The Complete Guide to Building Hardware Startup Teams: Part 3 (Management + Scale)

This is Part 3 of a three part series. Check out Part 1: Founders and Culture and Part 2: Contributors and Product if you missed them.

A startup is a machine that attracts, supports, and enables large numbers of people with different motivations (the solar system, remember?). One of the key differentiators between decent CEOs and excellent CEOs is their ability to design for the future of the company in the face of immediate pressing needs.

Designing the future of your startup has many components, but one of the most challenging is the organization design. As your company grows, the solar system of people gets large and complex. Without strong organizational design, this network can become a liability rather than a resource.

I love Manu Cornet’s satirical interpretation of some of the best-known tech companies and their organization designs. Be deliberate about your company’s organizational structure to maximize your team’s power.

There are two major paradigms in organizational design: product organizations and functional organizations. Product orgs tend to be best for companies with lots of diverse products and product lines (such as Cisco or DJI) whereas functional orgs tend to be optimized for companies with a single product or platform (such as Dropcam).

Deciding which company “you’ll be when you grow up” can be both frustrating and greatly illuminating to many people around you (including your investors). Take a quick look at the framework above to determine what kind of organizational design best fits your company and product(s).

One of the constant debates in the hardware startup world is how to structure the engineering portion of your team when you have both software and hardware to develop. There are many tools and frameworks software engineering managers use to run their organizations: agile, waterfall, Kanban, etc. When it comes to the hardware development process, most startups have their hair on fire just trying to ship something basic that works. This makes it all the more important to design your hardware engineering organization purposefully.

There are three common types of hardware/software engineering teams:

Early on, the founding team and engineers need to communicate directly with customers about their experience gets imbued in the company consciousness. While this is critical in the beginning, it turns our most engineers aren't very good at communicating with customers. Once you ship your first product, hiring a Product Manager to be the interface between the engineering/design team and your customers is incredibly valuable. Many companies do this far too late and wish they had done it sooner. My advice- do it as soon as you can afford to.

“How the Role of an Executive Evolves” courtesy of Drift (https://blog.drift.com/hiring-management/)

As a startups grows from a few people working on a single product to a complex organization supporting multiple products and customer segments, the requirements for successful leadership change. It is not uncommon for people who have performed well in the early days of a company to no longer be the right fit to lead as the company scales. This isn’t a failing of these individuals, it’s a natural side effect of company evolution and growth. Being emotionally prepared to facilitate this transition, both for those you have hired and for yourself as a founder, can help prevent pain.

Efficient and fair evaluation of employees is critical to building a team continually improved.

A large organization needs managers. Promoting individual contributors to become managers is almost always the preferred option, but there are many cases where this isn’t practical. Deciding when to hire a (usually expensive) manager can be a hard decision. An advisor of mine once gave me a valuable tip: either you’re hiring an outside manager for CAN DO (meaning something that you won’t be able to figure out on your own, like optical engineering) or HAS DONE (meaning something that you need experience to execute on, like industry sales experience).

Once you decide to hire an outside manager, these three areas of fit are particularly important to get right:

Finding strong outside manager candidates can be wildly difficult. For key managerial positions, it can make sense to hire a recruiting firm. Ensure you hire the right kind:

With both options, it’s important to recognize that the startup is responsible for hiring the right person, and as such, you should only treat the output from either type of firm as a lead generation mechanism, not a hiring solution.

As hardware companies scale, they often ignore two essential teams: supply chain and cash. These teams are usually complex groups of full-time employees, part-time employees, consultants, consultancies, manufacturers, lawyers, accountants, and service providers. Recognizing their value is paramount to success.

Many startups have the perception that their supply chain is simple: a contract manufacturer makes stuff that is moved around by a logistics company to your end-customers. On the 80+ products I’ve worked on in my life, this has never once been the case.

In reality, your supply chain is a complex web of people with different incentives and business models. Treating each of them with respect (as they control your cost, quality, and schedule) will make everyone’s life easier. One tool I’ve seen hardware startups wield very effectively is a simple rule:

Every single person/company in your supply chain gets pitched on your company’s vision just like a VC does.

This ensures everyone from the “lauded” venture capitalists to the “lowly” logistics providers treat your product with care and attention, situating themselves as critical to the future of your company.

As a point of reference, the above chart shows the various major pieces in the supply chain team and what each is typically responsible for.

Similarly, understanding how important cash management is to the vitality of your startup will help you incentivize the right people and make it easier to survive. Focus on three things when managing cash:

There are three major categories of service providers that tend to be helpful for later-stage startups when thinking about logistics, retail, and marketing/sales. The companies above are commonly used by our portfolio and the greater hardware startup community.

Most importantly of all, don’t forget to surround yourself with people that inspire and motivate you every day! Having people you love as a core part part of your day-to-day work will make every experience better.

That concludes this three part series on building teams for hardware startups. Check out Part 1: Founders and Culture and Part 2: Contributors and Product if you missed them.

President and COO at Ten Percent Happier. Previously founded @BoltVC, EIR @EclipseVentures.