Among all the excitement for the Internet of Things and the resurgence of hardware as an investable category, venture capitalists, many of whom new to the space, have been re-discovering the opportunities and challenges of working alongside entrepreneurs to build hardware companies. Combined with a rapid evolution of the venture financing path across categories over the last couple of years, the increasing importance of crowdfunding and a certain frothiness in the market, this leads to a certain confusion, as both entrepreneurs and VCs try to figure out the best way of financing and scaling hardware startups. Some patterns emerge, however: for example, VCs are mostly interested in opportunities that include a strong software and data component; and they are increasingly demanding when it comes to seeing the product actually shipping and gaining early traction.
