

Case Studies of Breakthrough Successes

Framework Laptop achieved $100M ARR by Q4 2023 through modular design and direct sales, defying PC market contraction. This hardware startup exemplifies the massive comeback in the tech industry.

Other successes include Nothing with rapid unit sales via glyph lights, Fairphone sustaining growth through repairable phones, and Rabbit securing pre-launch buzz for AI hardware. These cases highlight revenue growth, multi-round VC funding, and market disruption.

Consumer electronics like Nothing disrupted with community-driven DTC models, while industrial players like Formlabs scaled enterprise adoption. Lessons span product development, supply chain optimization, and crowdfunding triumphs on platforms like Kickstarter.

These stories show hardware startups achieving unicorn trajectories amid semiconductor recovery and AI hardware demand, proving the sector’s resurgence for founders tackling manufacturing revival.

Consumer Electronics Disruptors (e.g., Nothing, Fairphone)

Nothing Phone (2a) hit 1M+ units in 6 months with glyph interface; Fairphone 5 achieved 30% YoY revenue growth. These consumer electronics disruptors lead the hardware startup resurgence through bold innovations.

CompanyFoundedFundingUnits SoldKey InnovationRevenue Model
Nothing2020$200M2M+GlyphDTC
Fairphone2013$50M500KModular repairSustainable sales
Rabbit2023$56M180K pre-launchPerplexity AISubscription hardware

Nothing built hype with glyph lights for notifications, blending UX design and community feedback. Fairphone focused on right-to-repair and modular hardware, appealing to eco-conscious buyers.

Rabbit R1 tapped AI hardware with edge computing, showing DTC plus community drives product-market fit. Lessons include crowdfunding for MVP validation and scaling via Shenzhen ecosystem partnerships.

Industrial Hardware Innovators (e.g., Formlabs, Desktop Metal)

Formlabs SLA printers generated $200M ARR 2023, serving 80% of Fortune 100 for prototyping. These industrial hardware innovators fuel the startup comeback with high-margin 3D printing solutions.

CompanyMarketARRInstall BaseMarginExit Status
FormlabsDental/Industrial$200M100K+65%$2B val
Desktop MetalMetal 3D$190M4K+42%$1.6B SPAC

Formlabs pivoted from dental to enterprise, now sourcing 80% revenue from industrial uses like rapid prototyping with SLA tech. This shift optimized BOM costs and gross margins.

Desktop Metal targeted metal 3D printing for manufacturing revival, achieving scale through strategic investors. Key lesson: hardware pivots via software integration and B2B fleet management boost traction KPIs like order backlog.

Regulatory and Ecosystem Support

The CHIPS Act allocated $52B in grants and incentives plus $24B in tax credits. This policy move catalyzed over 40 new US semiconductor fabs and spurred $450B in private investment. Hardware startups now benefit from these tailwinds in domestic manufacturing.

Communities like Hackaday.io support more than 2 million makers with shared projects and resources. Talent pools are expanding, with hardware tracks at schools like MIT and Harvard drawing strong interest. These elements fuel the startup resurgence in the tech industry.

Access to venture capital and VC funding has grown alongside this ecosystem. Hardware accelerators such as HAX and Y Combinator offer demo days that connect founders to investors. The result is an innovation boom for products like IoT devices and wearables.

Founders can tap into Fab Labs for low-cost prototyping with CNC machining and 3D printing. This support eases product development from MVP to scaling production. Overall, these factors drive the massive comeback of hardware startups.

Favorable Policies for Domestic Manufacturing

$280B from the CHIPS Act and IRA unlocked $327B in private investment. Intel received $8.5B in grants for two Ohio fabs. These funds support semiconductor subsidies and reshoring efforts.

The CHIPS Act provides $52B in grants and $39B in loans for chip production. IRA adds $48B for semis, while NSF SBIR offers $300K in Phase I funding. Startups like PsiQuantum secured $940M from DARPA, and IonQ got $54M from NSF.

Compliance shortcuts help too. The EU’s CBAM carbon tax favors US production over imports. Hardware founders gain from supply chain resilience and nearshoring trends.

Practical steps include applying for hardware grants early in product development. Partner with ODMs like Foxconn for scaling. This policy environment boosts manufacturing revival for AI hardware and robotics.

Growing Maker Communities and Talent Pools

The Hackster.io community grew to 2M+ members. Over 3,000 global Fab Labs provide $0-50/hr CNC access. These spaces aid prototypes and MVP building for hardware startups.

Key resources include: Hackaday.io with 1.5M projects for open source hardware inspiration. Seeed Studio fusion kits for quick product development. TinyML Foundation supporting 200K devs in edge computing.

  • Hackaday.io with 1.5M projects for open source hardware inspiration.
  • Seeed Studio fusion kits for quick product development.
  • TinyML Foundation supporting 200K devs in edge computing.

