Tag Archives: Indiegogo

Crowdfunding Highlights Wearable Startups Shortcomings, but May Prove Valuable for Corporate Players

Crowdfunding – where individuals raise money for a project (campaign) in exchange for a pre-release product – has become a popular method for wearable electronics developers to raise money. Kickstarter, the largest non-personal crowdfunding platform founded in 2009, helped raise $500 million for projects in 2014 and $1.72 billion since inception. Crowdfunding has seen its share of wearable success stories; for example, Pebble (a smartwatch) is currently the third largest crowdfunding project, reaching $20 million by March 2015. Corporations are starting to take the lead and also use crowdfunding for their wearable projects; Sony launched a crowdfunding platform in July 2015, which includes projects like Sony’s SmartWatch.

Only 34% of wearable projects on Kickstarter were able to reach their goal amount, and companies also struggle to hit their crowdfunding commitments. To understand crowdfunding in wearables, we analyzed the top wearable projects from top crowdfunding sites Kickstarter and Indiegogo.

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None of the top five wearable companies on Kickstarter or Indiegogo were able to ship their products out in the estimated timeframe; besides Pebble’s second campaign, these campaigns were on average late by over eight months. This delay reflects the inexperience of such campaigns on their inability to translate from a prototype to high volume manufacturing, and can bring in negative feedback from backers and potential customers. In addition many of these companies required additional funding (both Pebble and Oculus Rift raised rounds over $10 million before their deliveries were fulfilled) as the amount from crowdfunding was not enough. Five companies were able to raise rounds much higher than their initial seed round, which shows that successful crowdfunding demonstrates to investors the market potential for a novel technology.

Post-campaign is another issue entirely; besides Oculus (which Facebook acquired for $2 billion), most of these companies were unable to capitalize on their crowdfunding success. For example, three of these Indiegogo campaigns are unable to deliver; Kryeos went bankrupt before it could complete shipments, Healbe’s product failed to meet consumer expectations, and Ritot doesn’t even have a prototype. Larger companies, like Sony, have a better chance over startups in making successful crowdfunding campaigns. By running its own crowdfunding platform, Sony can get valuable insight on the demographics of customers of new technology to determine if a project in a new area is worth pursuing (like how startups attracted investors with crowdfunding data). Not only does it show which projects are worthwhile, but the demographics and feedback from the campaign can give insight on how to tailor the project further to the needs of customers. Large companies are also able to deliver products in a timely manner as they have the financial backing and manufacturing partnerships to back up the campaign, which will help retain customer loyalty that has plagued the growth of some of the crowdfunded startups.

The Innovation Gene-ie is Out of the Bottle; Let’s Wish for Better Genetic Tools and Rules

Biological and genetic technologies like DNA sequencing and synthesis are advancing rapidly, outpacing even Moore’s Law of semiconductor performance (as Rob Carlson has pointed out). Genetic technologies are now at a point where long-standing assumptions about a wide range of legal, ethical, and societal issues are being debated or even overturned:

  • Collective (bioethics) versus individual (grass-roots funding) rights. Several U.S. states voted on mandatory labeling of GMO foods as a consumer protection, but sloppy science and sloppier lawmaking led to their defeat (client registration required) at the ballot box – and a victory for ag biotech. At the same time, civil society advocates ETC Group tried to stop the Kickstarter crowdfunding campaign of Glowing Plant, a house plant genetically modified with a bioluminescent non-toxic protein.[1] ETC did convince crowd-funding site Kickstarter (client registration required) to prohibit future campaigns for genetic technologies, but – possibly eyeing GlowingPlant’s massively successful $484,000 campaign – Kickstarter competitor Indiegogo rolled out the welcome mat (ironically, ETC’s “kickstopper” campaign there raised just 10% of its goal). In both cases, popular sentiment sustained pro-genetic technology, even though the developers ranged in scale from global giant to garage startup – the latter putting ETC in the odd position of being the bully. Even if you wanted to stop it, could you? As startups and garage biotech groups like DIYBio and BioCurious disseminate access, know-how, and funding, they are sharing data electronically on how to make their own glowing pets and plants and snacks, circumventing antiquated restrictions and IP schemes.

