Feld, Herron, and O’Driscoll Talk Startups and Investments at Eureka Park
Beyond the glitz of new big ticket electronics, startup innovations sparked chatter at this year’s International CES in Las Vegas—especially after a trio of high-profile VCs came to Eureka Park, the startup-focused exhibitor area at the show.
Frank Gruber, founder of Las Vegas–based media company and events organizer Tech Cocktail, moderated the spirited chat that featured Brad Feld, founder of Foundry Group in Boulder, CO; Christine Herron, director with Intel’s investment arm Intel Capital in Santa Clara, CA; and Rory O’Driscoll, managing director with Scale Venture Partners in Foster City, CA. Startup America Partnership brought them together on opening day of CES at Eureka Park in the Venetian Hotel where they discussed what got their blood racing to invest and the role crowdfunding plays in product development.
Feld, also a co-founder of startup accelerator TechStars, said his firm invests in companies across country, and he’s particularly interested in startups that innovate in human-computer interaction. He joked about a future when self-aware machines dominate their organic creators. “I believe machines have already taken over; they’re just waiting very patiently because they’ve got no incentive to kill us off,” he said.
Matrix-style nightmares aside, Feld said he also funds companies that make their hardware as essential as their software. Foundry’s investments include San Francisco’s Fitbit, a maker of wearable health tracking devices; 3-D printer developer MakerBot in Brooklyn; and Modular Robotics, the Boulder, CO–based maker of Cubelets robot kits for kids. Cube-shaped Cubelets, which were on display at Eureka Park, perform different functions and react based on how they are connected to each other.
Feld said he also likes ideas that are one step away from activities that people already do, such as exercise, and that enhance users’ interaction with the world. Eureka Park exhibits that got him excited included Instabeat, a startup from Lebanon developing waterproof heart rate monitors that affix to swimmers’ goggles. “We’ve got a bunch of stuff for runners and cyclists,” Feld said, “For swimmers, there’s a couple of products and they kind of suck.”
Though Intel’s Herron said she invests in social commerce platforms and some infrastructure platforms, she also takes interest in consumer products such as mobile personal devices. “There’s nothing like making something tangible that you can actually drop on your foot,” she joked. Intel Capital’s investments include Palo Alto–based file sharing service Box, MongoDB developer 10gen in New York, energy management platform developer JouleX in Atlanta, and recipe search site Yummly in Palo Alto. Herron said her team tends to focus on early investments though Intel is stage agnostic.
While she finds Internet investments interesting because they can iterate quickly and generate immediate feedback, physical products such as Cubelets catch her eye as well. “It’s like cool Tinkertoys with the engine attached.” Other Eureka Park exhibitors 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.”