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Tech Startups Begin Making Real Stuff Instead of Websites

Back in April at Popular Mechanics, Glenn Reynolds of Instapundit lamented what he saw as the tendency of today’s science fiction authors to write depressing, dystopian stories instead of the grand exploration epics of old. To look at this another way, Glenn wrote, you’ll notice that many smart young people these days are putting their energy into websites instead of building cool new stuff:

It seems that too many technically savvy people, engineers in particular, are going to work for Web startups or investment firms. There’s nothing wrong with such companies, but we also need engineers to design bold new things for use in the physical world: space colonies instead of social media […]

In the 1950s and 1960s, scientists could cite antibiotics, nuclear energy, and moon flights as evidence that science just plain worked […]

Facebook doesn’t have the same impact—it’s fun, but even its users don’t see it as an achievement on par with Apollo.

Perhaps this is starting to change. The WSJ reports:

A long-shunned Silicon Valley technology sector—consumer-electronics start-ups—is showing some surprising signs of life.

Entrepreneurs in California have quietly launched dozens of small hardware companies, designing everything from smart wristwatches to digital thermostats […]

Venture capital for consumer electronics remains scant compared with the plethora of cash available for Web companies, but investments into hardware start-ups are rising. Venture capitalists put $262.6 million into consumer-electronics companies last year—a fraction of the $5.2 billion that went into consumer Web firms—but that was up more than 50% from $130.4 million in 2010 and $108.8 million in 2009, according to VentureSource […]

Idan Beck, CEO of Incident Technologies, said as more small hardware companies have grabbed consumer interest through Kickstarter, they are proving there’s a market for newfangled devices.

“We used to have to spread a much wider net [to raise money] because of an aversion to funding hardware,” he said. “But now there’s a congregation of people interested in the product category.”

There have been notable success stories, like Square Inc., a company started by former Twitter CEO Jack Dorsey, which offers a credit card reader that plugs into iPads and iPhones for small businesses. Square has been valued at over $3 billion, according to people familiar with the company.

But just as with web startups, there are many failed hardware companies no one has heard about. Raising money and interest in a product and finding buyers and manufacturers can be far more difficult than just starting a website.

Will the trend toward making stuff—interesting, useful, valuable stuff—be a growing part of the technology world in the future? We hope so.

A new moon program this ain’t. But maybe it’s a start.

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  • Jeff W.

    Sorry to be off topic, but I would like to respond to quote from WRM’s excellent article “The Last Compromise.”

    WRM: “Global competition, the full entry of women into the labor force and the start of a new wave of mass immigration following immigration law changes in 1965 has held real wages down”

    My response: America’s open door trade policy, the intense pressure to get all women into the workplace, and open-borders immigration are all policies that have been pushed strongly by The Powers That Be. Because of these wage-suppressing policies, TPTB have been able, since 1981, to engineer their proudest achievement: printing trillions of new fiat dollars while keeping inflation under control. But these policies have also left the U.S. job market in a shambles from which it may never recover.

  • Eurydice

    You’ve put your finger on a major issue – money. Bright young things are going to go where the jobs are. And I don’t imagine carrying a giant student loan bolsters the entrpreneurial spirit all that much.

    As for the state of science fiction, I’ve been lamenting since the days when it switched from science to fantasy. But again, it’s about money – what the mainstream audience wants, what publishers are demanding – not to mention the politics of publishing in determining who can play and who can’t. But here is where social media can be like Apollo – in that outsiders who want to buck the trend can bypass the gatekeepers and find their own audience, basically form their own colonies.

  • f1b0nacc1

    If you want to understand why startups and other tech firms pursue social media (et. al.) as opposed to ‘building things’, simply look at the regulatory environment. Manufacturing is heavily regulated and susceptible to costly litigation. It (manufacturing) requires significant capital investment, which in turn requires plentiful credit, both of which are problematic in today’s economy. Software and the various associated developments that accompany it are relatively inexpensive to distribute, require less labor (and very few workers in the knowlege industries are unionized), and are (relatively) free of regulatory entanglements.

    Obviously this is somewhat oversimplified (the intellectual property issues surrounding software are a counterexample, for instance), but if you were going to start a company these days, what would YOU focus on? Our existing government is overtly hostile to the capital class, and it should be no surprise that the capital class responds to the incentives (and disincentives) that are put before it….

  • Charles


    Agreed entirely. Was just about to post something along the same lines. The economics of manufacturing in California just aren’t there. Heck, there’s a reason the Apple slogan is “Designed in California…”

  • Da55id

    The issue that drives investors toward software/web ventures are time to revenues and time to exit. It takes seconds to days to fix a software error or shift course on a business model. With hardware or biotech it can take many months to years. Therefore, the opportunity space in software will be exploited first the same way that people pick up gold off the ground until it’s gone. Then they start digging mines deeper.

    Regulatory induced economies of scale hold back innovation because small ventures cannot surmount the time and costs required to jump the regulatory hurdle rate until innovation can iterate faster than regulation. This is why IT/software/internet works. It out cycles the headwinds.

  • NikFromNYC

    After getting a Ph.D. in synthetic chemistry and nanotech from Columbia/Harvard I started a little company that amounted to a high tech art studio at home. Over a decade later, I have quite good command CNC machining and surface manipulation of composite materials. And there is zero enthusiasm from kids these days when I casually attend, say, venture capital or crowd sourcing networking and elevator pitch events here in Manhattan despite the huge sci/tech push the major colleges are adopting. They are even building a whole new tech campus on the formerly boring Roosevelt Island in the middle of the East River as Columbia expands its science campus into Harlem. That Facebook movie still has everybody hyped up into an irrational panic that spells bubble. The cost of startup cheerleading events is itself skyrocketing into the hundreds instead of just pizza money. The main impression I get though is that serious academic scientists are not at all networking with the hoards of undergraduates who have got the startup bug. Yet these kids don’t even know how to network with us older audience members during the usual B school seminar room gatherings. I can barely get a word in as they frantically line up to fawn over the half dozen official speakers who happen to have gotten some press on their Kickstarter and are sitting on the whopping one time capital boost of $100K, merely. There is an boldly unapologetic gold rush pump and dump mentality in which stories abound not about wonderfully creative lifestyles, but about quickly getting enough hype going that a big company will buy you out before your sizzle goes flat. Basically the boys involved just seem to want to sparkle their cocktail party conversation with insider knowledge of “twenty million” funding gossip. These kids lack even the most rudimentary BS detectors and if I dare express a strong opinion about the value of real invention over mere packaging and hype, over the very idea of trying to consciously sell hype as a strategy, well, a haughty snubbing is evidently in order, since being young, they seriously outrank me in the New Economy, you know, the one that sent the NASDAQ into a permanent sideways funk when they were six years old?

  • DH

    My reaction to Facebook is “meh”. On the other hand, Amazon has changed my life. It’s neither a pure web company nor a pure “stuff” company, but a highly tuned blend of both. Note, though, that they don’t do their own manufacturing. Re: the reason we don’t see more new manufacturers, I completely agree with @f1b0nacc1’s remarks.

  • M. Report

    An idea whose time is coming soon:
    Grow the manufacturing economy by
    reducing regulation, drastically;
    e.g. Patents cover products, only.

  • teapartydoc

    I like the kind of thinking #8 M. Report is doing. Copyright should be fourteen years and done, too.

  • PaymentJoe

    I think that it’s incorrect to call Square a manufacturer. They are a credit card payment gateway front-ending Chase. Their differentiators are the availability of a point-of-sale system, free with their service, easy underwriting and an integrated consumer e-wallet. The “dongle” itself is required to transmit magstripe info to the device. It is in no way Square’s main product.

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