Is it time for a Genetic Frontier Foundation?

To someone from the information technology (IT) world, these and other genetic technology (GT) issues will sound very familiar: open source, patent trolls, privacy, security, innovation – and the list goes on. The similarity is not coincidental: electronic and genetic data have both transitioned from a past when they were closely tied to a physical substrate, to a future where they are simply data – easily copied, changed, simulated, and transmitted. In IT, the non-profit Electronic Frontier Foundation (EFF) has played an indispensable role in representing citizens, entrepreneurs, and other smaller and newer players – but larger ones, as well, e.g. on Net Neutrality – in both updating and preserving technology-associated rights from regulatory overreach and unfair, uncompetitive practices.

The EFF addresses issues ranging across ownership of intellectual property, free speech and information transparency, ethics, and innovation – witness IP (Open Source, Fair Use, patent trolls) access (Rebroadcasting, Digital Rights Management, Broadcast Flag), privacy (Do Not Track, NSA spying), and many other topics. As such, the EFF offers a model for how the users and developers of genetic technologies might collaborate to address the issues they jointly face. Its website says:

When our freedoms in the networked world come under attack, the Electronic Frontier Foundation (EFF) is the first line of defense… New ideas challenge the status quo. That’s why people who make cool tools get so much heat from the old guard – and their lawyers.

Do genetic technologies need a similar body? Many GT organizations and laws do exist to address these and similar issues – like Genetic Alliance in personal genetic privacy, BioBricks Foundation in open-source gene IP, BioFAB in bioethics, and BIO in regulatory matters. Sometimes these groups are on the same side, but they can also be unaware of each other or even in opposition (when their economic interests diverge). And they are frankly not as aggressive or effective as the EFF has been. The legal, economic, and ethical aspects of genetic technology are deeply interwoven, and they share many of the same stakeholders, which is why it makes sense now to consider them together. Moreover, these issues are just beginning in genetic tech (whereas the EFF has stayed pretty busy with new IT issues throughout the nearly 25 years since its founding).

Just as the EFF was founded to reinforce or reform law, regulation, and policy around digital technologies, we now need a “Genetic Frontier Foundation” to ensure the same beneficial co-evolution of genetic technologies and the rules that govern their use in treating disease, increasing food supply – and yes, glowing house plants. Despite today’s outmoded regulatory, IP, and ethical environments, genetic technologies – and the number of people who know how to use or make them – have grown so far and so fast, it’s nearly magical. They will only accelerate, not slow or retreat back into the bottle. With coordinated advocacy, developers and users will continue to reap the benefits we all wish for.

 


[1] The same protein is used to make GloFish pets, which are approved by the U.S. Food & Drug Administration (which has jurisdiction over biotech animals), and found to be safe by the United States Department of Agriculture and United States Fish and Wildlife Service. They are banned in only one state, California. Notably, FDA considers GFP to be an “animal drug,” and GFP is in the middle of a notoriously complex patent pool (started by GE Healthcare), opening up further legal and regulatory questions around its ownership and use.

As VCs Retreat Four New, Nimble Innovation Funding Structures Step In

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Venture capital is seemingly synonymous with innovation. Venture-backed software companies like Google, Facebook, and Twitter have launched products that billions of consumers use on a daily basis, and their funders have reaped huge dividends.  VC has also catalyzed successful biotech and cleantech companies like Genentech and Solazyme. Thousands of important, successful companies would not exist if it had not been for venture investors providing funding and business acumen to entrepreneurs and inventors.

