In July 2017, device maker Jawbone became one of the most spectacular failures in the history of startups.

The company’s announcement that it was selling off its assets was long coming: Despite grabbing $930M in funding during its 10-year lifespan, Jawbone failed to hold on to significant market share for its line of headsets, fitness trackers, and wireless speakers.

Jawbone became the second-costliest VC-backed startup failure of all time.

This was just months after well-funded consumer hardware startups Electric Objects, Hello, and Lily Robotics also kicked the bucket.

Why did they fail? Many reasons typically come together to lead to a startup’s death.

But it is possible to tease apart some common drivers if you look closely. We sifted through nearly 400 failed consumer hardware startups from our database and identified the reasons for failure among a subset of them, and found some of the main reasons include:

1. Lack of consumer demand

2. High burn rate

3. Lack of interest after initial crowdfund

4. Product strategy mistakes

The list of well-funded flameouts we looked at includes companies like NJOY, Pearl Automation, Coin, Plastc, and Jawbone, as well as lesser-funded startups like Inq Mobile, Bia Sport, Electroloom, and others.

(For a full list of the top 9 reasons for consumer hardware failures and the relative frequency of each in causing startups’ demise, download the complete whitepaper.)

It’s notable though, that while failure may be common among hardware startups, there always seems to be a second act.

After the asset sale in July 2017, Jawbone co-founder/CEO Hosain Rahman found investors to keep the company’s pulse alive in a related venture: According to reports, former Jawbone financier BlackRock has a stake in Rahman’s new effort, Jawbone Health Hub, which will sell health-related software and hardware.

So it seems to go in consumer hardware: Despite the huge challenges of building a successful business in this space (even with massive funding), investors and entrepreneurs never stop chasing the dream of creating the next mass-market product.

Ignoring the tired-but-true cliche that “hardware is hard,” they look past the graveyard of once-praised failed startups, including Jawbone, Juicero, Flip, Pebble, and others.

And they try again … and again.

Investors continue to pile into consumer hardware

Part of the reason they do so is that investors and crowdfunding sites keep putting cash in their pockets. Entrepreneurs continue to raise funds through Kickstarter or the early-stage markets based on their aspirations to build a future consumer hardware empire.

The second quarter of 2017 saw nearly 140 deals and $1.2B in funding to consumer hardware startups. And last year was a record year for deals and dollars. Some $4.4B went into consumer hardware across 624 separate deals. Half of the activity went to early-stage opportunities, including nascent companies in emerging areas like robotics, smart-home solutions, and AR/VR. Three early-stage upstarts to raise last year included robotics startup ROOBO, “intelligent oven” maker June, and VR-headset developer Fove.

Consumer hardware startups continue emerging at a fast clip.

When we look at data on how many companies in this category receive their first round of outside funding in each year, the number keeps going up.

That means entrepreneurs and investors continue to believe in consumer hardware innovation, despite the odds being stacked against them.

The number of new consumer hardware startups hit an all-time high last year with 450+ first-time financings, including rounds to connected-home company Latch (maker of a smart door lock) and Rythm (maker of the Dreem, a wearable device designed to improve sleep quality).

“Investors have a deep-seated bias against hardware,” Paul Graham wrote in 2012, citing the conventional wisdom that software businesses can scale up faster and more cheaply than hardware businesses.

However, the data stretching back to that year tells a different story — as long as crowdfunding sites are included in a stretched definition of “investors.”

Crowdfunding actually plays a big role in the consumer hardware ecosystem and the proliferation of problematic startups: Sites like Kickstarter and IndieGogo make it possible for hardware entrepreneurs to raise money (or even take pre-orders) for concept designs or poorly functioning prototypes that would never pass VC muster.

Entrepreneurs often believe the exposure will help them land the VC funding that will bring their wares to life, but as our funnel data shows, that doesn’t happen often.

Another notable trend emerges from the funding data: There’s been a significant run-up in the size of late-stage rounds.

The median late-stage round size peaked at $45.5M in 2016, after three consecutive years of deal size increases.

Chasing the big exit

Is investor’s confidence in consumer hardware warranted? IPOs in the consumer hardware space are rare, and for every multibillion dollar acquisition achieved by makers of Beats headphones, Nest thermostat, or Oculus Rift headset, there’s a trail of postmortems by the creators of the Pebble smartwatch, Narrative Clip camera, Angel Sensor wristband, and so many others.

Only 17 consumer hardware startups have gone public since the start of 2012, and the category has averaged less than 50 total exits per year over the last five years. However, there have been over 55 exits per year in each of the last 3 years.

The brutal statistics on consumer hardware failure

For any startup, the path toward success is brutally difficult.

We’ve tracked a tech startup’s chances of success after raising an initial seed round, including both hardware and software companies. Only 46% of them will succeed in raising even just one additional round of funding.

We also found that 70% of them will die or become “zombies,” i.e. self-sustaining.

These are the walking dead of the venture ecosystem which may be earning revenue but aren’t successful enough to IPO or be the next billion-dollar M&A.

As hard as it is for all tech startups, it’s even more difficult for consumer hardware companies. See the data below.

As the graphic shows, they have a very small chance of survival.

Only 24% raised a second round compared to 46% for tech companies generally. A full 97% of the consumer hardware companies we tracked died or became zombie companies. Although we did include business plan competitions and crowdfunding in our hardware funnel, the stark difference cannot be explained away fully.

In all, 56% of the 382 consumer hardware startups analyzed raised their first funds on a site like Kickstarter or IndieGogo.

The median size of those crowdfunding raises was just $210,000 — providing very little runway to support hardware manufacturing, marketing, or sales costs.

Intuitively, it makes sense that many hardware startups fail after one round of financing.

For hardware startups — which face the added need to build consumer-ready physical items before going to market — a small seed round, incubator/accelerator deal, or crowdfunding raise can rarely take a startup’s product beyond the prototyping phase.

Startups are likely raising money to get to a limited release stage, and then finding that there is not a large enough market for their product to justify a larger raise and production at scale. Indeed, as we saw above, lack of consumer demand was the №1 reason for product failure.

We also dug into consumer hardware zombie companies to see roughly how many of them were likely to be active at all.

Since startups don’t typically publicize their failure, and maintain their websites and even social media accounts even after operations have ceased, we used web traffic data as a gauge to get a rough idea of how many of the zombie companies are likely dead outright.

We found that among the consumer hardware startups in the CBI database that haven’t raised funding since 2014, 57% see negligible levels of website traffic, almost certainly indicating a defunct operation.

As we mentioned the other side of the coin is the occasional big exit for hardware startups, including Facebook’s acquisition of Oculus VR for $2B in March 2014.

Despite the long odds, not all hardware startups are lost. Get the full reportfor profiles of startups still in contention for a significant exit, followed by an analysis of two of the most prominent and well-funded hardware startup failures of recent times: Juicero and Jawbone.

If you’d like even more data on the most (and least) successful startups out there, be sure to check out the CB Insights platform or subscribe to our daily newsletter to follow the biggest news — and biggest blowouts — in the tech world as they happen.