SCiO and the rise of hardware start-ups at TechCrunch

Dror Sharon demonstrates the SCiO, which can quickly scan items to determine their chemical composition

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Forget social applications, and take your head out of the cloud: let's get physical. For decades now, technology start-ups have focused on creating software - but 2014 looks to be the year of hardware hopefuls.

Dror Sharon holds up a tiny device around the size of a matchbook, just a few inches from the side a shiny red apple.

He presses a button which directs a blue circle of light onto the fruit. In a few seconds, his phone dings, and voila: the sugar count, and other molecular information about the apple, pop up on the smartphone screen.

"Pretty sweet," he says.

It's not clear if he's referring to the fruit or the technology.

Start Quote

It's gotten much less capital-intense to build a hardware start-up and much less risky”

End Quote Boris Wertz Version One Ventures

A project three years in the making, the tiny device is a SCiO, which Mr Sharon claims is the world's first cheap, accessible molecular spectrometer. Costing $199 (£117), it can scan anything from food to jewellery and instantly reveal the chemical make-up of the object.

Mr Sharon, who is co-founder of Consumer Physics, the firm behind the device, says he hopes the SCiO can be the "Google" for the physical world: a way to instantly search and discover what makes up the objects around us.

Others, however, have questioned if the tech is too good to be true, asking just how much accurate information such a device can provide.

Despite such doubts, SCiO, which was just unveiled last week, has already raised over $950,000 on the crowd-founding platform Kickstarter - more than quadruple the firm's initial goal of $200,000 - with 39 more days to go.

Getting softer

The saying about hardware used to be that it is called "hard" for a reason.

Tango hand PC Tango is one of several hardware start-ups hoping to appeal to investors at TechCrunch

But now, "it's gotten much less capital intense to build a hardware start-up and much less risky," says investor Boris Wertz, founding partner of Version One Ventures.

Mr Wertz says the rise of 3-D printing, the ubiquity of smartphones, which can be used as controllers, and better manufacturing processes have all contributed to making it easier for many hardware entrepreneurs to get their products made quickly, without putting too much money on the line.

Start Quote

People are realising that we live in the real world...and while software is awesome, you still need hardware in the loop”

End Quote Scott Miller Dragon Innovation

And that's led to a hardware renaissance, with many hardware firms debuting products and grabbing attention at this week's TechCrunch Disrupt - one of the year's biggest tech events, where new companies jostle for funding and a chance at becoming the next Twitter or Facebook.

Two of the finalists of the competitive "Start-Up Battlefield" are hardware firms: Tango PC, which makes a smartphone-size Windows PC using "space technology" and Mink, a make-up printer.

With attention has come money: according to Dow Jones VentureSource, more than $869m was invested in hardware start-ups in 2013, nearly twice the $422m invested in 2012.

Showing the money

Part of what is attracting investors like Mr Wertz and others is that hardware firms can now first display prototypes and gauge interest by putting their projects on crowd-funding sites.

"Crowd-funding is just perfectly suited for hardware," says Scott Miller, founder of Dragon Innovation, which helps firms raise money and manufacture products, primarily in China.

Dragon Innovation group photo Scott Miller (l) runs Dragon Innovation, which helps hardware firms get their products manufactured

Mr Miller, who worked at iRobot, Disney and Hasbro before co-founding Dragon, says that "in the old days you'd do these focus groups and they'd just tell you what you want to hear".

"When you have people vote with their wallets for something that doesn't exist, that's a strong indicator that you're on the right track," he adds.

Take, for instance, Acoustic Stream, a device that sits in acoustic instruments like guitars and wirelessly transmits both recordings and information about the moisture in the instrument to a users' smartphone or tablet.

Bob Bean, the founder, said he created several prototypes before putting the first version on Kickstarter last month.

After raising $55,000 from 418 backers, he says he was able to then go to investors at events like TechCrunch with a better pitch to get them to help fund a larger production run.

"Kickstarter validated the product concept, because [I] think it's a good idea, but do other musicians think it's a good idea and, more importantly, will they pay for it," he says.

AcousticStream device on inside of acoustic guitar Acoustic Stream capitalised on two trends: the rise of smartphones and the ease of crowdfunding
Too much of a good thing

But success, of course, does have its downsides.

Mr Sharon says in the first few days that the SCiO was live on Kickstarter, he slept just two hours - in his car, outside the office.

He says that interest has far exceeded his expectations, but that he still hopes to ship the first devices in the fall, with a commercial prototype by Christmas.

Scio screengrab of nutrition information SCiO's creators have created sample applications that they hope developers will build on in the future

However, some entrepreneurs have found themselves unprepared for success, with delays and disappointment. Just last week, Washington State Attorney General Bob Ferguson filed what is believed to be the first consumer-protection lawsuit involving crowd-funding.

"It might be easy to produce 100 copies of the piece you designed, but it's much harder to produce a thousand or a million," says Mr Wertz.

That's why, he adds, while it is easier than ever for consumers to back a project with their wallet, for big investors, hardware is "still a difficult category".

That's why talk of a hardware revolution continues, as investors wait to see more successful firms like FitBit and the Pebble watch go from prototype to success.

"We're just at the beginning," says Mr Miller.

"People are realising that we live in the real world - the world of atoms - and while software is awesome, you still need hardware in the loop."

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