And that’s why it’s so worrisome that traditional Venture Capitalists are in increasingly obvious retreat. Over the past five years:

  • VCs are doing less: dollars and deal count are down. According to the National Venture Capital Association (NVCA), venture funds peaked in 2011 with $29.7 billion going into 3986 deals. In 2012 they fell to $27 billion, in 3796 deals; and while 2013 is not wrapped, it looks to be a down year again. And VCs are raising less money to invest; through September this year they had brought in $11.6 billion, a plunge from $16.2 billion in the first nine months of 2012. In fact, for 11 of the past 13 years, VCs invested more money than they raised. All these declining numbers point to a long-term shrinkage of VC – meaning less money and mentorship for innovation.
  • VCs are struggling to create value, especially outside software and drugs. Medical biotech and software have long been the dominant categories of VC investment (taking about 15% and 60% respectively). But with global warming fears and oil prices soaring from 2005-2008, many investors briefly branched out into “cleantech.” For example, VC Khosla just put another $50 million into its biofuels maker KiOR (client registration required), which has been on a downward spiral of missed production milestones, producing just 80,000 gallons to date this year (it claimed it would produce more than 3 million gallons by the end of 2013). VCs’ other forays (client registration required) into areas like nanomaterials have fared similarly. Sadly, the only return on many of those investments was to make VCs realize that they don’t understand the science, engineering, and economic constraints on the technology, and even if they did, commercializing it takes too long for VCs to wait.

Fortunately, several alternatives to traditional venture capital are arising to take up the slack. Where will they complement VC, and where will they replace it?

  • Corporate VC invests $5 billion: Corporate VCs like Intel Capital, BASF Ventures, and Monsanto Growth Ventures are large corporations’ way of staying abreast of, and investing in, promising new technologies they find. Last year they invested about $3-5 billion – less than a fourth of conventional VC, but CVCs put it towards areas like industrial and agricultural technology that traditional VCs don’t know how to commercialize.
  • Conscious Capital (aka “impact investment”) grows to $9 billion: As legendary investor Warren Buffett recently argued in a New York Times op/ed article, charity has the potential to better achieve its goals if it adopts more business-minded principles. JP Morgan recently estimated that impact investment will grow by 12.5% this year to $9 billion. And many super-successful entrepreneurs like Jeff Bezos (Amazon), Elon Musk and Peter Thiel (PayPal), and Richard Branson set aside money for pursuing technically audacious goals (client registration required). VCs can’t make such long-term, high-risk bets with their partners’ money, but firms like Bezos Expeditions, Breakout Labs, and the Skoll Foundation can. They are investing in companies like Modern Meadow (client registration required) (which grows meat from cells, lowering the need for both natural resources and animal suffering) and D-Wave (client registration required), the world’s only quantum computer manufacturer.
  • Competitions bring in $2 billion, but have outsized impact: Like business-minded conscience capital, innovation competitions are based on the premise that competing for investment makes the recipients stronger. While high-profile programs like the X Prize and NASA Centennial Challenges are the best-known, the Institute for Competition Sciences, which documents data and best practices in the area, estimates that 30,000 competitions take place worldwide annually. While they are a smaller slice of the overall dollar pie and seldom can fund an innovation entirely, they amplify the value of all other investments into the organization.
  • Crowdfunding bringing $5 billion: Sites like Kickstarter and Indiegogo help small entrepreneurs and inventors to get seed money from thousands of individuals, usually in exchange for the product or merchandise like stickers and t-shirts. Then there are “pure science” crowdfunding sites like Microryza, FundaGeek, and Petridish.org which seek to support experiments and research that may or may not have a tangible return to the donor. Crowdfunding brought innovators some $1.5 billion in 2011, $3 billion in 2012, and will hit $5 billion this year. As with other sources, Crowdfunding’s biggest benefit is not the money – the fundraising campaign brings publicity, customer input, and community-building all at once.

Venture capital is slowly shrinking, while the four new forms of funding – Corporate VC, Competitions, Conscious Capital, and Crowdfunding – are set to pass $20 billion in aggregate, and are growing, fast. In fact, it seems inevitable that they will surpass VC in the coming year or soon thereafter. It’s important to keep in mind that these new forms of funding can both complement traditional venture investment, as well as compete with it by offering better terms inventors and entrepreneurs. Whether they are competing or collaborating, innovation can only benefit from these novel approaches.