The biggest thing that I noticed in 2013 was the amount of energy in small hardware startups. Even without a really robust infrastructure for the Internet of Things (IoT), the same kinds of developers who have been launching software companies are now switching to hardware. In truth, the line between hardware and software is becoming negligible because these new devices are purpose-built virtual machines that get their smarts from internet-connected software.
This is not a new idea. title="joi ito, personal site">Joi Ito, the director of the MIT Media Lab listed “Hardware As The New Software” as one of his trends to watch—for 2013! Ito refers to three startups that grew out of the media lab as examples of this trend, LittleBits, a LEGO-like “opensource library of electronic modules” for prototyping IoT ideas, Formlabs, a 3D printing innovator and Twine, a maker of programmable home sensors.
In my own experience, I recently attended the demo day at HAXLR8R in San Francisco. This program sends hardware startup teams to Shenzen, China for three months to design, source and build their prototypes and then come back to SF to find financing. Some of the most interesting companies from this third class of startups included the Roadie Tuner, a smartphone-enabled guitar tuner, Vigo, a headset like device that helps users from dozing off, Petcube, a way to monitor—and play with—your pet remotely and The Dustcloud, a hardware-enabled real world assassins game.
That the rapid progress evidenced by the HAXLR8R startups is even possible points to a radical switch in the barrier to entry for hardware products. As Ito pointed out (last year!) “What’s new this year is that supply chain provider companies are making the cost of manufacturing and risk really, really small. So hardware start-ups are looking like the software start-ups of the previous digital age.” But as promising as this appears, consumer adoption of new technology takes time. Google Glass early adopter Robert Scoble wrote a post yesterday saying that 2014 will not be the year for Glass and pushing wide adoption out to 2020! And he’s a fan of the product.
Another way to look at the hardware trend is that these mostly under $200 devices are actually a great way to sell software. As any app maker knows, it is exceedingly difficult to get consumers to actually pay for apps. This is a problem on the iOS platform, but even more so on Android. Such difficulty leads developers to do all sorts of things that undermine the user experience either in the foreground (like requiring in-app purchases for key functionality) or in the background (like the less-than-transparent selling of user data.) With hardware, consumers expect to pay. And if the software is part of the cost, so be it.
Many of the new hardware devices can be drastically upgraded via software alone, for example the Leap Motion controller. The ability to improve core functionality and add whole new functions through software or hardware add-ons turns these products into potential platforms with streams of recurring revenues. Considering the emphasis on the part of VCs for startups to show revenues, these new hardware companies will fit right in.
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