Table of Contents

• 1. Introduction
• 2. Enabling tools
  • 2.1 New Business Models
  • 2.2 Hardware Tools
• 3. Ecosystems
  • 3.1 Crowdfunding
  • 3.2 Incubators and Accelerators
  • 3.3 Getting help with hardware
  • 3.4 Makerspaces
  • 3.5 Countries
• 4. Categories to Watch
  • 4.1 Smart Kitchen
  • 4.2 Agriculture, Sensors and Monitoring
  • 4.3 Trends in Agriculture
  • 4.4 Health and Fitness
  • 4.5 Drones
• 5. Women in Hardware
• 6. Conclusions
• 7. Recommendations

1. Introduction

It was only 4 years ago, in 2011 when Marc Andreessen, one of the most well known technology entrepreneur and innovator declared that “software is eating the world”. While that statement is more true than ever, in the meantime fundamental changes in the economy also brought about a renaissance of hardware too.

It has never been as easy to create new hardware devices as now, thus more people are creating businesses based on that: hardware startups. The increasing abundance of hardware in turn makes it easier for people to tinker and create, fueling a powerful positive feedback loop. This growing interest is illustrated by online search results, “hardware startup” starting to show up significantly in the recent year¹ (see Figure 1 above).

This hardware renaissance seems to be the result of multiple developments coming to fruition just recently, opening up whole new areas for development. Since many of these changes are ongoing, in this report we are aiming to take a critical and comprehensive look at the important factors, as well as their trends. In the end, we hope to help the reader have a deeper understanding of the current status of hardware startups and entrepreneurship, and help them find opportunities in this space.

We have centered our investigation on the Asia-Pacific region, as we believe that large changes are coming to the economies of the region. The large size of the population, the importance of education in the region’s cultures, the unique skills in general manufacturing and trade, and the increasing availability of capital (both from investors and general customers) set Asia-Pacific on a course of large changes in hardware entrepreneurship.

The structure of the report is as follows. In Chapter 2, we introduce the changes in the tools for entrepreneurs that have the largest bearing on what’s possible nowadays compared to before. Chapter 3 surveys the ecosystem specific to hardware startups, and the inherent strengths and challenges of the different players. Chapter 4 highlights a number of product categories that we think are posed to be very significant areas of development in the near future. Chapter 5 takes a look at women in technology as we believe there are very important lessons to learn and great opportunities to have. Chapter 6 presents our conclusions. Finally, we are closing our analysis in Chapter 7 with a number of recommendations for the governments in the Asia-Pacific region in order to take advantages of these ongoing developments.

2. Enabling tools

Even as little as two decades ago, starting a company, especially in the hardware space, was a huge investment. Much less investment capital was available, as well as much fewer tools to help create the actual products. The dot-com boom of the millennium brought a very different thinking for software startups (more capital, much better tools), while hardware-focused businesses went through a similar revolution in the last 2010s.

I growing reach of the Internet with more people and more regions being online now enable new business models, easier access to capital, easier access to knowledge and resources. The rise of open source hardware resulted in a proliferation of prototyping tools. A much larger section of the population can now have the opportunity to follow their ideas and passion in a form of creating tangible products.

While not all barriers have disappeared, the playing field is more level now. Previously the main skill of founders was to convince potential investors that their idea has merit. Nowadays people can create their working products and start talking to the potential customers directly, for example, through online communities. This direct communication with the customers lets businesses make more solid decisions that were mere guesses before, and can raise the funds required for large production through actual sales, instead of venture capital.

In this chapter we take a look at these tools and trends that facilitate the rise of hardware startups.

2.1 New Business Models

The startup and business community learns new business models as new tools are available. Wide access to the Internet and the acceptance of online retail have brought about a complete shift, enabling organizations to directly talk to their customers. This first hand feedback is expected in the software business, while hardware businesses traditionally relied on distributors that decoupled them from customer feedback to a large extent. Establishing such a direct connection has tremendous benefits for hardware makers:

• financial improvements
• shortening the time to market
• making long term planning, roadmaps more reliable
• externalizing parts of Research & Development

The two new business model we see to be increasingly utilized are crowdfunding and crowdfeedback.

Crowdfunding

Crowdfunding can be imagined as a team going public with a product idea, saying:

“We want to create this thing, we know it’s going to be amazing, please help us make it happen!”

As the name suggest, the aim of crowdfunding in the beginning was to raise funds required for the development of product in question. Hardware is expensive to create, takes a long time, and having more access to capital from, for example, 1000 excited backers, often makes the difference between a product launching or fading away.

There are very large variations in the amount of funds being raised from a few tens of thousands of US$ to millions. For example the Pebble smartwatch, originally aiming for $100,000 raised $10,266,845 in 2012¹, and then returned to raise $20,338,986 for their new Pebble Time model.²

This variation makes it possible for projects to raise the amount of funds that is appropriate for them instead of fitting some universal model. As the community gains experience, people uncover some general guidelines from the failures and successes of projects on the long term. For example, experts argue that $100,000 is not enoughto go from prototype to production these days.

Crowdfunding also have good side effects that can be more important for some organizations than the money being raised. This engagement with the community also provides:

• low cost market validation
• customer and community development
• R&D ideation by the comments received during the campaign
• attraction of potential distributors

These aspects can be utilized in all levels of business. The traditional crowdfunders are startups who are just establishing themselves. Small & medium enterprises can launch campaigns to grow their user base. Large, publicly traded organizations instead of focusing on the funds raised can seed internal innovation and improve their connection to the community (which usually money can’t buy) by crowdfunding.

One special case is equity crowdfunding, when the startup itself is the promoted product: people are funding the organization instead of anything in particular they make. It is a very new model that is actively developing due to changes in financial regulation. It is likely be more relevant for the software and service industries, as hardware startups have a more naturally attracting offer to promote (their “gadget” in question). Still the trends are pointing to more experimentation with this business model as well in all areas of the startup ecosystem.

Crowdfeedback

Crowdfeedback is a distinct model that is illustrated with the organization effectively posing this question to the community:

“Look all the great products we’ve made so far, obviously we know how to do things, tell us what other great things we should create?”

