1. Why Hardware Startups are the Future
Curtis MacDonald
@curtismacdonal
www.htgf.de
www.startupde.com
c.macdonald@htgf.de

2. Last 15 Years…
Hardware Startups – historically not loved by VCs

3. 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

4. Historically Hardware Startup Challenges
Development Manufacturing Distribution
1. Ramp Up Time
2. Electronics
3. Housing
4. Assembly

5. Historically Hardware Startup Challenges
Development Manufacturing Distribution
1. Fulfillment
2. Direct / indirect sales
3. Retail squeeze

6. Happening Now…
Hardware Startups – present and future

7. Development – Electronics and Housing

8. 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

9. 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

10. 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
Investmentsin€m
Volume
Volume Investment Total
Hardware Kickstarter
Projects
0
2
4
6
8
10
12
14
16
2010 2011 2012
HTGF Hardware Investments
~30%
Portfolio

11. • 2000‘s: Software Barriers to entry lowered
• 2010‘s: Hardware Barriers to entry lowered
Trends

12. • 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

13. 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

14. 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. €+

15. • 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

16. • 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

17. • Venturebeat, “Don’t be Furby: What investors look for in hardware startups”
• Skip Fleshman, “Why VCs should love hardware startups”
• Flickr/ UmHealthSystem
Sources