Venture Capital

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

By May 20, 2013 6 Comments

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.