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Will there be a wave of ‘maker-centric’ companies?

Venturebeat has an article up this morning titled Startups and big corporations embrace the maker movement which reports that the annual Maker Faire has this year introduced a ‘Startup Pavillion’ which it cites as evidence that the maker movement is moving beyond hobbies to being a ‘rich source of economic potential’. Here’s a selection of the 20-odd startups at Maker Faire:

  • SeeedStudio, an “open hardware company develops and brings to market innovative and cost-effective prototyping solutions for hobbyists and aspiring inventors.”
  • RedBearLab, which makes a wearable BlueTooth 4.0 board you can use to interface with an iPhone or Android device.
  • Formlabs, makers of a high-resolution 3D printer aimed at engineers and design professionals.
  • Deezmaker, another 3D printer vendor, this one aimed at making an affordable printer called the Bukobot.
  • BioLite, a company that aims to reduce third-world pollution with a small wood-fueled stove that converts heat from the fire into usable electricity, improving combustion while allowing users to charge small devices.
  • BlinkM, makers of multicolored, programmable LED lights for use in your electronics projects.
  • Smitten, a maker of handmade “artisan truffles.”

For the last couple of weeks I’ve been asking myself if we are witnessing the beginning of a major trend here or whether there will only ever be a small number of successful ‘maker-centric’ or innovative hardware companies.

Here are my observations and emerging thoughts:

  1. the number of startups in this space is definitely increasing – there are a small number that have been around for a few years, like Jawbone, Micro Mobility Scooters, GoPro, and DFJ Esprit portfolio company Graze, and a much larger number that have been founded more recently, including Nest, Sphero, Local Motors, and Pebble.
  2. A number of factors are combining that enable faster product iteration in hardware
    • 3D printing is reducing the cost of prototyping
    • Short run manufacturing is getting cheaper and cheaper due to robot manufacturing and improved supply chain management techniques
    • The labour component of manufacturing is falling increasing the feasibility of local manufacturing
  3. Kickstarter and other crowdfunding platforms are radically improving capital efficiency because customers are now paying for product months in advance and because first demand validation is now virtually free
  4. Arduino and other open source hardware platforms are reducing costs in the same way open source software reduced costs for web companies
  5. Companies are aggregating global audiences and selling direct making new product categories viable which wouldn’t have worked when national distribution limited customers to single countries – companies which build communities around their interest area are particularly powerful in this regard – e.g. DIY Drones
  6. Consumers like buying from companies that embrace the ‘maker’ ethos – i.e. companies that have a human face and a genuine interest in delighting their customers
  7. In contrast to other investment themes that turned out big it is unclear how many opportunities there are in innovative hardware – most of the companies listed above look obvious in hindsight, but it isn’t easy to list large numbers of new opportunities in the way it was for ecommerce or mobile, or to see how these companies will transform the world in the way social media has
  8. It is still unclear how much capital these businesses will require or what the exit market will be like

Writing and reading back this list it strikes me that whilst it is too early to know how big this wave will be there is more than enough going on to want to start making some investments.

  • http://www.gamesbrief.com Nicholas Lovell

    I totally agree. One thing to bear in mind is that 3D printing might be a bit of a red herring. It’s very cool and changes many things, particularly rapid prototyping, but it is the advent of digital manufacturing (of which 3D printing is one component) that is so exciting.

    It’s CAD+Etsy+3D printing + relationships with customers through Twitter and Pinterest and Facebook and your website + new sources of crowdfunding.

    So while much of the noise is about 3D printing, the investment opportunities may be more about companies using the web and all its attendant technologies to disrupt the process of discovering/guessing what customers want in the physical world and making it for them cost-effectively.

  • http://RogerEllman.com/ Roger Ellman

    I think there will be much “trying and doing” – a la early days of “throwing up a website” and seeing what happens. (It still do something close to that!)

    But there is going to be an explosion of things made, tried, improved and then going – the ones that work at least – mainstream.

    Investing will be a broad learning curve. Progress on the other hand is going to take another leap forward by allowing anyone who wants to have a garage workshop to give their ideas a try.

    I think what will also be worth watching, perhaps more so, as an investment opportunity, will be the geopolitical or perhaps geo-economic changes that could, may and certainly can come to be. Greece could manufacture many things it cannot now do, so could Myanmar or Spain. Excluding transport costs, excluding inventory requirements and applying design of local suitability and preferences, on the manufacturing and industrial level….that’s to be a big thing.

    There will in the miox, be a wave – no doubt about it. Surfing that…it’s pre Beach Boys time all over again!

  • http://www.theequitykicker.com brisbourne

    Hi Nicholas – I think you are right. As I’ve looked at more companies in this space it’s become clear that laser cutting, robot manufacturing and short run manufacturing in China are all more important than 3D printing.

  • http://www.gamesbrief.com Nicholas Lovell

    It’s funny that the bit that will make digital manufacturing more visible and acceptable may not be where the most interesting investment opportunities lie.

  • http://www.theequitykicker.com brisbourne

    indeed

  • http://RogerEllman.com/ Roger Ellman

    True, historically, of all new inventions and concepts – at least initially. Takes the showcase to make the main case!