pioneers festival 2013 curtis mac donald - hardware startups

Why Hardware Startups are the Future

Curtis MacDonald

@curtismacdonal

www.htgf.de

www.startupde.com

c.macdonald@htgf.de

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

c.macdonald@htgf.de

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