Hardware trends in 3 sentences:
Hardware manufacturing was challenging due to the difficulties of prototyping, offshoring, and lack of investor interest. However, the rise of hackerspaces, 3D printing, lower China wages, and increased VC funding in hardware has made hardware development easier. The growth of connected devices, wearables, and the Internet of Things is driving more investment and opportunities in hardware.
29. 2011 Kickstarter
0.46%
of all projects
were hardware
120
Hardware projects
on Kickstarter
649
Product Design
projects
26k
Total projects
on Kickstarter
$2.5M
Hardware project
dollars raised
2.43%
of money raised
on Kickstarter
30. 2012 Kickstarter
0.58%
of all projects
were hardware
239
Hardware projects
on Kickstarter
1373
Product Design
projects
41.4k
Total projects
on Kickstarter
$9.7M
Hardware project
dollars raised
3.02%
of money raised
on Kickstarter
31. 2013 Kickstarter
1.7%
of all projects
were hardware
784
Hardware projects
on Kickstarter
2453
Product Design
projects
46k
Total projects
on Kickstarter
$46.6M
Hardware project
dollars raised
9.94%
of money raised
on Kickstarter
Nearshoring is gaining in popularity as manufacturing wages in China continue to rise. Although no official Chinese wage data has been released since 2009, in several industries it is now cheaper to hire workers in Mexico. US companies are moving manufacturing to Mexico, across the spectrum - both large automakers, and in startups such as 3D Robotics.
Besides wages, considerations include costs of shipping a 40-foot container, the exchange rate, time differences, language barriers, and the challenges of managing a far-flung supply chain.
Reshoring is largely made possible by robots. This is a trend within a trend. Industrial robots are getting increasingly powerful, and dropping in price. They are changing the face of labor around the world.
Robot density is the ratio of robots to human workers. Countries with high density have 27-40 robots per 100,000 employees. China currently has 2. That is expected to change. Chinese manufacturing is becoming automated as well. This is driving demand for more robots.
Historically, prices are in the $100k range.
But that’s changing. Smarter robots are changing the way things are made, and reshaping the global economy.
The new robots of today are safer, play well with humans, and can be trained to perform many different tasks.
Getting into dollars here…
Crowdfunding gives potential founders the opportunity to raise a bit of money without having to go to angels and venture capitalists. It’s most often used to finance the first run of a product and allow entrepreneurs to field-test their ideas. It’s been an invaluable addition to the funding ecosystem for hardware.
On Kickstarter, we see hardware, tech, and product design categories progressively gaining strength. Number of projects are up. Dollars are up. And both are increasing as a percentage of proects and funds on Kickstarter.
And VCs are getting in the game. This chart shows the prevalence of early-stage venture deals, Series A and below. It does include medical devices. And what we’re seeing here is the number of early-stage funding events increasing every year
Hardware startups raise more in the early days.
But follow-ons are hard to come by. The mean success rate across all sectors is 19.8%. On average, only 10% of hardware startups raise a second round.
Looking at total dollars across all stages, it’s clear that now is a great time to be a hardware startup raising money.
These are the general sectors that entrepreneurs are starting companies in.
Venture capital deals are being done in most of these sectors. Drones is a subset of robotics, but it’s attracting an increasing amount of interest so I broke it out here. In 2013, VC dollars flowing into drones hit $79 million.
Investments are likely to continue, as the hardware sector has seen a number of high-profile and lucrative exits. Robotics alone: in 2013 Google purchased 7 robotics companies
Of course, it’s not just robotics. Virtual reality, 3D printing, and connected devices all had significant exits.
Make no mistake about it: hardware is still hard.
But the trends we’re seeing in the startup ecosystem - protoyping, manufacturing, fundraising – they all indicate that it’s getting progressively easier to get from that idea on a napkin to a space on the shelf.
Marc Andreessen once said, “Six decades into the computer revolution, four decades since the invention of the microprocessor, and two decades into the rise of the modern Internet, all of the technology required to transform industries through software finally works and can be widely delivered at global scale.”
And while it may yet be early to make the same claim about hardware, the hardware revolution is happening. Which means that we’re in for some truly exciting developments, as today’s creators leverage the power of software and the promise of hardware, and bring new and compelling connected devices into the world.
Thank you.