A hardware company’s portfolio often speaks for itself, but it takes more confidence in one’s achievements to openly invite the general public to new products. This especially works well for startups and companies that are trying to create a more robust ecosystem around their products. When done well, crowdfeedback can have the positive effects of:

• increased engagement in the community through discussion
• accelerated R&D within the organization
• building an image of innovator
• creating partnership opportunities

As an example, Seeed Studio in Shenzhen, China, is a hardware innovation platform that both produces their own designs, as well as enabling others to make their own. Their website’s Wish section is open for anyone to propose improvements and new products.

The Little Bits, the prototyping platform where one can build a device by snapping together different electronics building blocks, created the bitLab where they showcase their new creations, as well as encouraging anyone to “start dreaming” and propose a new module for them to create. Since their platform is built on modularity, crowdfeedback is a great fit for speeding up development and empowering the community to become stakeholders.

LEGO is an example of a large company relying on crowdfeedback. Their LEGO Ideas platform lets anyone create an idea for a kit, then campaign around it to gain support. The company reviews the most successful designs, and choose which one of them make into reality. LEGO already has a large presence in the merchandise market, making custom designs for popular franchises such as movies and computer games. Crowdfeedback makes this merchandising use even more accessible, as any community can create their own, shared LEGO universe. Case to the point the very successful space adventure indie computer game, Faster Than Light creating LEGO models of the spaceships in the game.

Crowdfeedback also works very well for other organizations that are trying to cater for the ever-growing hardware ecosystem. For example Codebender is a cloud-based integrated development environment (IDE) for the very popular Arduino microcontrollers. Since there are practically uncountable variations of Arduino devices (originals, clones, variations), Codebender needs to make tough choices for which boards they will support in their software. Their support forum’s board requests section is a very effective place to gather feedback on which Arduino variations are popular and worth their time supporting.

We expect to see more hardware companies starting to use crowdfeedback, as successful products based on community-initiated designs become more common.

2.2 Hardware Tools

As people create more hardware startups, there are also more startups trying to cater for these hardware makers. It is a self-reinforcing process, where easier, cheaper access to hardware tools will create new hardware projects, which in turn will create easier, cheaper access to hardware tools. To show the extent of this development, the AngelList startup database currently lists 1,028 Manufacturing Startups.

In the last decade the biggest leaps in hardware tool development happened for electronics prototyping and 3D printing, now followed by all the other tools that are traditionally found in a well-equipped workshop.

Electronics Prototyping

Digital electronics is what puts the smart into objects, and the speed at which someone can go from an idea to a proof of concept makes a large difference. The faster, easier it is to prototype a gadget, the larger variety of interesting solutions will be created. We would like to mention a couple of platforms here that we feel did the most for lowering the barriers in electronics:

Arduino

Arduino is arguably one of the most successful hardware project so far. It’s a microcontroller board that enables digital and analog manipulation of physical objects, and building of connected devices, all based on open source hardware. The simplicity and openness enabled other companies to build “clones” and “variations” of the original hardware. Also, people can prototype with an Arduino board and later build in just the microcontroller into their final product. Arduino became a true household name in a large part of the world, almost as much as Lego did with their construction toys.

Raspberry Pi

Raspberry Pi is a single-board computer with the aim of teaching more kids about computer science. In many ways it did the same to computers as Arduino did for microcontrollers, and sparked a many-million strong following around the world. While both the Arduino and Raspberry Pi are not the strongest hardware in their respective categories, the build on their accessibility and the community around their platforms. Unlike Arduino, though, single-board computers are cloned much harder because of their complexity, and can’t usually be simplified to be used directly in products. Aware of these issues, Raspberry Pi themselves introduced their Compute Module in 2014, a hardware variation to be built into other products.

Little Bits and Grove

Little Bits is a prototyping platform where devices are created by snapping together circuit building blocks. Almost like a Lego kit for electronics, their mission is to “democratize hardware”. Creating working electronics devices doesn’t get much easier than this, and that powered their growth into areas that are not traditionally markets for electronics: kids even to a very early age, and people who were weary of electronics before. Their niche is to build people’s competence with making hardware, and in our opinion that also directly affects the number of people who would consider starting a hardware startup down the line.

Grove is a similar platform built by Seeed Studios, but targeting digital electronics. With its modular design it addresses some of the shortcomings of the traditional microcontroller systems like Arduino, which is that connecting external hardware to a microncontroller is not always straightforward or even follow the same pattern across devices. Grove has a large number of sensor, communication, and user interface modules available, and can significantly shorten the time needed for learning and prototyping.

LinkIt ONE

LinkIt ONE targets the first step of the hardware making process by being the most comprehensive prototyping platform: their kit integrates GSM, GPRS, Wi-Fi, GPS, Bluetooth into an Arduino platform, enabling both special accessories and the large ecosystem of Arduino accessories to be utilized.

It was designed in a collaboration between Seeed Studio and the chip maker MediaTek, which also shows the growing trends of partnerships between large companies and smaller teams of experts. The companies bring their IP, institutional knowledge, and customer base, while the teams can move quicker, can be better at integrating many different technologies, and know better what makers need in terms of features and support.

Particle

Particle stands out in their approach by aiming to address both of the two stages of hardware development: prototyping and production. For that they have created a combined hardware and software stack, targeting a specific niche of Internet of Things products, and partner with other hardware makers that create devices that could fit their platform, such as Digistump. This full stack, comprehensive thinking from the customer’s point of view is a good trend that we think will have a lot of followers in the near future, even though it is a tough task to create a successful platform like this and it is likely not everyone will make it.

3D printing

3D printing is one of the great success stories of hardware in the recent year. The basic ideas were available at least since the 1990s, but recent converging trends made it into the $4.1 billion industry with over 30% year-on-year growth that it has now become:

• expiry of 3D printing related patents
• very easy availability of powerful microcontroller platforms
• establishment of crowdfunding
• much wider access to internet to share information and ideas
• explosive growth of open source hardware

These are not unique to 3D printing, other technologies benefited from similar trends, such as electronics mentioned earlier. The explosive growth was also due to the fact that while people could do electronics before, albeit it was a bit more difficult, 3D printing puts a completely new tool into the hands of everyone, that most people couldn’t have imagined possible even a few years ago.

3D printing made a fundamental difference to prototyping:

• creating complex shapes and structures can be done without any external help
• increasing the speed of prototyping to even multiple versions in the same day
• enabling test-driving mock-ups for more sophisticated products, raising the quality of devices
• making hardware design shareable digitally, and thus available everywhere in the world

On one hand many hardware startups use 3D printing for prototyping, and for the final products move to more scalable production processes such as injection molding. On the other hand, now there are many platforms that are working on bringing great improvements to the 3D printing process in the form of better quality, and larger number of available materials (besides the traditional plastic, for example metal, porcelain, sandstone, castable wax). This in turn allows traditionally hardware businesses to become effectively software business (designing hardware in software), with many of its benefits. One example is the Shapeways 3D printing platform, which is also home of many jewelry, accessories, arts, games, miniatures projects.

Open source hardware greatly benefited the development of 3D printer making startups, and we are expecting large gains in the next few years in quality, reliability, speed, software support of 3D printers, as well as further innovative growth of the ecosystem around them.

One example is MakerBot, which went from a small hardware project in a hackerspace to a company whose products are maybe the most well-known brand of 3D printers. Their open source design inspired a large number of followers, and “MakerBot-compatible” is one of the key features of many other 3D printers.³

Other prototyping

3D printing was maybe the first “workshop” tool that has left the workshop and managed to get into people’s home, and now many other machines follow as well.

Desktop CNC routers are computer controlled cutting machines built on the hardware development of 3D printers (many new CNC prototypes were built on 3D printer frames, for example). At the time of writing there are at least 10 different CNC router projects on the crowdfunding site Kickstarter.

One trend we see regarding these tools is that while 3D printers were single-use tools, many new devices are built modular, providing multiple functionalities. As an example, Voltera is a circuit board prototyping machine, capable of printing circuit boards, dispensing solder paste, and doing the reflow process. The only thing it still needs is the capability of pick-and-place components on the circuit board. In its current form it can already replace an entire supply chain of electronics manufacturing with automatic tools, bringing the time to create a working prototype from 1-2 weeks (board printing and shipping from a factory to the user) to 1-2 hours.

3. Ecosystems

Despite the impressions through the media, startups don’t achieve success overnight. This is even more true for hardware startups, most of the long upfront development leading to the launch day often hidden from the general public. Also despite the popular belief, startups operate within an ecosystem, and their success and failure depends on their skill of choosing the right partners and tools as well!

In this chapter we look at the current hardware startup ecosystem, with more detailed discussion on the features that are dominating today’s trends.

We divide the ecosystem into three main areas: financial, creation, and external.

Finance

The financial area concerns with supporting the startup on its path from an idea to profitable business.

This includes traditional angel investors and venture capital, though many investors are just figuring out their modus operandi in the hardware space, what they consider signs of a potential large hit in hardware. To complement their support, crowdfunding sites let startups leverage a large global community of potential customers. Finally, there are the incubators and accelerators that provide some low level funding uniformly to the startups that take part in their program, as well as mentoring and access to an investor network to facilitate further funding.

Creation

Ecosystem players in the creation section affect how the hardware products get made.

This includes companies that are making prototyping tools to get the first idea into a workable form. The more different prototyping tools are available, the lower the barrier to entry at the very low level.

Factories and general manufacturers are the places where the products actually get made. Not every geographical area is equally good to do the same things, illustrated by the example of Shenzhen, China taking over most electronics manufacture. These players can help startups to create great things fast, but startups that choose their manufacturing partner badly can face failure very quickly. The process of finding the factory must involve selecting one has the right skill set, has the right match for the startup’s product volume, and has a good track record. A lot potential improvements in hardware product development can be achieved by helping manufacturers and startups be closer to one another. This convergence can be brought about geographically by higher level economical incentives of industry development. On the practical level sourcers and match-makers can facilitate in most cases.

External

The external section is about the partners that interact with the startups out in the public.

There are a large number of events that provide publicity to startups, including pitching, promotion, hackathons, and meetups. Many of these tap into existing communities, though startups do need to build their own communities as soon as possible.

Crowdfunding bridges the gap between communities and the startups funding needs. Makerspaces are a connection between communities and product development. Shipping companies and distributors are also invaluable partners that make the last mile connection between the startup’s product and their customers.

3.1 Crowdfunding

Introduced earlier in this report, crowdfunding is a very important development supporting the rise of hardware startups. Creating hardware products requires significant amount of capital, and crowdfunding spreads the risk of raising that capital over a larger number of people instead of the traditional way of small number of investors.

The two most dominant Crowdfunding websites are Kickstarter and Indiegogo.

Kickstarter is open for US-based teams only, and its focus allowed it to become the largest player for the US consumer market.

Indiegogo took an international path, and it’s more inclusive for projects by not filtering them. Indiegogo’s recent InDemand service is directly improving hardware campaigns by providing a pre-order page for successful, finished campaigns, so they can continue to acquire users while their product is being made.

Other large players are for example Crowdsupply, a hardware focused crowdfunding site, and flyingV that is focusing on Asian-based teams.

Kickstarter’s 2014 report shows that while 5% of all projects were in Technology (1,124 of the total of 22,252), almost 23% of the funds raised were for these projects, which translates to $111,209 raised for each successful technology campaign.

Based on crowdfunding industry reports, 2013 has seen $6.1 billion raised globally through crowdfunding, a number which has grown to $16.2 billion in 2014, and will likely hit above $34 billion in 2015. This suggest at least about $8 billion available this year for hardware projects across the world through crowdfunding.

Trends

The key trends that indicate further growth of crowdfunding:

• growing user base, more people will back their first projects
• more crowdfunding sites¹
• more projects, both earlier stage and more sophisticated
• more “serial crowdfunders”: teams with more than one successful campaigns

Based on the experience of successful campaigns so far, hardware startups can improve their share of funds and probability of success by doing good foundation work before their campaigns, start to build their community as early as possible, delivering their products well and on schedule, and engaging their community (users, possible partners, distributors) every step along the way.

Equity Crowdfunding

An alternative to the rewards-based crowdfunding above is equity crowdfunding, where a team is looking to raise money for their organization directly. Equity crowdfunding has its own challenges, especially regulatory difficulties. The financial regulators of in different countries have different opinions and plans for the future of alternative fund-raising. Most countries haven’t addressed equity crowdfunding yet, while those that addressed range from Singapore where its practice is illegal, through Australia where there are proposals to make it available, all the way to New Zealand which has legal framework since 2013 supporting it.

3.2 Incubators and Accelerators

Incubator and accelerator programs usually help early stage companies to succeed. Most of the time this help takes the form of:

• participant selection process based on demonstrated results
• a fixed length program (few months)
• funding in return for equity in the company
• mentorship & networking opportunities
• demo days to pitch to further investors

The aim of these programs is to increase the success probability of good teams and to teach them how to build companies using all the tools and skills available nowadays. Because of this, most programs were started by industry veterans with large technical and financial networks as well as plenty to teach to the up-and-coming teams.

The number of incubators and accelerators increased markedly in the recent years, since the bootcamp-style model of these programs is relatively straightforward, and because business experts, large companies, governments are all looking to discover the companies creating the Next Big Thing. The share of hardware startups participating in these programs is also increasing, and there are also accelerators focusing on hardware products only.

Still, the development of Asian accelerators is far behind their US counterparts, both in number of companies graduating from them, as well as the total amount of investment in companies going though the program.

There are a number of notable hardware accelerators in the Asia Pacific region.

Hax is an accelerator with offices in China, Singapore, US, and has more than 250 founders and 50 mentors. They work with startups on their prototyping, development, manufacturing, supply chain skills, right at the source of global hardware manufacturing.

Lemnos Labs, based in San Francisco invests in early stage hardware startups, especially in the aerospace, robotics, transportation, agriculture, and Internet of Things areas.

The IdeaSpace Foundation is a non-profit organization in the Philippines to spur technology entrepreneurship in the country, providing very early stage incubator program for many different areas of technology.

Since both the current hardware startups and hardware accelerators are following a new development model, most people involved are learning along the way from the successes and failures encountered. It is likely more hardware-focused accelerators will emerge in the near future, at diverse locations, and differentiating from each other to provide more value to the startups.

3.3 Getting help with hardware

Another group of non-traditional accelerators are companies providing help for startups in the product creation process, and staying out of the business side of running of a company. They can be described as specialized engineering and logistics consulting groups with unique knowledge for early stage product development.

One of the notable examples is HWTrek, a hardware development and expert-matching platform in Taiwan. They connect teams that have ideas, with experts that can solve their specific problems. HWTrek is also promoting first hand manufacturing experience and supplier match-making by bringing global startups to Taiwan and China with their Asia Innovation Tour. The premise is that with help startups can shorten their development time and avoid costly mistakes down the line by taking manufacturing into the account from the very beginning.

Another firm is Dragon Innovation, which targets teams that are planning to launch a crowdfunding campaign for their hardware product. They review the product design, manufactuability, and give advice. Based on the results of the feedback they also provide a seal-of-approval to help the teams’ future crowdfunding campaign, as the potential backers can be more certain about the feasibility and quality of the promoted product.

The common issue teams are trying to solve through these programs is going from 1 prototype to 100 to 500 products. Many factories are not well suited for these intermediate numbers, and partners like HWTrek and Dragon Innovation can bridge that gap through their networks.

For some niche areas, such as electronics, a number of companies are providing solutions already. Seeed Studio’s Fusion service provides a platform services around prototypes in the 10-300 units range: printed circuit boards (PCB), stenciling, and PCB assembly. Their Propagate service takes this to the next level of 100 to 10,000 units, with device assembly, testing, and drop shipping. These services bring Shenzhen’s manufacturing skills and power to anyone around the world, significantly lowering the barrier of entry for electronics products.

CircuitHub is a similar electronics manufacturing service, directly targeting hardware startups, with the goal of scaling from 1 unit to 10,000 with the least amount of effort. They mix the lessons learned from software startup regarding great service and powerful user interfaces, bringing it to facilitate hardware work.

In the future, similar services will likely target other aspects of the hardware manufacturing process, further lowering the barrier for more sophisticated products.

3.4 Makerspaces

Makerspaces (also called hackerspaces) are communities built around public workshops to share tools and knowledge, and facilitate all kinds of learning and creating. They are very successful breeding grounds for hardware startups. The community aspect facilitates a more bootstrapping style development (as opposed to getting an investment), which might make them slower growing than other startups for example going through accelerators, but often result in deeper hardware knowledge and more useful personal networks within the community.

At the time of writing there were 71 active makerspaces on the Hackerspaces Wiki in the Asia-Pacific region. China and Australia had the most spaces listed, though the list is likely not exhaustive on the page.

Their popularity really rose around 2009, together with increased global exposure of initiatives like Maker Faire around that time. Maker Faire is an event where DIY and hardware creators show off their inventions and creativity. The Asia-Pacific region has at least 16 Maker Faires at different locations, and many of them experienced tremendous growth in the last couple of years. This shows the much wider acceptance of tinkering, maker culture, and hardware creation.

The trends point at new makerspaces being created continuously, though not necessarily in an increasing rate. The biggest gains in the near future are likely not in the number of spaces, but the size of their communities, the number of people who frequent makerspaces. Since the amount of knowledge available is connected to the number of people in the community, this is a good sign for creating and supporting the makers of the future. As more startups will emerge from makerspaces, they are more likely to feed back to their communities too, and provide a powerful “alumni” network, similar to the more formal programs of the accelerators.

3.5 Countries

The background of different countries is also an important aspect to consider, as they wary a lot across the region. On the Bloomberg Innovation Index 2015 that ranked countries by R&D spending, manufacturing, number of hi-tech companies, education, research personnel, and patents, there are 3 Asia-Pacific countries in the Top 10 in the overall ranking: South Korea at No 1, Japan at No. 2, and Singapore at No 8, with five more countries further down in the Top 50. This shows that Asia-Pacific has a large variation, having both the leaders and many of the laggards in innovation.

One of the most crucial decision an early stage startups can make is where to set up their operation. It will determine quite a long way into their development their access to resources such as:

• skilled talent (both young and industry veterans)
• manufacturing infrastructure
• affordable living and office space
• high quality services such as banking, shipping, administration
• inspiring ecosystem of existing startups
• culture of support and encouragement of entrepreneurship

In today’s world an increasing number of people spend a large part of their lives away from their birth country, and this mobility must results in good communities getting better by the immigration, and uncompetitive locations falling even more behind without an intervention.

4. Categories to Watch

We would like to illustrate the role of hardware startups through highlighting a couple of product categories that we feel are poised to large changes in the near future.

The categories include traditional industries such as kitchenware and agriculture, where the role of the kind of technology described so far is not obvious. How will sensors, abundant data, smart devices, the Internet of Things, and full stack products (hardware and software closely connected within) affect them?

Another type of industry is fitness, where there are already many technology players and driven by the passion of the users. Here the theme is applying intelligence to the data for recommendations, and making data previously considered impossible to gather now available.

Finally we have an example of a newly created category, drones, that came into being only in the last few years because of the advances in hardware development.

4.1 Smart Kitchen

Driven by the smart technology, many kitchen appliances have been redesigned to compete with other premium products out in markets. Unlike the traditional appliances, these appliances can be programmed to integrate nicely into our fast-paced lifestyles. The newly remodeled appliances boast a healthy eating lifestyle without compromising the convenience that consumers demand. One of the trends that we’ve noticed on crowdfunding platforms recently is the high success rate in funding campaigns particularly in smart kitchen appliances. We projected that the kitchen appliances are expected to continue to grow in the next few years. Thus, we’re taking a deeper look into the smart kitchen appliances so it can help us understand future trends.

Trends

The increase of smart kitchen appliances can be noted through the number of smart kitchen appliances found on different crowdfunding platforms like Kickstarter and Indiegogo. This sector is very interesting because of the kitchen items that are placed on the crowdfunding platforms, all of the projects have had successful funding campaigns. The kitchen appliances were clearly a popular trend found on these platforms. There were three main conditions that have allowed this sector to thrive especially during these past couple of years:

• Healthy eating has gained a lot of attention in the media during these past couple of years.
• The demographics show that our population is undergoing negative growth. Therefore, we have an older population, which makes us stress on healthy eating.
• With the integration of more IoTs, we have a fast pace life. Consequently, our attention span has become shorter, which has caused us to demand for more fast and convenient methods to do things.

With the combination of these three conditions, it has accelerated the growth of smart kitchen appliances. By taking a closer look into the different smart kitchen innovations in different crowdfunding sites and markets, it gives some interesting data about different consumer trends.

There are two main ways in how the new technology is integrated into the everyday kitchen appliances. The two technology integration methods are 1) to promote healthier eating habits through the items and 2) create a more convenient cooking lifestyle.

From these two main reasons for integrating new technology, many new products have been able to rise. By looking at the information in a micro level, the kitchen items can be split into 4 distinct groups which fit under either one of these two reasons.

Smart Utensils

Eating utensils have been objects that haven’t seen any technological advances for centuries. Only recently during this uprise of technology have we seen an evolvement in these eating tools. Since the tools have evolved, the usages of these tools have also evolved. These smart utensils that were created were to not only act as a traditional eating utensil, but also help monitor the eating habits of the users. The utensils are able to collect their data through different types of connectivity such as Bluetooth, 3G/4G, and wifi. An example is the HAPI smart fork; this fork is able to send data regarding the pace of food consumption to the user via application.

All of the following, with the exception of the Google’s smart spoon, have features that will give data to the user regarding their eating habits or environment. One of the recent innovations are the smart chopsticks. With the recent news of hazardous food conditions, the chopsticks help alleviate the problem by alerting the user about the cleanliness of the oil that the food was cooked in. The user can use the information to change their eating habits. These premium eating utensils attract consumers because it provides high efficiency compared to the traditional eating utensils.

Smart Containers

Smart containers have also seen recent changes in the models as a result of the new technologies at hand. Same as the first group of kitchen tools, smart containers are also under the first method of integration; they provide a way to stay on a healthy lifestyle. The smart containers are equipped with different sensors that allow users to know how much of the food/liquid they are consuming. This allows users to stay on top of their recommended diet. One of the successful smart containers that had a successful funding campaign was the NEO Smart Jar. This smart jar was designed with unique sensors that help monitor the amount of food that was consumed from the jar. This product alleviates the hassle of remembering to log the amount of food consumed for health conscious people. The data can be used for the user to help them reach or maintain their health goals.

Smart Cooking Tools

Technology has also integrated itself into various cooking tools. The technology allows the cooking tools to provide a more convenient cooking environment. For example,Pantelligent’s smart frying pan gives users data to help them make perfect meals. Equipped with different temperature sensors, it helps the user understand the optimum time to keep the food in the frying pan. Things like sensors, easy access to data, and easy connectivity has allowed cooking tools to flourish.

Smart Cooking Appliances

The technology advancements in cooking appliances have long remained untouched. However, with the push of new startups, cooking appliances have also been remodeled in the past few years. There has been particular attention in integrating smart devices to things like refrigerators in the past couple of years. This is also because of the second technology integration: new quick and easy lifestyles that many people are acquiring. Samsung has shown interest in the growth of smart cooking appliances; they have created a smart refrigerator. This refrigerator is learn to grow accustomed to the users and create grocery lists. This allows users to save time when grocery shopping and food planning.

There are future developments to be seen in the kitchen industry in future markets. Technology integration has had a huge impact in the kitchen industry. Instead of continuing down a “dead” industry, it has become competitive in markets by integrating new technology to help create our lives easier and healthier.

4.2 Agriculture, Sensors and Monitoring

Agriculture is already a huge market; with net farm income worldwide estimated at somewhere around $120 billion a year. Yet in the past, the support hasn’t been there to accelerate technological advancements in agriculture as fast as in other industries. Until recently, agriculture hardware startups struggled to get the funding, manufacturing, and test facilities needed to mass produce their prototypes that could boost agricultural production efficiency around the world. There are signs, however, that the venture capital community and hardware accelerators have woken up and have begun investing in agriculture after realizing the many opportunities for agricultural innovation. Case in point, according to the Wall Street Journal a funding campaign led by Google Vetures raised upwards of $15 million for agricultural tech startup Famers Business Inc. Some other notable startups that have taken advantage of such funding are:

• Edyn
• Anemon
• Farmeron
• Solum
• SmartGardener
• Blue River Technology

Although the agricultural envrionment is going through this massive digital transformation, with most equipment implementing sensors and controls to monitor everything from livestock fertility to soil quality, the addition of autonomous farm vehicles, drone mapping, and telemetry, there are still many concerns when it comes to this technological transformation within agricultural spaces, such as automation replacing jobs, rapidly changing hardware and software, massive cultural changes for the traditional” farmers as well as fears over data privacy, to name a few.

4.3 Trends in Agriculture

Urban Farming

Another interesting trend these days in agriculutre is called “urban farming”, which is a concept that is trying to make our food as close to home as possible, literally. Growing our food closer to home, we are able to help cut down on the wear and tear that the food goes through during transportation, while at the same time optimizing “freshness”. Urban farming is very interesting because it’s an area of agriculture that tech companies have just scratched the surface with meaning there is massive potential for the future.

4.4 Health and Fitness

The sheer number of health related startups has grown exponentially over the last decade, and one particularly noticeable area is fitness-related wearables. The health and fitness spaces are ever-evolving, but its recent evolution has accelerated, and hardware startups are playing a vital role in this development. Sensor technology has led to a massive increase in the popularity of health-tracking devices.

Being a health related hardware startup, there’s a lot to be excited about when deciding to build a business because of the continuing rapid development of hardware accelerators. Nonetheless, with all the buzz and excitement when it comes to health and fitness related hardware, there still needs to be a realization that even though it’s becoming easier, hardware is still hard. It’s still tough to be successful in such a competitive cutthroat market, but the future is certainly looking like it’s full of potential.

As per MaRS Market Insights fitness and sports wearables accounted for 2.4 billion dollars of the global wearable consumer market in 2014 and that number is forecasted to more than double to 5.1 billion dollars in 2018. On the non-consumer side of things, the market for medical and health wearables is forecasted to almost triple in 2018 to 2.9 billion dollars up from 1.1 billion dollars in 2014. All very encouraging numbers for hardware startups within health and fitness spaces.

Some trendy new health and fitness products that are picking up a lot of steam are:

*Smart Yoga Mat

*Connected cycle smart pedal

*Linx IAS concussion monitoring system

*Sensoria fitness socks *Darma sitting pad.

4.5 Drones

Drones or remote controlled unmanned aerial vehicles benefited very much from the improvements of hardware manufacturing. Previously they were smaller variations of normal aircrafts, making them quite expensive, dangerous, and only accessible for large organizations or governments. In the last few years, drones were re-imagined such that the majority of the market is a variation on small (palm-sized to football-sized) quad-copters, with ever more powerful control electronics.

This change has started with small brainless indoor vehicles just for entertainment. Now, drones are one of the fastest growing areas of startup investment in 2015, with 63% annual growth rate.

Use cases

With the large growth came a diversification of use cases, and the major ones we think are:

• Entertainment
• Video
• Data collection
• Delivery

Entertainment

The first drones that got popular were targeting the “flying is fun” feeling in their users, and were usually indoors devices. Now they are becoming more sophisticated, robust, reliable, and powerful.

Some new drone designs use this evolution to emphasize the original fun aspect, for example by making aerial acrobatics focused versions.

Others are exploring the use of drones as a variation of existing forms of entertainment, most popular being First Person View (FPV) drone racing: flying around a designated track with a fast drone, using video streamed to a head-up-display for accurate control, and racing against other pilots, often at speeds over 50mph.

A large ecosystem sprung up around FPV racing to create specialized accessories, and versions of drones:

• using faster motors
• making lighter drones suitable for racing
• creating wireless video headsets
• creating quickly repairable designs

At the moment it is still mostly a hobby for most people, even if not a cheap one (a complete set of racing drone and gear is at least $1000, likely more). As many other hobbies that are competitive and Adrenalin-fueled as FPV racing, there’s a big potential to grow and become more professional overall, creating a larger market for suppliers.

For more information see for example “FPV Racing drone racing star wars style Pod racing are back!” on YouTube, or many other available flight footage there. Also in Make Magazine’s “Formula FPV: Drone Racing is Taking Off” feature earlier this year.

Video recording

As drones improved to carry more than just their own weight, one of the early variation was the attachment of cameras. Even now, the large majority of drone projects on crowdfunding sites are different variations of the drone-plus-camera arrangement.

First this modification was just for fun, as aerial video provides an interesting new point of view. As professional videographers started to use drones with cameras, the selling point of their footage was that “it was made with drones!”. As now people have more experience with drone-shot videos, drones become one more tool in the professional videographer’s repertoire: the “mobile aerial camera” aspect is highlighted and usually mixed with footage recorded with traditional cameras, enhancing a narrative (as opposed to dominating it previously).

There are many services popping up around this use case both for the hobbyists and professionals:

• stock videos focusing on drone footage
• different camera systems for drones (GoPro is very successful due to small size, good video, and being cheap)
• cinematographers focusing on drone videos (for example wedding photo shoots).
• drones repairs

There are still challenges, though, especially regarding safety issues using drones in sensitive areas such as restricted facilities, airports, emergencies. The rules are often unclear and government institutions, such as the Federal Aviation Administration (FAA) in the United States, are trying to regulate drone usage. The trend is likely more official regulation. Hopefully most issues will be instead addressed by common-sense rules, and community self-regulation.

Data collection

Drones carrying sensors have enhanced data collection capabilities compared to manual collection by humans. They can operate in hazardous environments, which otherwise would be inaccessible or very expensive and dangerous to access. Many drones now can operate autonomously, for example following a pattern of GPS markers set by the controller. This multiplies the area that can be covered as more drones can be operated in the same time by fewer controllers, as well as making the surveys more precise and repeatable, for example doing the same pattern every day for an extended period of time. Surveys can be done more frequently as well, providing better data for monitoring and decision making.

The types of data collection is only limited by the available sensors. Some examples that exist already:

• mapping
• environmental survey (radiation, pollution, forestry)
• animal population monitoring
• search and rescue
• use as communication node

Some challenges still remain. Most jurisdictions allow only “line of sight” flight which limits the area that can be covered by a single operator. The reliability of drone hardware needs more improvements to limit the cost of doing such surveys. The data quality can be difficult to control since it’s a mobile platform and movement affects many sensors and the environment. This can be improved by better data post-processing and analytics tools.

Delivery

Cheap unmanned aerial vehicles promise a lot of improvements for delivery services, most importantly smaller cost for not necessarily needing a driver, faster deliver by not being tied to surface roads.

The most widely known drone-based delivery initiative is Amazon Prime Air. It hasn’t quite delivered yet, but it has a lot of potential in certain niche areas, for example in scarcely populated areas, within large area facilities.

There are more specialized projects working on delivering specific objects, such as TacoCopter¹, though the feasibility of many projects is in question, due to similar challenges mentioned for the other use cases. The line-of-sight flight rules and reliability issues can limit use. The value of the cargo compared to the value of a good drone is also an issue, as in most current use cases the drones are not disposable².

Future trends

The visible future trends hold a lot of promise to improve on the drones as tools for many tasks:

• Multi-drone interaction, intelligent swarms of devices can do certain tasks such as survey more efficiently
• Improvements in autonomous flight, similarly as there were big leaps forward with autonomous road vehicles recently
• Creation of different form factors: much smaller or much larger devices for different use
• More sensors and more attached tools

Future developments of drones have a lot of opportunities for hardware makers to bring many real world benefits.

5. Women in Hardware

As stressed in the previous chapters, there has been an increase of startups because of the lower barriers that technology has allowed. Although there has been an increase of people starting startups, the number of women pursuing entrepreneurship has remained constant. Because of this, it has prompted us to take a closer look at the statistics and what this may mean for our future.

Women have long been underrepresented in different science fields, including hardware industries. Despite the dynamic shift towards hardware, there is still an obvious gender gap towards innovation. One of the key forces that drive our world towards more innovation is the science, technology, engineer, and math (STEM) workforce. That being said, it is important to encourage women to participate in this technologized movement.

Women in STEM

Even in our high-tech world, there are still little women to be seen in these fields. The root of this problem can be seen in our education system; STEM subjects are presented in a mundane way to young girls. Because of this, by eighth grade, girls are half as interested as boys in STEM careers.

In the workforce today, there are only 24% of women working in the STEM fields. Although there has been a gradual increase of women pursuing further education, the number pursuing careers in the mathematics and science fields have stayed the same. By encouraging more women to pursue these careers, it can allow more diversity into these fields. Ultimately, in the ideal diverse environment, there will be more possible innovations to enter markets. In turn, this will boost up the economy.

To further confirm the statistics, Y-Combinator has given a few statistics about the gender gap. Y-Combinator is a prominent startup accelerator that is known for helping many successful startups. However, internally, there are some gender inequalities within this company; only 25% of the startups it funds have a female founder. Because of the attention this accelerator has gotten about gender inequality, there have been some companies that are working towards diminishing this gap.

Action

Microsoft and Google have shown action towards the underrepresentation in women in these fields. Microsoft has sponsored an annual Women in Hardware event that promotes women to participate in subjects like the math and engineering fields in hopes of seeing more women starting hardware startups. The event is organized like a mini hackathon and it gives an opportunity for the women to collaborate with each other and create an environment to create new innovations. Like Microsoft, Google has also been working towards closing the gap. Google has done this by donating $1 million dollars to organizations that will promote women to start their own startups. Through actions from companies like these, it allows us to hope for more women-led hardware startups in the future.

Trends

With the combination of the lower barriers to start a hardware startup and the recent attention to the gender inequality in the workforce particularly the science fields, we project that there will be a growth in women in the next couple of years. This is a bold projection; however, there are some statistics that have led us to come to this conclusion.

First off, many companies are working towards creating a new and diverse environment in their workplaces. A more diverse workplace allows for more innovative solutions because of the different backgrounds, cultures, and experiences the workers have. According to the demographics, the majority of the hardware startups are male. By creating a more diverse culture within the hardware startups, we can develop a more diverse and innovative products. Statistics predict that there will be an increase of 77,232,000 in the number of women in the workforce, which is about 6.2%. Although there has been a progressive increase of women in the workforce, we believe that there will be a steady increase in particularly women in hardware startups. There are more support organizations encouraging women than before to participate in hardware related careers. Because of this, it will only increase the amount of women who pursue careers or even startups in hardware.

In addition to the diversity, there is a great opportunity to increase the amount of women in the workforce. With the development of hardware startups taking place, many women-led hardware startups have equal chance to take some market share. With the growth of women in these fields, our economy will be able to reach stability and become more competitive with other markets.

Another trend to note is that it is difficult to have many women leaders in the Asia-Pacific Region. In the 2015 Global Women Entrepreneur Leaders Scorecard, there were only 2 countries in the region that placed in the top ten. These countries were Japan and Australia. It could be noted that the countries in the Asia-Pacific Region have a more conservative view towards innovation. Because of this, there needs to be a stronger push towards innovation which will allow not only women to prosper, but the world economy as well.

While, there are still some women that have been able to achieve a great number of things despite the low number of women in the field. These women have shown hardwork and dedication through their executive leadership, ability to start their own startup, activism.

