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Why Hardware Startups are the Future
Curtis MacDonald
@curtismacdonal
www.htgf.de
www.startupde.com
Last 15 Years…
Hardware Startups – historically not loved by VCs
Historically Hardware Startup Challenges
Development Manufacturing Distribution
1. Prototyping expensive
2. Lots of time per iteration
3. Materials and Components
4. Avg 2 years time
Historically Hardware Startup Challenges
Development Manufacturing Distribution
1. Ramp Up Time
2. Electronics
3. Housing
4. Assembly
Historically Hardware Startup Challenges
Development Manufacturing Distribution
1. Fulfillment
2. Direct / indirect sales
3. Retail squeeze
Happening Now…
Hardware Startups – present and future
Development – Electronics and Housing
Local – Expensive per Unit
• Low volume runs plastics and
housing parts, not too expensive
overall
• Low volume runs for electronics ->
“print to volume”
• Electronics still expensive if using
dedicated runs, but using service
bureaus can alleviate a lot of this
problem.
• Fast, weeks or days
China, etc. – Cheap per Unit
• Higher NREs for both Electronics
and Plastics
• Partnering with an OEM for the
electronics can save tremendous
time and NRE cost, at the
expensive of higher unit costs
• Slow, expect months for ramp-up
and for each production run
Manufacturing
Do after volume
demand
Distribution
• Continued growth of
eCommerce shows online
purchasing continuing to
become more mainstream
• Online store for own direct sales
is easy, cheap, and fast to setup
• Fulfillment can be outsourced
easily
Crowd-funding can also be initial
distribution channel
Trends
• The traditional reasons against HW startups are falling away for
investors.
• Enabling technologies, new wave of potential
• Better user experiences, connected to smartphones and each other
0
5
10
15
20
25
0
100
200
300
400
2011 2012 2013 - 1st Half
In
vestm
en
ts i
n €
m
Vo
lum
e
Volume Investment Total
Hardware Kickstarter
Projects
0
2
4
6
8
10
12
14
16
2010 2011 2012
HTGF Hardware Investments
~30%
Portfolio
• 2000‘s: Software Barriers to entry lowered
• 2010‘s: Hardware Barriers to entry lowered
Trends
• Multiple products leveraging core competencies
• If „Hit Business“, show the hit
• Nest, Jawbone
Product Portfolio
• Product leading a high growth market
• Arduino, Makerbot Enabling
• Gateway technologies
• Leap Motion, Eyefactive
Platform / Ecosystem
What Investors are looking for
Why Hardware Startups are the Future
Curtis MacDonald
@curtismacdonal
www.htgf.de
www.startupde.com
HTGF Overview
• 500T€- 2Mio.€ in German Seed Stage
• 338 portfolio companies
HTGF Overview
• HTGF Overview
• Two Seed Funds totaling ~550 Mio.€
• 338 portfolio companies
• 500T€ + 2Mio.€ <- primarily German Seed Stage
• Experienced team of 24 VCs covering Software, Hardware, and
Bio/Medical
• 429 Follow-on Financing from other VCs Totalling 600 Mio. €+
• Wired.com „Here’s How to Make Hardware Startups More Than Just a Fad”
• esg.-global.com “Open Source Hardware May Have Real Impact”
• Wired Magazine, “Build It. Share It. Profit. Can Open Source Hardware Work?”
• Oshwa.org, “Brief History of Open Source Hardware Organizations and Definitions ”
• Open Electronics, “The Truth About Open Source Hardware Business Models”
• Cnet News, “Five trends driving the hardware boom”
• CNBC, “Software Out, Hardware Start-Ups In”
• PEHUB, “VCJ Report: Hardware is Sexy Again! “
• Wired, “Hardware, the Ugly Stepchild of Venture Capital, Is Having a Glamour
Moment”
Sources
• Crowdsourcing.org
• Dstevenwhite.com / US Census data
• Dshen.com, David Shen
• Adafruit, „Building Retail Distribution“
• Forbes.com, „Manufacturing in the States“
• http://blog.noupsi.de, Renee DiResta‘s excellent article „Hardware, by the numbers“.
• Flickr/ Alan Levine
• Flickr/Eileen M. Kane
• Flickr/John Biehler
• Flickr/ Lima Pix
Sources
• Venturebeat, “Don’t be Furby: What investors look for in hardware startups”
• Skip Fleshman, “Why VCs should love hardware startups”
• Flickr/ UmHealthSystem
Sources
