In 2021, Derek Thompson wrote The End of the Millennial Lifestyle Subsidy, an essay about how Ubers, $5 lunch delivery, and sleek co-working spaces weren’t priced for sustainability. They were bankrolled by investors trying to buy market share before turning a profit.

It worked. For a while…and then valuations dropped, prices increased or pivots were forced.

Today, electronics manufacturers are in a similar spot. A wave of venture-backed companies are targeting EMS as their “ideal customer profile” offering steep discounts, white-glove onboarding, and a roadmap full of buzzword promises.

But there’s a catch: that experience isn’t being paid for by your monthly subscription. It’s being subsidized by someone else’s capital, capital that expects a return.

EMS Companies: If It Feels Too Generous, It Probably Is

There’s nothing wrong with getting a good deal. But if you’re paying $X and getting $5X worth of service, ask yourself who’s covering the gap, and how long that will last.

When EMS companies choose to work with a startup, they’re not just buying a tool. They’re stepping into a venture experiment.

It’s a commonly deployed playbook for venture backed startups: win loyalty now, worry about margins later. The problem? EMS companies aren’t built for easy switching. If you lock in too early, you may end up holding the bag when the subsidy ends, prices increase, or service drops.

Subsidies are seductive. They delay hard choices and make even unsustainable business models look great, at least temporarily.

🚀 Founders: There Is a Way to Do This Right

Raising capital to fund long-term value makes sense. Startups often need a runway to build, test, and get traction. That’s normal.

But don’t confuse subsidizing market entry with ignoring unit economics. If you’re spending $10,000 to land a $5,000 customer, and they churn out, that’s not just a funding strategy. That’s a countdown to implosion.

It’s also important to recognize the challenges of selling software to EMS companies. It isn’t like launching a viral consumer app. You’re helping factories rewire critical workflows. That takes patience, trust, and real understanding of the customer’s operations.

Capital should help you build a durable business, not hide a flawed one.

💸 Investors: EMS is for Work Horses, Not Unicorns

It’s tempting to believe you can transform a sleepy industry with enough capital. But EMS isn’t consumer tech.

I’ve met with several companies and investors that asked: “How do we use our cash to accelerate growth?” My answer? You probably can’t...at least not without fundamentally changing how EMS companies buy and adopt.

The truth is, many EMS buyers aren’t wowed by pitch decks, AI hype, or series X press releases. They want to build a relationship, feel understood, solve a real problem, and see a solution add value to their bottom line. You can’t growth-hack your way to trust, or A/B test your way through change management.

✅ When the Model Does Work

Not all subsidies are bad. Strategic investments can help unlock value that pays off down the line, if the fundamentals make sense.

Here’s when the investor-backed model can work:

• The product solves a painful, expensive problem.
• Customers stay and expand over time.
• Margins improve with scale.
• The startup avoids becoming just another services company in disguise.

But when buying cycles are long, churn is high, and the ROI is just barely positive… you’re in for some tough times sooner or later.