TeaBot’s Rehman Merali says good hardware companies don’t just sell hardware

The razorblade business model — where companies don’t sell an actual product on its own, but make revenue off the refills — is a popular one. But for large hardware companies that sell products like office printers, alternative methods of gaining revenue like charging a per-page fee instead of a one-time price is more viable.

TeaBot co-founder Rehman Merali spoke at TechToronto a few weeks ago to share how his company found success with their self-serve tea kiosk by using the latter model. When Merali and his co-founder started out, they approached real estate agents and offered to install the bot for free and write a cheque to them based on the revenue. He says it’s not about selling the bot, he says, but it’s about selling a high quality tea. “The recurring revenue model is inherent. Like the razorblade model, we’re selling a consumable.”

Merali said that with this model, companies can get their product to market faster, “Compared to the other companies that are constantly iterating before they put it in their customer’s hands, we put our early prototypes out before they were finished,” he said. “Those early prototypes are now retired but we still sold our product because our product is tea, not the bot.”

Watch the whole talk, including some of the cons of this model, below: