Last week, in honor of Consumer Electronics Week in New York City, tech fan site gdgt.com invited readers to an open house featuring gear from hardware giants including HP and Motorola, as well as startups like 3-D printer creator MakerBot. Asked to name the coolest thing they had seen in the room, a group of young men remained silent for a moment until one offered SugarSync–a cloud data backup service. Another attendee named OnLive, a service that runs high-end video games like Duke Nukem Forever on servers in the cloud instead of an Xbox.
Why are these gadget geeks more excited about web services than the hard, shiny objects that usually arouse nerd desire? It turns out to be a growing trend in the tech world, one that the Consumer Electronics Association (CEA) is finally paying attention to.
At next year’s Consumer Electronics Show in Las Vegas, the CEA’s mega-tradeshow where iconic devices including the VCR and plasma TV have been unveiled, you’ll see more web and mobile app companies–even tiny startups–than in years past. And that’s by design: The committee that sets the agenda for the Consumer Electronics Show, of which I’m a member, proposed an especially high number of sessions about apps, the cloud, and social media. The final lineup, unveiled yesterday, will include panels with cutesy titles like “Planet of the Apps,” “Bringing the Cloud Down to Earth,” and “Subscription Wars” (about streaming video and music services).
There will also be a new section of the show floor devoted exclusively to early-stage startups. Enthusiastically named “Eureka! Park,” qualifying companies will be provided with a fully stocked 10-by-10-foot booth for $1,000–five grand less than the standard cost. Any startup is welcome as long as it’s consumer focused, hasn’t exhibited at CES before, and will have a product out within three years. “You see very few startups [at CES] because it’s a very expensive proposition,” says the organizer of the NY Tech Start-Up Classic, Nate Westheimer.
Eureka! Park is an expanded version of Westheimer’s three-year-old Start-Up Classic, a mini American Idol in which the CEA awards one company a free booth at the Las Vegas show. This year’s award went to Shelby.tv, a web service that creates a custom stream of videos based on what someone’s Facebook and Twitter contacts are watching. It requires not a gram of new–or even recent–hardware.
The relationship between software and hardware companies isn’t always symbiotic. Big hardware companies dominate CES and garner the most press attention because they can afford the giant booths. Meanwhile, the cheap, sexy online startups suck investment away from more-challenging hardware development. Upstart hardware makers get lost in the mix.
“VCs really hate it [hardware]. It’s so easy to fail. It’s so expensive,” said Shana Fisher from High Line Venture Partners. She’s invested in hot Wweb companies such as Foodspotting and Fashism. But she’s also supported hardware companies including the sleeper-hit MakerBot–a low-cost 3-D printer that turns digital designs into real-world objects.
“Capital requirements for hardware are usually so much higher,” said Karin Klein, a business development expert at Bloomberg L.P. “So if a venture capitalist has a certain-sized fund, they can’t be doing an investment that’s going to be a quarter of the fund. It’s a lot easier to put a couple hundred grand or less than a million in a lot more companies and play the portfolio.”
So far, most of the startups that have signed up for Eureka! Park produce cutting-edge physical things, such as robotic, battery, or digital imaging products. The CEA is still hoping to attract more of the web and software companies that those gdgt geeks are so fond of.
Getting software developers onto the CES floor is important for the hardware makers too, says Westheimer. “I was with Boxee when they first went to CES three years ago.” Boxee, software that pulls together video and music content from around the Internet and allows users to share with friends what they are watching and listening to, was born on a shoestring budget just a few years ago. “You saw every single hardware manufacturer, every single big company, walking by their booth,” he says, “to be inspired by what they were doing.”
[Image: Flickr user zoomar]