Talent pipelines strengthen through programs like Stanford’s ME326 with high applicant interest. MIT’s Martin Trust Center offers $500K grants. HAX Batch 11 founders raised $250M in follow-on funding after demo days.

Founders should join hackerspaces for networking and pitch events. Attend hardware accelerators for angel investors and corporate VCs. This ecosystem drives hardware innovation in wearables and smart home devices.

Future Outlook and Predictions

Hardware startups will capture 35% of VC by 2027 ($120B total), led by sovereign AI stacks and spatial computing. Over the next five years, the edge market could reach $500B, fueling a wave of 50+ hardware unicorns. The US may shift toward a global manufacturing hub through reshoring and CHIPS Act incentives.

This startup resurgence builds on chip shortage recovery and supply chain optimization. Founders can target niches like Rabbit R1 devices or Framework Laptop modularity. Expect innovation in custom silicon and edge AI for IoT devices, wearables, and robotics.

Venture capital flows will prioritize product development with strong product-market fit. Crowdfunding on Kickstarter and Indiegogo will bridge prototypes to scaling production. Hardware accelerators like HAX and Y Combinator demo days will connect founders to angel investors and corporate VCs.

Global manufacturing revival, including Shenzhen ecosystem partnerships, will lower BOM costs and improve gross margins. This outlook points to a massive comeback for hardware entrepreneurship, with IPO potential and Big Tech acquisitions on the horizon.

Emerging Trends to Watch

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RISC-V adoption forecast: 25% of AI chips by 2027 (vs 4% 2023), reducing $10B+ ARM licensing fees. Top trends ranked by market size include sovereign AI hardware ($120B), spatial computing ($80B), RISC-V ($45B), solid-state batteries ($30B), and neuromorphic chips ($15B). Custom silicon startups raised $2.1B in 2023, signaling opportunity.

Sovereign AI hardware drives demand for privacy-focused hardware with secure enclaves and edge computing. Startups can prototype using FPGA for AI stacks, then scale to ASICs. Examples include devices like Humane AI Pin for on-device processing.

Spatial computing expands with AR glasses and metaverse headsets, akin to Apple Vision Pro. Founders should focus on haptics, spatial audio, and sensor fusion for immersive tech. RISC-V enables open source hardware, cutting costs for embedded systems in drones and eVTOL.

Solid-state batteries promise better power efficiency for EVs and wearables, while neuromorphic chips mimic brain-inspired hardware for energy-efficient AI. Watch for startup opportunities in these areas through hardware grants and NSF funding to accelerate MVPs.

Potential Challenges and Mitigations

Tooling costs average $250K-$2M; many hardware startups underestimate NRE by a significant margin per HAX data. High upfront expenses shorten runways and delay prototypes. Founders must plan for injection molding, CNC machining, and 3D printing early in product development.

Low yields and talent shortages compound risks during scaling production. Supply chain issues can double COGS and extend hiring timelines. Mitigation starts with modular design and partnerships like OSH Park for quick-turn PCBs.

ProblemImpactMitigationTools
High NRE ($1M+)18mo runwayModular design, DFMAFusion 360 ($545/yr)
Low yields (65%)2x COGSDfM analysis, Six SigmaSiemens Polarion
Talent shortage6mo hiringHAX, OSH Park ($5 boards)HAX accelerators

Use these strategies for yield optimization and regulatory compliance like FCC certification. Hardware accelerators provide access to expertise in firmware development and UX design. This approach helps achieve traction KPIs like pre-orders and repeat customers.

Frequently Asked Questions

Why Hardware Startups are Making a Massive Comeback in 2024?

Hardware startups are making a massive comeback due to advancements in AI integration, supply chain stabilization post-pandemic, and growing demand for IoT devices, enabling faster prototyping and scalable production.

What Key Technologies Are Driving Why Hardware Startups are Making a Massive Comeback?

Key technologies like 3D printing, edge computing, and modular hardware designs are fueling why hardware startups are making a massive comeback, reducing costs and time-to-market significantly.

How is Funding Landscape Contributing to Why Hardware Startups are Making a Massive Comeback?

Venture capital is shifting towards tangible products, with dedicated hardware funds like those from Bolt and HAX, explaining why hardware startups are making a massive comeback through increased investments and crowdfunding success.

Why Hardware Startups are Making a Massive Comeback Compared to Software-Only Ventures?

Unlike software, hardware offers defensible moats via patents and physical supply chains, which is a primary reason why hardware startups are making a massive comeback amid market saturation in apps.

What Role Does Consumer Demand Play in Why Hardware Startups are Making a Massive Comeback?

Rising consumer interest in wearables, smart homes, and sustainable tech gadgets is a core factor in why hardware startups are making a massive comeback, with markets projected to grow exponentially.

How Can Entrepreneurs Capitalize on Why Hardware Startups are Making a Massive Comeback?

Entrepreneurs can leverage no-code hardware tools, global manufacturing hubs like Shenzhen, and platforms like Kickstarter, positioning themselves to thrive in why hardware startups are making a massive comeback.

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