Executive Leadership

While there are several women who have held executive leadership positions, we have selected some women who have shown not only excellence in executive leadership, but had this leadership in engineer-focused fields. One notable woman who have shown excellence is Jean Wang. Jean Wang is the hardware engineer and founder of Google Glass. Another woman who has also shown impeccable skills in the engineer fields is Gywnne Shotwell. She is the president and COO of SpaceX. These two women have accomplished a number of things in science heavy fields.

Startup Ability

Some women have also displayed innovativeness through the STEM related startups that they’ve started during the hardware startup popularity. Maker’s Row is a startup that serves as a platform for entrepreneurs to have easy contact access to American entrepreneurs. This startup was started by a woman named Tanya Menendez; she is the co-founder and CMO of this startup. Like Menendez, Limor Fried created an educational electronics platform. She is the founder of AdaFruit. The companies that they started were meant to spark more innovativeness in more individuals.

Activism

Lastly, there have been organizations that have aimed towards educating the general public more about hardware. Despite the recent technology advances, there are still many people who are skeptical about the direction that technology is taking us. Because of this, there are organizations that can educate the public about what things like hardware is. One organization that stands out particularly is the OSHWA organization; the founder and president is a woman named Alice Gibbs. There are many women who have started activism organizations in hopes of making technology clearer to the general public.

6. Conclusions

People who get inspired nowadays to start a hardware company have a lot more help to make it a success than ever before. Crowdfunding makes raising capital for the prospective product essentially straightforward compared to before. Prototyping is getting better every day, as more platforms are available, they are more sophisticated, and targeted directly at prototyping (as opposed to mere tinkering). The community knowledge is building up regarding hardware and technology, making learning new things faster.

All the changes that make hardware creation faster make startups be more resilient too, as they need much less capital now than before, increasing their chances to survive till launch day and beyond. Accelerators are also there to further improve their odds, and the rise of hardware-focused accelerators will be able to provide much more tailored advice to entrepreneurs.

The ecosystem around hardware is changing very quickly as well, and all stakeholders will need to think in their place in tomorrows economies. Factories and manufacturers start to open their doors to smaller customers (startups instead of the traditional large multinationals), and a lot of effort goes into finding a common (economical) language on both sides.

Consumers are thinking about hardware in a different way too. Pre-sales are much more acceptable and often products can be brought out earlier to eager beta testers to ensure that the final design will be a big hit. This new transparency, seeing the work going on previously behind the scenes also inspires a lot of people to become creators from consumers, driving a strong entrepreneurial feedback loop.

Many previously “dumb” products and industries are poised to become “smart”, by people applying technology in helpful and unusual ways. Companies at the top of industries like kitchenware and agriculture will likely look very different in a few years than they are now. Companies in passion-driven industries like fitness can benefit a lot by the ability to drive further engagement through providing interactivity, data, and intelligence to their customers. Whole new industries will be created by gadget categories that didn’t exist before, as we have illustrated it with the development around drones.

The Asia-Pacific economies have a lot at stake, as they are the center of traditional manufacturing, which is poised to undergo large changes in the near future. While the upcoming changes are uncertain, there are steps that can ensure long term flourishing of economies in almost any scenario, based on lessons learned from the quick rise of the hardware startups.

7. Recommendations

Our recommendations for governments fall largely into these main categories:

• harmonize rules and regulations across regions
• create better foundations for future hardware innovation
• provide very early funding of innovation
• conduct more research into how hardware is created

Regulatory Harmonization

Unlike software which operates almost without borders because of the Internet, hardware startups are very much aware of the existing boundaries between countries. Hardware needs shipping from the producer to the customer, and there are quite a few opportunities to lower the current obstacles in a meaningful way:

Simplifying and harmonizing import / export rules and procedures would let companies spend more time on their business and would result in cheaper products to the customers as the administration overhead is reduced.

There are many regulatory areas where the differences between countries make it difficult to create a single product for multiple countries. For example the division of the wireless spectrum varies quite widely between countries, and there are situations when a network-enabled product cannot simultaneously fulfill the requirements of even neighboring countries. Another example is certification requirements (such as FCC, CE, and similar marks around the world). Cross-regional collaboration in this matter has a potential to spark further waves of innovation.

Building Foundation for Innovation

One of the key determinant of the number of hardware startups is the number of people creating hardware as a hobby. Improving proficiency with the latest workshop and prototyping tools, promoting tinkering and experimentation, supporting inventions have a great potential pay dividends for decades to come.

As makerspaces are a great example of places where this kind of learning takes place, we suggest governments to start supporting the creation of more makerspaces, especially where people are already learning. There are very interesting examples of universities setting up their own workshops and tinkerer communities, and we are hoping that in the future there won’t be a university without a makerspace. This process should not stop at the higher education, judging by the examples of successful hardware projects targeting kids of various ages, gradually makerspaces could be created at high schools, elementary schools, and in some form even at the kindergarten level. Governments have the power and resources to bring about these changes by financial support for equipment, training, and making tangible creation part of the mission of educational institutions.

Early Funding for Innovation

One of the most critical time for any startup is the very beginning, getting to the first prototype and the first customer. Now with better access to the technological tools, the next bottleneck is the time available for people to work on their project. Providing early stage funding for budding startup teams can bridge that gap between idea and realization as they could focus on the development instead of making ends meet.

We would like to encourage governments to support more incubators who are already doing such work, and develop schemes of very early stage (angel) funding. These should take forms that fits both the governments’ general low tolerance to risk, and the benefits technological entrepreneurship to the entire society.

Mapping the Regional Hardware Ecosystems

More knowledge is required by mapping out the evolving hardware ecosystem to spot opportunities and provide support at the weak points. We suggest governments to take stock of their hardware creation environment, their strengths and challenges. This should include all stakeholders in the process, from traditional manufacturers, financial institutes, small and large businesses, educational institutes, legal experts, transportation providers, hardware related service industry players, and so on.

This could serve as a good foundation for discovering a country’s unique value proposition for hardware makers, and attract more value creators to their territory.