Feld, Herron, and O’Driscoll Talk Startups and Investments at Eureka Park
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that impressed Herron included Reno, NV–based Securifi, whose touch-screen router can connect to sensors in homes. “I want to know if someone left the backdoor open so I can yell at them to go close it,” she said.
Scale Venture’s O’Driscoll shared in his peers’ appreciation for Cubelets and health tracking products. He said he looks for business and personal productivity innovations, particularly from companies that can scale up to serve large markets. “I love stuff that makes your working life easier,” he said. O’Driscoll’s investments include Box; San Francisco–based electronic signature company DocuSign, and digital pen maker Livescribe in Oakland, CA. He also maintains an almost unrequited love for the music industry. “I long to do a music deal that actually works,” he said. “I would like to see a music deal where the music recording industry did not stick it to the company and say ‘we need more money’. It drives me insane.”
The conversation soon shifted to talk of the role crowdfunding plays in the evolution of ideas and products. O’Driscoll said crowdfunding through such platforms as Kickstarter in New York and Indiegogo in San Francisco changed the ability of innovators to create prototypes and to get products to consumers. “There’s a number of folks who wouldn’t be here [at CES] without that,” he said.
Tech Cocktail’s Gruber pointed out Hermosa Beach, CA’s Intuitive Motion, an exhibitor at Eureka Park, raised some $250,000 through Kickstarter. The cash helped the company design and ship its first run of ZBoard weight-sensing electric skateboards.
“Kickstarter is awesome,” Feld said. “I probably spend a couple of thousand dollars a month sponsoring Kickstarter projects.” He said crowdfunding drives costs lower for creating prototypes and initial product runs. “You don’t have to crank of up this huge manufacturing process.”
Though he makes donations to projects via Kickstarter, Feld said he does not regard crowdfunding platforms as funding vehicles. “[The projects] are not things we’d invest in as a firm,” he said. “It’s not the kind of stuff we get excited about. It’s just another reference point.” However he does see benefits in prefunding products through such platforms to develop prototypes. “There is a whole discussion about crowdfunding, which is different than the discussion about prefunding your product using something like Kickstarter,” he said. “They’re very conflated right now. People are focused about that from the outside looking in.”
O’Driscoll said with crowdfunding help “manufacturing a prototype at the early stage can be more cost-effectively done in the U.S.” However crowdfunding alone is not enough, he said, to scale products up for high-volume distribution. He offered a bit of caution for companies eager to burn cash quickly trying to push their products out. “What you can’t afford to do as a startup is spend $10 million to put [your products] in 5,000 stores on October 1 and then get a phone call on Christmas to see if you’re bankrupt or not,” he said. “That’s no way to live your life.”
Herron said she views crowdfunding as a kind of a reference point to get a feel for how ideas are catching on with the paying public. “Many investors look at who’s trending the most on Kickstarter because it is good evidence of consumer demand,” she said. “I care a lot more about what’s trending on Kickstarter than I do about what’s trending on AngelList.”
Regardless of how products get funding, putting them into customers’ hands still remains essential for startups. Looking back a decade, Feld said retail served as the primary means of mass distribution for consumer products. Though virtual distribution has grown, he believes retailers remain relevant for reaching the public. “There’s a mental model, especially among a lot of software investors, that retail distribution doesn’t matter anymore,” he said. “That turns out to be bullshit. When you get to that scale where you are selling more than a million units per year, all of the sudden Target, Best Buy, AT&T, and all the storefronts become interesting.”